Poland: How are developers financing their housing projects
How do companies raise capital to build new projects? Do developers find it difficult to obtain financing for their next housing projects? What terms and conditions do banks offer? What impact do the costs of project financing have on the overall cost of housing construction?
Tomasz Kaleta, Sales Department Director, Develia S.A..
We are a large company with a stable financial situation. We use bank loans to a small extent, mainly for the largest projects. In the vast majority of cases, we finance our investments with our own funds and customer contributions. The financial terms currently offered do not differ from those offered in recent years, with both margins and other credit parameters maintaining stable levels. We estimate the total share of financing costs in the budget of a residential project at 3-5 per cent.
Zuzanna Należyta, commercial director at Eco Classic.
We have not noticed any particular difficulties in obtaining financing. What is noticeable is the more assertive attitude of the banks and, consequently, worse conditions, i.e. the increase of the own contribution and the % of realised sales to start loans.
Angelika Kliś, Atal S.A. board member.
We are a very reliable partner in the financial instruments market. This makes it easier for us to raise funds from the market on attractive terms. This is exemplified by the recent bond issue and the F-series share issue. The capital for project financing comes from our own funds and customer contributions.
Yaron Shama, vice-president, CFO of Ronson Development
We do not have any difficulties in obtaining financing for our current projects, which is due to the company's good credit history. We raise capital for the construction of further investments by issuing bonds through private placement and public offerings, which we also do not have any particular problems with.
As far as financing conditions are concerned, apart from the change in the WIBOR, they have remained unchanged over the last 1.5 years, and in some cases have improved, because, for example, we were able to negotiate lower interest margins. Construction costs are rather stable, although of course they are influenced by WIBOR.
Małgorzata Ostrowska, Director of the Marketing and Sales Division at J.W. Construction.
Due to our long, more than 30-year activity on the market and the accumulation of a stable financial cushion and assets, we do not face the problem of investment financing heavily. What is more, some of them are financed entirely with our own funds, by launching already completed flats for sale. This is the case, for example, with the Naturalnie Aluzyjna investment in Warsaw's Białołęka district. Other projects are implemented with the partial support of bank loans, which, due to inflation and rising interest rates, have been reflected in an increase in the cost of investment implementation.
Cezary Grabowski, Sales and Marketing Director of Bouygues Immoblier Polska.
Our financial results are very good and we have no problems with raising funds for further projects. We are also not affected by difficulties related to investment loans.
Joanna Chojecka, Sales and Marketing Director for Warsaw and Wrocław at Robyg Group.
The biggest challenge for developers at the moment is launching new investments due to the lengthening time of obtaining building permits. The waiting time for a building permit now takes about 1.5-2 years, whereas it used to be 6-9 months. Due to the limited access to land, and also due to the low number of building permits issued, it significantly slows down the process of project implementation. Therefore, the state administration as well as the local government should facilitate procedures as much as possible so that construction can be carried out as efficiently as possible. This is an area that should certainly be improved.
It is certainly also important to acquire new land. The TAG Group, which in Poland owns Robyg and Vantage, has one of the largest land banks among developers in Poland, enabling the construction of around 23,000 flats. The availability of land is now less, but there is still a huge potential for the development of urban spaces and the delivery of an interesting residential offer by developers. The signing of an agreement with the CenterBridge fund was very important for our development. Our cooperation has taken off and several projects are already underway. The important thing is that, having a partner, we can think about bigger purchases.
Anna Bieńko, Sales Director at Wawel Service.
Wawel Service is a well-established Group that enjoys trust on the financial market and we have no trouble obtaining financing for new projects. We still want to finance them with bank loans. On the other hand, we expect the costs to be higher in the newly started projects and this will certainly translate into an increase in the price of flats.
Tomasz Dotkuś, vice-president of the management board for finance at Lokum Deweloper.
The company's project financing model assumes the use of both own and third-party funds, such as bank credit. The already repeated increases in interest rates have had a major impact on the increase in costs related to financing investments, while we observe that the recently obtained conditions for obtaining funds are more favourable compared to the previous ones. The company's current liquidity situation allows for a gradual reduction in third-party financing of new projects. The most noticeable in investment financing costs are outlays for the purchase of land. Land and property transactions for the construction of new estates are financed from the proceeds of bond issues and the profit generated.
It is precisely the costs of land purchase that account for a very significant share of total capital expenditure. Due to the low availability of suitable plots of land, their prices are very high. In addition, the process culminating in the obtaining of a building permit is highly protracted and may even take several years. During this time, we incur the cost of interest on the bonds, which translates into a significant value over several years. Consequently, the share of these interest costs in the price of a flat in new developments may amount to as much as PLN 2 000 to the price of a square metre of a flat. Naturally, these costs will ultimately have to be borne by the purchaser of the flat. That is why it is so important to shorten the time needed for developers to obtain building permits. This will have a positive impact on the overall development costs, which in turn will make it possible to reduce the dynamics of housing price increases. Responsible city authorities understand this well and are increasingly willing to use administrative tools to shorten the process, such as the housing speculative law.
Mariola Żak, sales and marketing director at Aurec Home.
We carry out all our investments with our own funds. As a result, we have no need for external financing. This is a very safe situation for our customers, as we are not threatened by the loss of liquidity, which is difficult to maintain, for example, in the event of a significant drop in sales at a construction site in progress. We recognise that lending is currently very complicated and lengthy and that developers primarily use financing raised from capital. In addition, the amendment of the Development Act, which has imposed additional financial burdens and obligations on developers, is also adversely affecting their financial situation. In the case of small companies, there is a freeze on investments, and among large players, there are strategic changes.
Joanna Szafranek, CFO at Okam.
Good projects in attractive locations will always defend themselves in the process of obtaining external financing. Therefore, despite some turbulence on the financial markets in recent months, we have not experienced problems in raising debt financing. We also issued corporate bonds in July 2023, which attracted significantly more interest than the anticipated issuance pool, both among private and institutional investors.
As a general rule, the trend towards a tightening of the banks' financial policy is evident. On the other hand, it should be remembered that a bank analyses a specific project carried out by a specific developer and, therefore, the financing conditions granted by a given bank may differ significantly. We have not felt over the last few processes that the terms and conditions received are significantly worse than historical ones.
Damian Tomasik, founder of Alter Investment.
In line with our current strategy, we do not use bank financing. We are currently considering raising financings in the form of private debt or joint ventures and we are seeing a lot of interest from operators in this area. The costs of financings are of course higher than they have been over the past few years. However, I am noticing a downward trend in discussions as potential capital providers appreciate our track record and the quality of the projects we offer. In recent months, we have finalised a joint venture cooperation on the first phase of our project in Pomlewo near Gdansk. It took only three months from going to market with this project to finalising the cooperation, so it is clear that well-prepared offers have a chance of efficiently obtaining financing on good terms.
Source: dompress.pl
Photo: Centralna Park, Develia
