The Consequences of the Construction Sector's Downturn Will Be Felt by All: Gurgen Grigoryan

The increase in state duties in the area of construction permits has led to a number of institutional and localized issues. Gurgen Grigoryan, the President of the Armenian Developers’ Association, stated this during discussions in the National Assembly about the raised rates for construction permits.

According to Grigoryan, localized issues include the regulations of local duties and fees set for 2024 in the Yerevan municipality, as well as nationwide problems that relate to the daily activities of individuals involved in construction both in Yerevan and outside the city.

He pointed out that they have studied the experiences of capital cities and other major cities in post-Soviet countries and found that Yerevan stands out for imposing such fees. In those cities, all urban planning permissions are either free or set at symbolic amounts.

He also stated that, according to the presented zoning calculations, it is more attractive to carry out construction in central areas, as profitability there is high and the weight of the duty is not a significant burden. Grigoryan remarked, “However, carrying out construction in peripheral areas is increasingly becoming impossible, as only economic-class construction is being undertaken there, and the weight of the duty plays a critical role.”

“There are zones where the total of all construction duties and payments exceeds the anticipated budgetary profit, specifically by 109 percent. Meanwhile, let us not forget that, for example, the profit tax is 18 percent. That is to say, local duties and payments together amount to 5-6 times the profit tax. This means that developers either have to substantially raise property unit prices, which is not so realistic in the current market conditions, or construction will no longer be profitable for businesses, which may either relocate to other countries or shift to other sectors,” Grigoryan stated.

Grigoryan continued to elaborate on the issues. According to him, a climate of distrust has formed from the perspective of foreign investors: “Many investors have reported in recent months that they refuse to invest because they lack predictability in the business environment.”

The industry representative emphasized their plea for special attention to be given to construction activities, as it is a locomotive sector for the economy. “If there are downturns here, via the domino effect, the entire interconnected economic system will face a decline, from banks to agriculture. We will all feel its consequences, even the grandmother selling sunflower seeds on the street will sense the economic impact,” he reiterated.