Delmar Group is a property developer that constructs modern buildings according to international and European standards. It has successfully constructed 148 properties, ranging from shopping and entertainment centers to apartment complexes throughout Ukraine. Its highly successful track record has won it national real estate awards, and in its more than 20-year history, none of its projects have gone unfinished. Here, the group’s general director, Aleksandr Turchin, explains why the conditions are right for German investors to purchase property in Ukraine today, and how his group can minimize risk for investors while maximizing returns
What makes Delmar Group the ideal partner for German investors looking at Ukrainian real estate?
This kind of investment will bring about eight to 10 percent per year of profits in terms of rent. But people are scared because there is risk involved. You buy property to rent out, but unforeseen events can happen. However, we have a system that is very interesting for foreign investors. We have an arrangement with the bank that allows investors to purchase an apartment here, while their money actually stays in their German account. The way it works is that with this money that is still in Germany, we get the credit with a certain percentage. There are also additional guarantees like insurance.
So the funds stay in Germany, and when are they released?
In the very beginning, for investors not to be worried, the money is left in the German account. It gets frozen or credited for a certain amount, but investors should not be worried because the money is still in Germany. If someone doesn’t like the situation, they can cancel the agreement and get their money back. As soon as several years pass and the investor sees that everything is stable and working, then we sell them the apartment directly. We currently have properties available in Kiev and Dnipro. This is a program that has piqued the interest of many investors, especially German investors who are quite risk-averse. Now, German investors have this advantage – they can come to the bank, lease the property and get credit at one or two percent per year. When he or she invests in our project, they will receive eight or 10 percent back annually. We opened a representative office in Germany for the Chinese, and they do the same kind of business through Europe.
What sort of average investment are we talking about?
Any kind, from one apartment to dozens. These are only the new apartments that we have built. Why are our apartments interesting? I myself and Delmar have been in this business for decades. I’m quite a public person and I have a reputation to uphold. So, today our buildings, our apartments and housing are innovative in terms of technology. We have electrical heating, not gas heating; we have a smart home system that actually regulates and solves this issue of the communal payments for heat and water; and the utility payments in our buildings are quite low, which is very important if you want to rent the apartment out.
What’s the forecast for property valuation over time?
Right now, Ukraine is in the stage when it’s being developed according to a prescribed European scenario. Europe is developing Ukraine now, putting a lot of effort into it, and the main goal is for them to stabilize the currency. In the context of Europe and in terms of housing, Ukraine is at the first stages. Look at Poland, for example. Not too long ago, it was at the same level as Ukraine. But now real estate prices have multiplied by three. Much of that is because in Poland, homebuyers started to get cheap credit. Ukraine has not gotten to that situation, and the minimum interest is 16 percent. So the market is based on the personal funding of the population. As soon as we can get cheaper loans, the market will quickly grow. Right now, this is a great opportunity to invest in real estate because there is high demand and the supply is quite low. That has caused the price of real estate to have approximately doubled in the last two years. Ukrainians with income have also been seizing on this opportunity. It’s not uncommon for someone to come to me with the intention to buy a flat for themselves and end up buying four more to rent out. The better the infrastructure becomes in Ukraine, like train routes and planes to Europe, the more tourism will also develop, which is another interesting way to rent apartments. In Ukraine, hotels are built only in the capital, so renting out apartments as vacation stays will be a sector with high demand.
What is the average cost of a one-bed apartment?
An average one-room rent in Dnipro is $500. The price of a refurbished apartment is $50,000. So, in one year you can make around 10 percent.
Delmar is based in Dnipro but has offices in Kiev and Munich. When did you open your German office and what are your activities there?
We opened it 18 months ago. Now, we are actually looking for empty lots to build housing in Germany. Right now, it’s difficult to find lots in German cities because there are few of them and they are quite expensive.
Germany offers the highest price per meter and the cheapest credit. However, it is an extremely rigid business climate there. Investors are very conservative.
How do you hope to expand your business?
Our main priority is to grow our profits, but we are also interested in hiring more people. If you look at markets like Spain, Austria or Eastern Germany, the real estate market is fluctuating. There are risks there too because the margin is small. In Ukraine, we have been able to get between 40 to 100 percent in profits. It’s good for us; we earn money. But we want to expand to Europe because Europe is stability and Europe is reputation.