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Red Code for Akims

The construction industry in Kazakhstan is slowly, but surely returning to the pre-crisis level. If in 2011 about 6.5 million m2 of new housing was commissioned, then in 2012 almost 6.8 million m2 more were brought in service. Moreover, even in January the Agency for Construction, Housing and Utilities stated about raising the bar for the current year up to 7 million “squares”. Later, however, the plans, as well as the Agency’s status were adjusted, and the Agency was transformed into the Committee for Construction, Housing and Utilities in the newly formed the Ministry of Regional Development.

The new, “regional”, residence of the Department for Construction is quite understandable and logical. The President of Kazakhstan, Nursultan Nazarbayev, in his speech about the new ministry establishment, explained this step by the necessity of transfer the major work on the economy development to the regions. This focus shift also implies the expansion of construction sphere in the regional and district centers, as previously the lion’s share of the construction amount was presented by Astana, Almaty and partly Atyrau.

Herewith, the relevant committee, despite its status lowering, was not relieved from the implementation of previous plans for the construction ramp up. These plans were specified in the program “Affordable Housing 2020”, adopted in June 2012 by the Decision of the Cabinet of Ministers. In the framework of this program during the period 2012–2020, 69.05 million m2 of housing should be commissioned in the country, including in 2012 – 6 million m2, in 2013 – 6.6 million m2, in 2014 – 6.9 million m2, in 2015 – 7.2 million m2, in 2016 – 7.6 million m2, in 2017 – 7.7 million m2, in 2018 – 8 million m2, in 2019 – 9 million m2, in 2020 – 10 million “squares”.

In practice, during the first year of program implementation a quite serious plan ahead was achieved. The total amount of new commissioned housing in January–December 2012 amounted to 6,741.9 thousand m2. Apparently, this good start gave the reason for the Deputy Chairman of the Agency, Nikolai Tikhonyuk, to declare the ambitious plans of his department at the beginning of this year: “I want to say that this year is a watershed. The tasks assigned are real. We are confident that in 2013 we will reach 7 million m2, though initially we expected that this figure would be achieved in 2014–2015.”

The main reason for such optimism is the growth of industry funding. If in 2012 about KZT 143 billion were directed for the construction purpose, this figure has already reached KZT 196 billion for the current year. At the same time it was supposed to increase the budget investments in the construction of the utility networks from KZT 20 billion to KZT 50 billion.

However, as is often the case, the allocation of the large amount of funds for the program implementation does not guarantee the full development of these funds in the field. The construction industry is not an exception. Even in May the Vice Minister of Regional Development, Serik Nokin, gave the following outline of the current situation at the Government session.

In 2013 the targeted transfers from the national budget in the amount of KZT 17.5 billion shall be allocated to the Akimats of regions, as well as the Akimats of the cities of Astana and Almaty, for the rental housing construction for the persons on the affordable housing waiting list. These funds should be used for the construction of 285 thousand m2 or 4 thousand apartments during this year. According to the financing schedule, on the 1st of May KZT 3.5 billion was already transferred and only KZT 2.9 billion or 82% of this amount was spent. As a result, 25.5 million m2 of housing was commissioned (or 427 apartments for the persons on the affordable housing waiting list). The overall picture spoiled by the figures of some regions. Thus, in Mangistau and South Kazakhstan regions the disbursements on rental housing construction was 0%, in Akmola region – 7% and in Aktobe region – only 22%.

As for the construction of rental housing for young families, the funding for 2013 amounted to KZT 10 billion, which is planned to build 117 thousand m2 (or 1.6 million apartments). According to the results of the 1st quarter, the Akimats received KZT 2.7 billion in the form of targeted transfers, KZT 2.5 billion or 95% of which were spent. As a result, 2.5 million m2 (or 42 apartments) were built. However, here is the regional “fly in the ointment” as well: the lowest country level of disbursements, about 11%, is registered in the South Kazakhstan region.

