How the construction business will survive - Rostislav Melnik for Novoe Vremya

At the same time, certain government anti-crisis measures for the private sector were announced, including credit holidays and deferrals. I agree that in the short term, they may indeed allow some to catch their breath and avoid bankruptcy in the coming months. But the value of such measures is negligible if businesses are not given “oxygen” at the same time. I mean, first and foremost, access to cheap resources.

In conditions of crisis and a shortage of working capital, loans or credits to support the private sector under state guarantees, at 3-4% per annum, are simply a vital option. Unfortunately, this is not working at the moment.

One might argue that cheap resources mean turning on the “printing press” and hyperinflation, which in turn will only harm business. But only two things can harm the private sector or an individual company: a damaged personal reputation and “dead silence” in the economy (the absence of clear rules of the game and stable legislation, a shortage of working capital, consumer passivity, and investor indecision).

Local authorities could also take a decisive step towards supporting business. For example, there is a rule that currently exempts owners of outdoor advertising space from paying local taxes if that space is not purchased by advertisers. As a result, half the city is covered with empty billboards, and the budget is losing out on significant revenue. Just how significant is illustrated by the fact that, according to last year's estimates, the domestic outdoor advertising market was worth around UAH 3.3 billion.

However, if the budget payments for billboards used for advertising were 50% lower, this would also reduce advertising rates for businesses. This, in turn, would make the service more in demand and enable entrepreneurs to use the funds freed up from advertising payments to support their businesses (which is more than essential in the current situation), social programs for employees, charity, etc. Or — the opportunity to expand their advertising presence.

I would like to note that the thesis we are used to, namely that advertising budgets are the first to be cut during a crisis, no longer works. The market is moving forward rapidly, and you have to remind people about yourself every day. Without this, most businesses will not stay afloat. Therefore, by reducing the amount of tax paid to the budget from each working billboard, the government could get more working billboards (and thus an increase in tax revenue) and more confident advertisers.

There are many examples where mutual support between the government and business could be successful.

It is worth moving towards each other. The state and business must emerge from the crisis together, supporting and taking into account each other's needs.

After all, we remember well that more than 80% of the state budget's revenue comes from taxes, 60% of which, in turn, are provided by powerful large companies and enterprises, mainly commercial ones. The collapse or stagnation of the private sector will very quickly affect the state budget and the state of the economy as a whole.

I have high hopes that the crisis will affect the construction market to a much lesser extent than most other sectors. It is no coincidence that construction in Ukraine is considered the locomotive of the economy, which will never derail. The experience of many crises in our history of independence proves this point.

I am confident that residential construction will remain a key issue for the country both in the medium term and in the long-term development strategy. The presence of external negative factors does not affect the essence of the problem: people lack housing.

Just one figure: in order to meet all existing demand, we need to build at least five times more today. But so far, the construction industry does not have such capacity.

Instead, the entire market has a rather ambiguous reputation, which has developed over the last two decades due to the presence of certain players — those who left the business, leaving behind frozen unfinished construction projects. More often than not, the main culprit was not the crisis, but rather a flawed strategy, miscalculations, insufficient safety margins, etc. There have been several thousand such unfinished projects in the history of the domestic market. And each story is a reputational shock that ricochets across the entire industry.

Therefore, now that the quarantine has just begun and restrictive measures have been introduced, some market participants have decided not to stop working during the crisis (I mean stable companies with a certain margin of safety and reputation).

At the same time, according to various estimates, between 40 and 70% of all construction sites have been frozen or suspended since the announcement of the special regime. Some will, of course, return and continue building, but there will certainly be those who have already abandoned their work for good.

This could hit the entire industry again. This means — once again — a loss of investor confidence in developers, a decline in construction and sales volumes, the cessation of lending to potential buyers by banks, and a significant increase in the cost of financial resources for developers themselves. Another reputational shock. And only one thing can mitigate it: the skillful and high-quality work of those who are working. Therefore, I am convinced that the future of the entire construction industry depends on those who continue to ensure the functioning of their facilities now. We cannot afford to fail.

Президент Корпорації Нерухомості РІЕЛ Ростислав Мельник для Новое Время