By AZE.US Editorial Board
A buyer purchasing an apartment in Baku pays for the land, concrete, construction labor and the developer’s profit.
But the price may also include costs that cannot be seen during an apartment viewing: waits for permits, interest charged while a project is stalled, poor coordination between government agencies and the risk of another delay.
Those expenses do not provide the buyer with an additional room. Yet they can still add significantly to the price per square meter.
A discussion on the Oct. 28 edition of İTV’s Sabaha Saxlamayaq program raises a more precise question: How much of the increase in housing prices comes from necessary construction requirements, and how much results from the way the sector is administered?
Interest Accumulates While Construction Waits
Marketing specialist Firdovsi Khalilov said permits that once took several months to obtain can now take two or three years in some cases.
He estimated that borrowed financing for construction companies can cost as much as 20% annually.
These are market-participant estimates that require independent verification. The mechanism he described, however, is straightforward. If a company has already invested in land and design work but cannot begin construction, the waiting period costs money.
When apartments are sold, the developer will try to include those costs in the price. Whether it can do so depends on demand and competition, but the delay itself creates expenses that someone must cover.
Buyers are often told simply that everything has become more expensive. They are less often shown how much of the price reflects materials, how much reflects the land and how many months the project spent moving between offices.
Baku Needs Livable Courtyards, but Not Endless Approvals
Khalilov also linked higher costs to stricter enforcement of limits on building density. If less saleable floor space can be constructed on a plot, the cost of the land must be spread across fewer square meters.
That does not mean Baku should return to building on every available courtyard in the name of cheaper housing.
Daylight between buildings, access for emergency services, playgrounds and public spaces matter. Residents already understand the consequences of construction in which the needs of an existing neighborhood are treated as an afterthought.
Enforcing construction standards is necessary. Making a project wait years for a predictable decision is expensive for everyone.
A functioning system should tell an investor in advance what can be built on a particular plot, which documents are required and when a final answer will be issued. The greater the uncertainty, the greater the risk a business will try to incorporate into the sale price.
The Apartment Is Ready, but Infrastructure Can Wait
The program also examined failures to coordinate housing construction with the expansion of utility networks. Khalilov offered a hypothetical example in which an apartment complex must be commissioned even though the utility company does not plan to install a required main line until much later.
That mismatch means participants in the same development process are working according to different schedules.
City authorities should know how much additional demand the networks can handle before new buildings appear. Developers should understand connection requirements before they begin selling apartments. Buyers are entitled to expect that the homes promised to them will be suitable for normal living.
When these issues are resolved during construction rather than before it begins, the result can be additional work, delays and disputes over payment. The final cost may fall on both the buyer and the public budget.
A proposal raised during the program to create a single body to manage the sector prompted debate. A new agency by itself would guarantee nothing. If it merely adds another approval, the cost of administration will rise. What is needed is coordinated decision-making and clear responsibility for deadlines.
Why Developers Choose Similar Projects
Architect Dilgam Ismayilov pointed to another effect of the current system. Complicated approval procedures, he said, narrow the space for independent architectural design.
The economic logic is clear. If an unconventional design increases the likelihood that a project will be returned for revisions and face another wait, an investor may choose a familiar model instead, especially while interest continues to accrue on borrowed money.
The buyer can therefore pay twice for administrative shortcomings: first through additional costs built into the price, and again through a limited choice of layouts and architectural solutions.
But developers cannot use bureaucracy to avoid questions about their own practices. Claims about construction costs, falling profit margins and the need for another price increase should be open to verification. Transparency cannot be demanded only from the state while the economics of private projects remain entirely closed.
The Numbers the Market Needs
The debate over rising apartment prices will become more useful when comparable data are available: actual permit-processing times, reasons projects are returned, utility-connection costs, and the shares of land and financing in total development costs.
That would show where prices are increasing because of objective limits, where they are rising because of company decisions and where buyers are paying for a poorly organized process.
Simplifying procedures would not automatically lower prices. A sufficient housing supply and competition are also necessary. But eliminating needless delays would at least remove expenses that do nothing to improve the apartment itself.
A buyer should pay for the apartment, construction quality and a comfortable living environment. Every year of waiting added to the price deserves a separate explanation.
Source: Vesti Baku.