Author: Fuad HUSEYNALIYEV Baku
- Your agency has moved into more active phase recently, especially after the groundbreaking ceremony of the first social housing complex held with the participation of President Ilham Aliyev. Tell us more about this complex. How many buildings and apartments will be there? When do you expect commissioning of the complex and the provision of apartments?
- First of all, I would like to emphasize that the improvement of living conditions of citizens is one of the main priorities of the social policy of the Azerbaijani state. In this regard, on the initiative and with the support of our President Ilham Aliyev, the implementation of plans to increase affordability of housing construction and preferential apartments was launched in 2016. To achieve this as well as to ensure state regulation in this area, the State Agency for Housing under the President of Azerbaijan Republic was created in April last year.
Shortly after this, an isolated plot of 11.6 ha was identified and allocated for the first project in Baku near the outer ring road. The architectural design of residential complex has been developed, which also includes the objects of social and domestic infrastructure. In December 2016, a groundbreaking ceremony of laying the first homes and schools in this area was held with the participation of President Ilham Aliyev and the First Lady Mehriban Aliyeva. The project covers 29 residential houses, including 12 twelve-storey single block apartment houses, and 17 nine-storey bi-block buildings. 1,854 apartments in these buildings consist of 301 single-room flats, 1110 double-room flats and 443 triple-room flats. In addition, there will be a school for 960 pupils and a kindergarten for 240 children. Under some buildings will be non-residential premises for social and economic projects. In addition, a special area is allocated for shopping center.
I want to note that the main attention was paid to compliance of our project to all planning and regulatory norms. For example, most of the complex is planned with creating comfortable living conditions in mind. The buildings will be cover only 25% of the territory while the remaining 75% will go under green areas, roads, big playgrounds.
We pay special care to the process of designing the houses, the development of apartments with optimal configurations. As a result, along with attractive design of facades, we are able to provide natural ventilation to almost all apartments. Despite the fact that we will build mainly small-sized apartments and affordable housing for the poor. At the same time, we do not compromise in matters of established standards and quality of construction, which will be strictly monitored by us at all stages of construction.
Regarding the size of flats, single-room flats will be 31-33 sq.m, double-room flats - 50-58 sq.m and triple-room flats - about 70 sq.m. All the apartments are fully renovated and equipped with kitchen furniture.
We plan to deliver the first buildings in the next year.
- Which categories of the population will be able to purchase apartments in the complex built under the order of your agency?
- Decree of 16 November 2016 implementing rules for social housing were defined by President Ilham Aliyev, in which is specified the mechanism of its purchase by citizens and the population categories that have the right to buy housing. The main focus is on young families. To ensure transparency in this area, our agency was instructed to establish an electronic portal on affordable housing. The idea is to ensure hassle-free online registration for people, have them go through authorization on the website as social housing applicants.
As soon as 30% of the scope of construction works is over, we will initiate the sales of apartments on preferential terms. The applicants will be able to choose apartments, the floors, squaring, etc. electronically. Accordingly, they will be able to choose the terms of payment - it may be a lump sum payment or a soft loan.
The program of social housing provides two main benefits: i) price below the market prices, depending on the location of the apartments; ii) the possibility of long-term payment through the social mortgage program of the Azerbaijan Mortgage Fund with an annual rate of 4%.
Our calculations show that using a 30-year social mortgage loan on a single-room apartment can cost no more than ₼130-150, double-room flats about ₼200-250, and triple-room flats about ₼300-350 per month. In fact, by paying the amount lower than the rental price for similar-type apartments, people may become the owners of the property.
In addition, in accordance with the above rules, we will use the pre-registering property rights system in Azerbaijan, which is legally approved but is not widely used. Electronic system of affordable housing should start operating a portal "Electronic government" starting on May 1, 2017. Currently the work is underway on the preparation of its statutes, after the approval of which we intend, together with "ASAN Service" to start registration of people applying for subsidized housing. We have already started negotiations with the State Agency for the provision of services to citizens and social innovation to provide our employees with opportunities to accept documents for registration to the relevant centers of "ASAN Service".
