Will the next amendments to the Development Act increase investment transparency and strengthen the protection of home buyers? How does the industry assess the proposed changes, especially the restrictive ban on indexing the price of an apartment after the preliminary agreement has been signed? What impact will the new regulations have on the housing market? The survey was prepared by the real estate website dompress.pl.
Tomasz Kaleta, Managing Director for Sales and Marketing at Develia
We assess most of the proposed changes to the Development Act positively, as they are aimed at increasing market transparency and further professionalising the sector. Expanding the DOM portal to include data on the activities of development companies may help customers make more informed purchasing decisions and strengthen trust in the industry. We also positively assess the clarification of information standards concerning investments and the strengthening of customer protection in the reservation and apartment handover processes, as this may help build more transparent rules for the functioning of the market.
However, some provisions require further consultation and refinement. Our greatest concerns relate to the proposed ban on indexing the price of an apartment after the agreement has been signed, particularly in situations involving the final measurement of the unit. In practice, minor differences sometimes occur between the actual floor area of an apartment and the design assumptions, for example as a result of changes introduced at the customer’s request during the implementation of the investment. Such issues require clarification in order to maintain a balance between consumer protection and the realities of the construction process.
Witold Kikolski, Member of the Management Board of MS Waryński Development S.A.
Changes aimed at increasing investment transparency and strengthening buyer protection are, in principle, something we assess positively. Building trust in the housing market is also in the interest of developers. Solutions concerning greater transparency in the sales process or clarification of the rules for returning reservation fees may have a positive impact on customers’ sense of security.
At the same time, the proposal for a complete ban on price indexation after signing the agreement raises the most doubts, especially in conditions of changing investment implementation costs. It is worth emphasising, however, that in projects carried out so far by the Waryński Group, we have excluded the possibility of applying price indexation, ensuring customers unchanged financial terms after the agreement has been concluded.
We do not see this proposal directly as discrimination against the industry. However, transferring the entire cost risk solely to the developer may result in a more cautious approach to launching new investments and calculating prices. In practice, this may mean the need to include a greater safety margin already at the stage of setting offer prices, which may ultimately translate into the cost of purchasing apartments. We therefore hope for solutions that will strengthen buyer protection while remaining adequate to the realities of conducting the investment process.
Grzegorz Smoliński, Member of the Management Board of Dom Development
We assess the proposed changes to the Development Act as generally positive, especially in terms of increasing market transparency and strengthening buyer protection. Solutions concerning broader access to information about investments, implementation standards or the developer’s situation may support more informed customer decisions and build greater trust in the housing market.
We assess the proposal for a complete ban on price indexation after signing the agreement neutrally. In our agreements, we have never used provisions allowing the price to be updated as a result of, for example, rising inflation, thereby ensuring transaction predictability and security for our customers.
Mateusz Bromboszcz, Vice-President of the Management Board of Atal
The current regulations protect buyers’ interests very well. This is the result of many years of regulation of the industry, which now operates in a completely different legal environment than it did a dozen or so years ago. Even today, the customer has access to very detailed knowledge about the investment and the company from which they are buying an apartment, thanks, among other things, to an extensive and detailed information prospectus.
We look at the proposal for another amendment to the Development Act from the perspective of a mature company that has been present on the market for more than 35 years and therefore applies high corporate and customer service standards. As a public company listed on the stock exchange, we are also characterised by a very high level of transparency. Our customers see this as an advantage and a guarantee of reliability, and take it into account when choosing investments from Atal’s portfolio.
Zuzanna Należyta, Commercial Director at Eco Classic
This is already the seventh amendment to the Development Act, which says a lot about the quality of the regulations and the negative attitude towards the industry. The draft provides for a ban on price indexation, but such indexation has been used by very few companies, especially recently. It is unclear whether a price correction related to differences in floor area after construction is also considered indexation. The price may be adjusted both upwards and downwards. We refund money if we build a smaller area.
