Ukrainian developer on costs of rebuilding Ukrainian homes

30 March, 05:16 PM
Ihor Nikonov says he has stopped work on all his construction (Photo:KAN Development)

Ihor Nikonov says he has stopped work on all his construction (Photo:KAN Development)

In an interview with NV Business, founder of Ukrainian developer KAN, Ihor Nikonov, talks about the impact of the war on the real estate markets, construction costs, and problems facing investors.

Most Ukrainian cities found their housing and real estate markets effectively frozen after Russia’s invasion of Ukraine. Many towns, especially in the east, are destroyed, and it will take billions of dollars to rebuild them. How nervous are property developers and investors, what’s going on with mortgages, and how much does it cost to build a high-rise apartment building – all these topics are covered in our interview with Nikonov.

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NV: How are the markets faring during this invasion? Are there any sales being made, is construction going forward?

Nikonov: There are no sales being made in areas where there are clashes. Nobody’s building or selling anything. We’re trying to figure out how to help those who bought condos from us in buildings that have since been damaged. For instance, how to mend roofs, in order to prevent moisture damage.

NV: Are there many damaged residential buildings?

Nikonov: One such complex of ours was hit: over 400 condos were damaged, one way or another.

NV: That’s Fayna Town, right? (A residential complex near the Nyvky metro stop in Kyiv - ed.)

Nikonov: Yes.

NV: Ukrainian cities are being shelled. Kharkiv has suffered major dam-age, Mariupol’s entire housing stock is destroyed. Kyiv is under fire, consistently. What are we going to do with destroyed houses across Ukraine?

Nikonov: There’s no one approach. Some buildings can be repaired. But those that have their structural integrity compromised would have to be demolished, since living in them is a risk. It’s especially true of older buildings, for example, (Soviet-era prefab concrete) panel houses.

NV: What’s the cost of a new high-rise of 100 apartments, say, 50 square meters, each?

Nikonov: Nobody can calculate that right now. Labor and material costs are unclear.

NV: And if we used pre-war costs, to get an idea?

Nikonov: Pre-war, it would be at $1,000 per square meter. A residential building of 100 apartments is about 6,500 square meters.

But it’s not just about the cost. New housing stock has to be made differently. Half of current regulations, regarding insolation, for example, should be abolished. There’s also the need for bomb shelters. A full underground level, with two entrances and enough room to sleep. These facilities have to be either in each new building, or near them. Bomb shelters in residential building have to be spelled out in state building codes. These are the questions we’re going to be working on, in order to rebuild the city and our country, as quickly as possible.

NV: Does Ukraine have the capacity to quickly rebuild?

Nikonov: We have more than enough capacity when it comes to conventional construction techniques. But I suspect that much of the work will have to be done unconventionally: prefabbing the components and then assembling them on-site. There are only three to four Ukrainian companies that can do that, and that won’t be enough. I think we’ll have to imports these kits for assembly here.

There are many ways to do this, and it will all depend on how Ukraine’s restorations will be financed. It’s clear that the private sector won’t be able to take this on alone. We will need support: international partners, cheap borrowing, mortgages that are unimpeded by red tape. On our part, we’re advising the government on these subjects.

NV: Did you have corporate debts?

Nikonov: No. We’re not touching the money people spent buying condos from us.

NV: Many paid for those in instalments. What’s their situation now?

Nikonov: We’ve allowed people to defer those payments for three-four months. Some are still eager to pay. We understand that our customers have more important thing to concentrate on right now. We launched KAN Help, an initiative to aid our residents in solving their day-to-day problems that emerge.

NV: How are investors taking all this? Is it clear who will be left holding the bag if a building under construction gets damaged by artillery fire?

Nikonov: No one is clear on how to finance repairs of unfinished projects, or who would be responsible.

We can take care of minor damage, but anything beyond that – we’ll have to look for alternative solutions.

NV: What are you focusing on at the moment, professionally?

Nikonov: There’s a lot of work. Most business people are not sitting idly by. We arrange humanitarian relief – food and medicine supply, erecting defensive structures, and so on. We fund these out of our own pockets, send them to Kyiv. We support our team.

NV: As your company has paused operations, do you still pay your employees?

Nikonov: Our company’s operation, construction-wise, has been stopped completely. Our efforts are now aimed at support the city and our people. We’ve maintained payroll, partially, and will keep paying our employees for some time. But that’s not something we can do indefinitely.

NV: Ukrainian construction workers are sought after abroad. Could some of them leave for Poland, one martial law is lifted?

Nikonov: Our country will obviously need rebuilding. I’m sure many will re-main here. There will be a lot of work, salaries will grow. I’m certain labour from other countries will come to Ukraine to earn good money.

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