- How do you intend to achieve lower prices in the construction of residential complexes? In general, what will be the price range of apartments?
- It is too early to talk about prices. They will be determined in the process of construction. In any case, they will be below market prices. To create conditions for the construction of subsidized housing through the allocation of land and infrastructure supply, the state gives us the opportunity to reach the price level, which will be available to the general population, low-income families.
In addition, our apartments will differ from their counterparts in the market for yet another reason. Some private developers often overestimate the actual area of the apartments, including in its interior and exterior walls, that is, are settled outside the perimeter. We will calculate the cost of apartments on the inner perimeter. This payment will also be presented on the outer perimeter of the area to people it was easier to navigate and compare prices on the market. For example, the area we offer a one-room apartment of 33 sq.m. When calculating the outer perimeter, it is greater than 40 sq.m. This means more than 20% of difference.
The low cost of the construction will be ensured by the selection of contractors through the tender. They should offer lower prices but at the same time guarantee the timely execution and high quality of construction works.
- What are other benefits of the program of social housing?
- Affordable housing project has another, purely economic purpose. In order to increase the stability and sustainability of the project, we have to attract the private business, which is one of our priority directions. Over time, we will try to reduce dependence on budgetary financing and increase the share of the private sector. But in order to achieve this, we need to show the private sector that it is beneficial for them to participate in our projects in terms of generating profit. This is not an easy job in social housing business.
We are currently working on mechanisms of state-private partnership, which would be interesting for private investors and developers. We would be able to make use of long-term private investment while maintaining the availability of new housing in the future.
I would like to also note that we make use of simplified permissions system on the territories allocated to our agency. The whole process of issuing building permits prior to acceptance by the Agency is carried out on the principle of "single window". We do provide all the documents, coordinate with government agencies, so we think that it will also be of interest to the private sector.
Another trend that has economic importance for our country is an increase in the volume of construction. The construction sector is one of the driving sectors of the economy and has a great impact on GDP. The expansion of our activities and attraction to cooperation of more private companies will result in an increase of jobs in the construction industry. At the same time, of course, we will develop related spheres with a priority on construction materials. Over the past ten years, we have many plants built in this sector, and our calculations show that the construction of affordable housing will be able to use 80-90% of local building materials.
- You have studied international experience in affordable housing. What models are particularly interesting?
- The striking and closest example is the achievements of the Turkish organization TOKI, which was established in 1984 and has made great strides so far. In 2003, they set a goal to build one million apartments and achieved this goal by 70% already. They were able to make use of both public finance and private investors. In fact, the profit they generate is used to increase the affordability of housing. Some profit is used to reduce costs or the construction of additional residential areas.
In accordance with the "Roadmap for the development of affordable housing" approved by the President of Azerbaijan in December 2016, the state agency will also be involved in the premium housing projects. Based on the experience of TOKI, we see that profits are generated in joint projects with the private sector in the premium property sector, which make it possible to increase the availability of housing, construction of additional volumes of subsidized housing and increase the sustainability of this model.
We also studied the experience of Singapore, which is quite advanced in this direction. Since 1960, they have successfully operated organization named Housing Development Board. Today, 85% of Singapore's population lives in houses built by this organization.
Often when we talk about social or affordable housing, the first thing, which comes to mind, is cheap, low-quality apartments designed only for the poor. Singapore's experience shows that they have completely changed the concept. If we look at the so-called "housing ladder", the people at whatever stage of the ladder may be, all the time trying to improve their housing situation and rise to a higher level. It really is the main engine of growth in the housing sector. Whenever people improve their living conditions, they leave old apartments for those people who are on the lower level of the "housing ladder" and / or in need of better living conditions. It does not matter whether they sell their apartments, lease them, transfer them by inheritance, etc. This success is based on the Singaporean model: increasing the affordability of housing at any stage of the "housing ladder". That is why Singapore is not shameful to live in houses built for this purpose.
