1. Give added value to old buildings

Low Cost proposals to help Romanian economy exit the crisis:

Romanian economy has faced better times than nowadays. While the following period will be difficult for everyone (and especially the weakest ones of us), it is more than necessary to restart the “economic engine” that can move the country. Having this in mind, it is time to choose and implement some simple, low cost proposals in order to see things improving in the following months and the near future.

1. Give added value to the old buildings

Today’s facts

– The “miracle” of Romanian economy during 2004 – 2008 was driven by the expansion in construction and Real Estate segments. Them being ceased or continuously declining, it will be very difficult to re-establish a serious growth.
– Construction and Real Estate segments are the ones which:

1.   Influence more than 200 professions.
2.   Spread money to thousands of people and not only to few rich.
3.   Have immediate impact in people’s life and the market in general.
4.   Create sustainable and visible wealth for the majority of population.
5.   Give to the State almost 50 Euro back (all kinds of taxes, consumption etc) for every 100 Euro invested.

– The stock of new (2000 – 2009) apartment blocks is very small comparing to the old ones.
– 70% of residential projects which started in 2007 or later face tremendous difficulties in selling their apartments. Nowadays most of them (despite the 20 – 50% price deduction) still do not sell, as they do not offer to people what they want to buy, in terms of location, surface, facilities and mainly price.
– After this “bloody” experience, it is expected that most of developers will be cautious or will simply avoid developing apartments in the near future. Banks are expected to be very careful while financing new projects as well. All of them will need at least 3 – 5 years to forget this traumatic experience.
– So, due to the economic environment, the mistakes of the past and several other reasons, we do not expect a drastic increase of new projects for apartments. Despite the “need for 700.000 – 1.000.000 new homes over the next 10 years time” (as many surveys predicted in the past) the country is not ready to finance and absorb this stock of new properties.
– Millions of Romanians will continue living in old blocks, which will not be demolished. These people face many small problems in daily basis, as they live in old, not renovated properties. The quality of their life is hurt by all these.
– Tens of thousands of old buildings lack the basic facilities that are necessary for a civilized life today.

Proposal: Invest in the old blocks, even if it sounds weird at first glance

Many people will think “he is crazy”. I know and fully agree that we have to promote the idea of new blocks, they are the best ones from all points of view and mainly for the end user who will live there. But:

1.      This is not possible to happen massively over the following years.
2.      The Romanian economy needs to be boosted fast.
3.      Romanian people should see their life becoming better NOW or soon, not in 10 – 15 years when things will improve.

Proposed measures

– We should create a list of all necessary improvements in old buildings: Control the quality of cement, refurbish the interior common areas, upgrade the fascade (installing isolation, improvements, painting etc), replace the cables and pipes etc.
– We should establish easy, fast and objective budgets for all these investments, allowing to each block of flats to act as independent. All people should be able to access this feedback online, without many implications and complicated “bureaucracies”.
– They should be able to collaborate with experts (architects, consultants etc) and apply easily for the State’s aid. They should find 5 – 10 templates online, in order to be able to estimate by themselves how much the whole project will cost approximately (and then how much each apartment should pay, based on its sq.m. etc)
– The Romanian State should give a guarantee for a loan covering 70% of the value of investment. *
– Instead of creating new organizations and procedures, we can use the mechanism for “Prima Casa” and improve its procedures.
– We can also connect this project with solar energy. We can prepare fast the legal frame in order for all buildings to have the right to install solar panels on their roof. There are many investors who can invest themselves to this project and provide to the owners of apartments a rent for 20 years (minimum).
– This rent can be used either to lower the bank installment (paying 20 – 30% of it) or to lower the monthly costs of the block (intretinere) (by 50% or even more!).

* (many people will propose the State not to provide just a guarantee in order for people to borrow money, but to actually give them Grants for 50 – 70% of the total budget, “because people are poor” etc. I doubt if this can work without huge scandals to be created. We should focus on citizens who are responsible and serious, not the ones who may want money by doing nothing. We should avoid the creation of problems that the bureaucratic State will not be able to control. Theoretically talking, there are also European Grants available for this kind of projects but they need time, years…)

Results

– The psychology of the market will change from the first day that this project will be implemented.
– Thousands of people will finally know what to do in order to improve the value of their property and life.
– The market will revive and tens of professions will get involved.
– Many people will prefer to invest 10.000 Euro in their property and prolong its value for 10 – 20 years
– New projects of apartments will be forced to offer “something more” in order to attract clients, not just the basics (which are not available in most of the old buildings).
– The Romanian State will start receiving money from all sorts of taxes, as the economy will move.
– I am not an expert, but I expect this measure to create thousands of new jobs, increase people’s incomes and the Gross Domestic Product of Romanian Economy.

PS. I know that many people will say “yes, but if we do this, an old apartment will remain old and renovated. They are correct, a new apartment is better. But as I explained to you, for various reasons we don’t have the ability to buy enough new apartments over the next few years.