However, as explained by Mr. Nokin, the main commissioning amount of new housing in both categories was initially scheduled for the third and fourth quarters of this year.

It should be noted that the rental apartments for the persons on the affordable housing waiting list and for young families are an absolutely social project. And this fact could partly explain the sluggishness of developers. However, the situation with the disbursements of budgetary tranches for “commercialized” directions of housing program in the 1st quarter is not much better.

So, according to Serik Nokin, the Akimats should receipt KZT 30.1 billion for the housing construction and sale via the Housing Construction Savings System by means of the credit funds from the national budget in 2013. These funds should be spent for the construction of 451.5 thousand m2 (or 6.4 million apartments). On the 1st of May KZT 2.3 billion were allocated and only KZT 1.5 billion or 66% were disbursed. Thus in Atyrau, Mangistau and South Kazakhstan regions not even one tenge was spent. As a result, in January–April of this year the volume of commissioned credit housing amounted to 65 thousand m2 (or 1,008 apartments).

It is clear that we should not make any far-reaching conclusions on the results of housing commissioning during the first four months as the climatic conditions of most of the Kazakhstan territory does not allow to perform active construction work in January, February and even March. However, the first point is that the pending disbursements include not only the construction of buildings, but the design as well (and here the climate makes no hindrance for Akimats). Secondly, is that the densely populated South Kazakhstan region (where people are in dire need of new housing), and this fact brings us to the sad thoughts about the efficiency of its Akimat’s work, as the Akimat is a mediator between the Treasury and private developers...

The Vice-Minister defined the reasons of schedule delay as follows: “... low disbursement in some regions is mainly due to the competitive procedures and failure to provide certificates of work performed”. At the same time, he found it necessary to remind the heads of the region administrations of the President’s instruction to withdraw the pending disbursements: “The issue of the funds reallocation from the regions with pending disbursements to the regions, where the funds are being spent should be considered at the end of the first six months in two months. At the same time I would like to draw the aims’ attention that for the regions, where funds are withdrawn, and the volume of housing commissioning will not be corrected. That is, the regions themselves will have to seek funding from the local budget to ensure specified annual construction volume”. 

Despite such a strong statement, in August at the Government session on implementation of the program “Affordable Housing 2020” the relevant committee had to revise its initial plans for this year. Instead of 7 million m2, about which Mr. Tikhonyuk spoke so confidently in January, the department returned to the figure of 6.8 million m2, that is, to the level of 2012.

Reporting to the Cabinet members on the outcome of the Committee’s work for the first six months, Mr. Nokin said that during this period about 3 million m2 of new housing were commissioned, that is, 46% of the planned amount. During the first six months 632 apartments were built for the persons on the affordable housing waiting list with the total area of 38.4 thousand m2, as well as 314 apartments for young families (19.3 million m2). The Vice Minister expressed the confidence that at the end of 2013 the industry would reach the level of 6.8 million m2. The more so as, according to the Prime Minister of Kazakhstan, Serik Akhmetov, “all the resources and opportunities are available” for this task fulfillment. The Head of the Government instructed to ensure continuous monitoring and strict control over the implementation of the program in all directions, and charged the Akimats of regions, cities of Astana and Almaty to take effective measures to disburse the funds allocated till the end of August.

It is noteworthy that today no one is able to give a firm answer to the question of how the implementation of the program “Affordable Housing 2020” is able to solve the housing problem (at least in the long term). Thus, in the middle of last year, the deputies of the Majilis of the Parliament, trying to find out from Serik Nokin the exact number of people, who need housing, received the following answer: “Even if there are a lot of people who need housing, but if do they have opportunities – it is another question. If all people need housing, do we have to provide it for all? Even to those who goof off?” – Mr. Nokin parried a question. Later, however, he recognized that there were no accurate data neither in his department, nor anywhere else: “There is no such figure, we will know it at the end of 2012 or beginning of 2013, when the applications are submitted (for the program “Affordable housing” – Ed.), as there are lots of persons who wish to participate”.