At the same time, we have also studied the experience of Germany, Russia and other countries. This process is constantly ongoing. We also establish relations with international organizations with experience in this area.
- Is it possible that more categories of population are able to take advantage of affordable housing in the future? Do you think the social housing program will lead to problems for the private sector?
- No way, we do not expect our activities to create any problems for private companies. On the contrary, our agency will focus on supporting private sector development. After all, we do not build anything. Private companies will be involved in all our projects as contractors or developers. This will give them an extra boost and they will be able to develop further.
Preferential housing is intended only for certain categories of the population, the list of which is approved by presidential decree. Most likely, depending on the dynamics of social policy, this list can be modified over time. The agency, as well as relevant state agencies may apply to the government with proposals to expand these categories. This will be possible once we have determined to be the database, the volume of flats and carried out some analytical work.
- How will the management of houses be implemented after their construction and delivery?
- First of all, we have to create conditions so that people feel comfortable both in terms of living conditions, as well as financially. The next step is to ensure the control of houses and small towns. Our goal is to create an effective process of control and set certain standards. In accordance with the legislation, we will offer the management of houses by a department under the auspices of MIDA OJSC but people can choose self-government, of course.
In general, the whole apartment block and the land beneath it will be co-owned by the residents. At the same time, our agency will be responsible for ensuring government regulation on the territory of residential areas.
We want to create an environment where people feel themselves the true owners of residential blocks. We hope that this will motivate citizens to participate more actively in public life. Earlier people were not as mobile as they are today. They lived long time in their homes having good and trusting relations with their neighbors. No wonder we have a proverb that "a close neighbor is better than a distant relative." We hope this traditions continues further, and we will make every effort to achieve this.
- The package of strategic roadmaps for the development of national economy and its respective sectors approved by the President in December last year, there is a document on the development of affordable housing in Azerbaijan. What are the priorities included in the document and what is the objective and goals of your state agency under this roadmap?
- The roadmap for the development of affordable housing has three stages to be implemented until 2020, 2025 and after 2025.
The utmost priority is to create 10 thousand new jobs in this sector until 2020. In general, the implementation of social housing construction program will lead to the growth of GDP to ₼250 million by 2020. The first stage is more focused on Baku.
The document also envisages the delivery of about 3 thousand apartments, which is approximately 10% of the real estate market.
In later stages, it is planned to develop a system of affordable housing in other cities and regions of the country.
It is expected that within the framework of the roadmap, 5% of unused state land will be used, and this will allow a 10% reduction in the cost of construction of apartments.
According to the document, it is planned to attract investments of ₼900 million by 2020.
The roadmap definitely has a huge social significance. At the same time, it is one of the documents aimed at development of the national economy. One of the main tasks of the document is to create a model of sustainable development, which will gradually decrease the dependency on the state budget in the long term.
Along with the improvement of living conditions of citizens and the strengthening of social protection of the population, one of the main objectives of the roadmap is the strengthening of the competitive environment in the construction sector to ensure the rational use of budgetary funds and the improvement of public administration in the areas of construction and urban Development.
- What are your plans for the construction of these social housing projects?
- The statistical data and our studies show that Baku has the greatest need for affordable housing to date. Therefore, it was decided to start the next project in Baku.
Among the areas proposed by our colleagues from the relevant government departments, the most favorable piece of land, both in terms of the development plan and the supply of transport and other engineering and communication networks, is the territory at Surakhani District. This land area of 20 hectares is located between the highway Zig-airport and Hovsan settlement.
Currently, we are on final to agree the issue with responsible state departments. After a decision by the Cabinet of Ministers on the transfer of land at the disposal of MIDA LTD, we will immediately begin developing a detailed plan of the territory, followed by the preparation of design and estimates. According to preliminary calculations, the number of apartments built in the territory will be about 4000. However, the final figure will depend on a number of details that are under discussion currently.
In the future, we plan to implement relevant projects in other cities and district centers of the country.