AFI Europe: The government encourages developers to deliver substandard projects

The ordinance is good, but calls for improvement

“The ordinance that sets forth a 5% VAT for housing units priced below 100,000 euros is good, but it could have been better, better structured. For example, for the first 100,000 euros to be charged a 5% VAT, and for a 132,000 euro apartment, the remaining 32,000 to be charged with a higher VAT”, said the head of AFI Europe.

Havar said that establishing the 100,000 limit was wrong, because this way, developers would change their initial planning in order to meet the price boundaries and would deliver apartments that within five years would probably be worthless.

For instance, many developers could build two adjacent apartments, one for 100,000 euros and another one at a different price. This, however, would not be the smartest solution, as two apartments require two parking spaces.

“The government’s decision will encourage residential developers to deliver poor planned projects. Furthermore, the ordinance is valid this year only, when the financial crisis will keep home buyers on sidelines. When people will be able to buy homes again, developers will remain with small apartments, to which it would not be applied the same regulation and nobody would buy anymore”, said Reuven Havar.

In residential segment, the group plans to develop AFI Towers projects in the former location of Inox manufacturing facility, AFI Golden City in the former location of Laromet, AFT Gardens in Pipera, AFI Village in Buftea and AFI Green City in Magurele.

For AFI Towers project, the developer will soon receive the Zonal Town Planning scheme approval and hopes to start construction works at the first body this year.

Although home sales are now on ice, Reuven Havar says this was triggered rather by mortgage loans, and has no direct connection to the crisis. Therefore, if the Central Bank hadn’t exerted pressure on Romanian lenders, people would have still bought apartments, even if at a slower pace.

AFI Cotroceni Park will worth 500 million euros after opening

AFI Cotroceni Park will open doors before Christmas, and Reuven Havar sees no real competition in the market. Head of AFI Europe says the leverage of his project consists in the leasable area (76,000 sqm) for a rent that he finds low, but also in the power of the brands, such as Mango, Zara, Pull and Bear, Massimo Dutti, InterSport, Mark and Spencer or Levi’s.

“When we will open AFI Cotroceni Park, we will be the most powerful mall developer in Romania. After inauguration, AFI Cotroceni Park will value around 500 mln euros. It is well-positioned which is a major advantage to clinch financing for the first office building, nearby the mall,” said the manager of AFI Europe Romania. He added he received takeover offers for AFI Cotroceni Park on a weekly basis, offers from people who think the group’s in distress. However, negotiations ended when it came to figures.

In Ploiesti, in an effort to cope with the competition, AFI Europe rethought its retail planning, the shopping mall concept being turned into a street mall, with all stores under an immense tent.

“The project is at eight-minute walk from central city, and the new concept will cost less and this way I will be able to charge low rents. Nevertheless, we haven’t yet received the zonal town planning and therefore, it will last a year and a half more until the construction works start”, Havar added.