It is noteworthy that, almost at the same time, his deputy Nikolai Tikhonyuk said that the number of people who need housing in Kazakhstan “is the same as in England”. It should be kept in mind that the standard of housing square meters per person in England, of course, is much higher than in Kazakhstan. “We are not the best in the rating of countries on the availability of square meters per person. Today our situation is even worse than in Russia, where are about 20 “squares” per person. Now we have 18.5 m2”.

However, he emphasized that the main task of the state is to get people to feel interested in the construction of individual housing. In the world practice the individual housing accounts for about 60% of all new property: “Before the crisis, we went up to such figure. During the crisis, the construction of individual housing decreased to 40% of all housing commissioned. Now we again went up to 55%, and our task is to return to 60%”.

Taking into account that the current population of Kazakhstan passed over 17 million people, and in 2018, according to estimates of the Agency for Statistics, the country population will exceed 18 million people in the next five years, we have to build at least 20–40 million m2 of housing. And this is just to reach the Russian level of housing “squares” per capita. This coincides with the forecast figures of program in the period 2013–2018.

Another question is whether such housing will be affordable for all those, who really need it. The state, as the Government declares, is doing everything possible to reduce the cost of the housing being built under Government programs (and now the Government programs provide the main volume of housing being built in the country). However, the state won’t give it for nothing to “the person, who goofs off”. It is still a confusing question, who belongs to this group according to the officials’ opinion...

If we talk about the real estate prices in Kazakhstan, then, in terms of the Agency of Statistics’ figures for March and June, we can conclude that they are raising, although slowly. In March, the average cost of 1 m2 of housing in new buildings was KZT 175,075, which is 12.1% more than the last year. Herewith, the prices in some cities of the country differed significantly: in Almaty 1 m2 cost KZT 245 thousand, in Astana – KZT 217 thousand, in Atyrau – KZT 209 thousand, in Shymkent – KZT 203 thousand and in Aktau – KZT 161 thousand And this is despite the fact that experts have rightly pointed out that the construction costs in different regions cannot vary so much. 

By June, the average cost of a “square” increased to KZT 180,482 that is quite in course of the forecast of analysts, who in the last year already suggested that in 2013, the property would rise in price, but in more moderate pace. In particular, such forecast was made by the chief specialist of the Department for Economic Research “ATFBank”, Aygul Omarova, defining such reasons for the slowdown as the moderate growth in household incomes, already achieved price level and relatively large amount of new housing.

The price growth in the secondary market in June was also relatively low: the resale price of 1 m2 of decent housing was KZT 140,559 (or 1.8% higher than in May), and the resale price of 1 m2 of deprived housing was KZT 82,665 (+2.1%). Herewith, the number of transactions for real estate purchase and sale in the first half of the year increased by 7.6% compared to the same period of last year. And this trend can continue as the commissioning of houses, built under the program “Affordable Housing” may slow down the property price increase even more (if not stop it at all).

If we talk about recipes to reduce the construction costs under this state program, they are, in principle, known for a long time. Even when the Committee was the Agency, the policy of material construction import substitution and of new technologies use, which significantly reduces the construction costs, was proclaimed. For example, at the beginning of 2013, Mr. Tikhonyuk said that Kazakhstan returned to the industrial building construction: “There should be the construction brick, frame-monolithic and monolithic buildings. But in our climate conditions we should not be too fascinated with such types as monolithic or frame-monolithic housing, as the required quality of concrete and monolith is very hard to be achieved.” Of course, this can be done using additives or pre-heating, but that would raise the construction costs. And if before 2008 we had to import bricks from abroad, today the domestic production covers the 100% of the demand for brick. This means that now the brick shall prevail in the construction industry. “Due to the fact that we move to industrial construction, due to the fact that we will not buy materials from other countries, the construction costs shall decrease, and, of course, the owners will drop prices.”