The amendment provides for even greater control by the bank, although the bank already monitors the progress of works. In addition, some planned changes are inconsistent, for example with the Commercial Companies Code. Some changes are absurd. Since the Development Act came into force, the finishing standard of the unit has been an attachment to the template development agreement, and the template agreement is an attachment to the prospectus. What is the purpose, then, of expanding the prospectus with the same information about the finishing standard? I have never encountered restrictions on customer-appointed specialists participating in apartment handovers, so this change will not alter anything. Apartment layouts are to be published on the developer’s website. I do not know whether there is any company that does not present layouts on its website. Besides, every customer must receive, upon request, a prospectus with the apartment layout. This provision already exists.
The website of the Ministry of Development and Technology contains information about the planned changes, including an increase in the amount refunded from the reservation fee if the promised agreement is refused. A reservation agreement is not a preliminary agreement under which a promised agreement is concluded. As the name suggests, it is a reservation agreement — an agreement to reserve, that is, to withdraw the unit from sale, not to transfer ownership. We do not assess the planned changes positively, because they will not realistically improve buyer safety and will only make the preparation and sales process more difficult.
Joanna Chojecka, Sales and Marketing Director for Warsaw, Wrocław and Łódź at Robyg Group
From Robyg’s perspective, every change that increases market safety and transparency is, in principle, beneficial for customers and supports the professionalisation of the industry. We positively assess solutions concerning greater investment transparency and the protection of funds paid by buyers. The housing market should be based on clear rules and predictability.
The proposal for a complete ban on price indexation after signing the agreement is what raises the most emotion. In our view, the issue requires a balanced approach. Developers operate in conditions of dynamically changing construction, energy, materials and financing costs. In practice, the complete elimination of indexation mechanisms may mean transferring all economic risk exclusively to companies implementing multi-year investments. I would not call this discrimination against the industry, but it is certainly a very restrictive solution that may limit market flexibility.
The new regulations may translate into higher investment costs and, consequently, higher apartment prices and a more conservative approach to launching new projects. At the same time, greater transparency may have a positive impact on customer trust in the primary market.
Damian Tomasik, President of the Management Board of Alter Investment
The proposed changes to the Development Act should be assessed from two perspectives. On the one hand, greater investment transparency and better customer protection are necessary and beneficial directions for the market. The customer should have clarity about the purchase terms, schedule and security of funds.
On the other hand, the attempt to introduce a complete ban on price indexation after signing the agreement raises serious doubts. The development market operates in a multi-year investment cycle, in which implementation costs can change dynamically — from inflation and construction material prices to the costs of debt financing and contracting.
In practice, this may bring the opposite effect to that intended. Developers will be forced to include larger safety buffers already at the start of sales, which will translate into higher apartment prices. In addition, some companies may delay launching projects for sale until costs stabilise to a greater extent, in order to reduce the risk of carrying out a project at a loss.
As a result, the new regulations may lead to higher apartment prices, a smaller supply of new investments, longer sales processes and higher project financing costs. Ultimately, it will be the customers — whom the law is intended to protect — who will feel this most. That is why a reasonable balance is needed between protecting the buyer and the realities of implementing multi-year development projects in a changing economic environment. The key is to build transparent indexation rules, not to eliminate them completely. Otherwise, the market will become more cautious, less flexible and simply more expensive.
Andrzej Swoboda, Vice-President of the Management Board, CTE Group
Overregulation of the market may not benefit either the companies operating in it or customers. It reduces the willingness to develop business activity, which in turn affects housing supply and prices in the future. The proposed changes to the Development Act are, of course, intended to increase buyer protection and improve market transparency, which in itself is the right direction. However, it is worth maintaining a balance between the interests of customers and the realities of running development activity.
The greatest doubts concern the proposal to introduce a complete ban on price indexation after signing the agreement. In practice, this concerns, among other things, situations involving the settlement of minor measurement differences, when after the completion of construction an apartment turns out to be slightly larger than assumed in the design, as well as possible changes in VAT rates, over which the developer has no influence. It is difficult to consider fully fair a solution under which the entrepreneur is obliged to bear all consequences of changes beyond their control without the possibility of appropriately settling the agreement.
It should also be remembered that the Development Act was significantly amended not long ago, and further frequent changes to the regulations have a negative impact on the stability and predictability of doing business. The housing market requires long-term planning, which is why excessive regulatory volatility increases investment risk and may translate into fewer new investments and higher apartment prices for customers.
Source: managerplus.pl