In addition, the state intends to create a convenient infrastructure for public access to the credit funds of House Construction Saving Bank. According to the Chairman of the Board of House Construction Saving Bank of Kazakhstan Nurbibi Nauryzbayeva, four service centers of potential clients operate in Astana, while there are still just few centers in the provinces, and the Bank intends to rectify this situation in the short term. This year’s plans include opening the service centers not only in the regional centers, but also in small cities such as, for example, Zhanaozen, Aksai, Kulsari, Temirtau, Rudniy. Generally, the Banks plan to open 24 new service centers throughout the country by 2016.

In 2012, the Bank attracted about 90 million customers to the Housing Construction Savings System or 10% more than it was planned. The total volume of loans amounted to about KZT 36 billion. In 2013, House Construction Saving Bank expects to attract more than 90 thousand customers and grand the loans, which total amount exceeds KZT 50 billion.

According to Ms. Nauryzbayeva, from the 1st of January the Bank significantly reduced interest rates on loans, as well as the commission amounts for services rendered. This was made thanks to the increase in transactions volume, arising from the client number growth. “Speaking on loans, from the 1st of January the current rate is 10%. It is for the loans that are issued without prior accumulation. And 9.5% rate if the person accumulated from 25% to 50%. We also lowered the rates under the program “Affordable Housing”: the pre-loans for the program participants shall be issued at the rate of 8% per annum, and interim loans at the rate of 6.5%.”

But if House Construction Saving Bank increases the level of the population involvement in the Housing Construction Savings System, it is clearly that the Akimats, responsible for the development of the construction project lists under this direction, cannot keep pace.

In May, at the aforementioned Government session the Serik Nokin said that the Akimats formed the list of projects for the credit housing construction within the Housing Construction Savings System for 2014 only by 40%, “Moreover, if five regions, in particular Aktobe, Kostanay, Kyzylorda, South Kazakhstan regions and the city of Almaty, provided the documentation for the full amount, then other seven regions, such as Akmola, Atyrau, West Kazakhstan, Karaganda, Mangistau, Pavlodar and North Kazakhstan regions, did not provide any documentation at all. That is why these seven regions may be left without funding for the credit housing construction at the beginning of next year.”

The percentage of the requests, developed for the housing construction for the persons on the affordable housing waiting list and young families, was slightly higher and amounted to 61%. However the full documentation package for the whole amount was provided only by two regions, which are South Kazakhstan region and city of Almaty, while the Atyrau and Mangistau regions failed to provide the lists. “That is to say, at the beginning of next year these two regions may be left without funding not only for the credit housing construction, but as for the rental housing as well” – complained the Vice Minister.

Thus, as today the state is a major customer of the construction industry, the problem of fast and accurate application of budget funds is of particular importance. It means that this year can become a real watershed for the construction industry only in the event that the Government fulfills its long-standing threats and begins to “break” the budgets of those Akimats, which do not disburse funds...

Table of contents
Red Code for Akims  Editorial 
· 2016 №1  №2  №3  №4  №5
· 2015 №1  №2  №3  №4  №5  №6
· 2014 №1  №2  №3  №4  №5  №6
· 2013 №1  №2  №3  №4  №5  №6
· 2012 №1  №2  №3  №4  №5  №6
· 2011 №1  №2  №3  №4  №5  №6
· 2010 №1  №2  №3  №4  №5/6
· 2009 №1  №2  №3  №4  №5  №6
· 2008 №1  №2  №3  №4  №5/6
· 2007 №1  №2  №3  №4
· 2006 №1  №2  №3  №4
· 2005 №1  №2  №3  №4
· 2004 №1  №2  №3  №4
· 2003 №1  №2  №3  №4
· 2002 №1  №2  №3  №4
· 2001 №1/2  №3/4  №5/6
· 2000 №1  №2  №3

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