Financing construction

Financing construction is the use of the funds under management by the financial institution (having the permission for the conduction of such a kind of activity) with the aim of the objects’ construction under the terms of the contract.

The requirement for the raising of funds of the population in the sphere of construction only through specialized funds is stipulated by Law of Ukraine #978-IV “On financial-credit mechanisms and property management in the process of house-building operations on real-estate” as of June 19, 2003.

For the investor the extension of such a mechanism means the presence of controlled by the State commission for the regulation of financial services financial middleman, that decreases the risks of the investor and makes the process of investment more transparent.

Depending on the purpose of funds’ establishment they may be:

Fund of financing construction (if the purpose is the purchase/obtaining the dwelling).
Fund of operations on real estate (if the aim of the certifacates’ owners is to gain profit).

Asset management company “ITT-Management” offers an alterative to funds of financing construction and funds of operations on real estate – financing construction by means of options’ and bonds’ emission.

In general option is the insurance of risk of the possible losses related to the changes in price of the certain object. The category “option” was brought into international practice in 1982 at the Chicago commodity exchange as a part of the experimental governmental program. The success of such type of contracts provided their use in various spheres of economic activity.

In the field of the real estate option becomes the right of his owner to purchase the dwelling at a fixed price in future, safeguarding himself from possible price growth. So if the market price of a square meter makes one and a half thousand dollars, you will get the possibility to fix the right to purchase an apartment in a house, that is being built, at the same price in future, regardless the changes of price at the market. Certainly, such possibility is obtained for certain fee, however, as a rule, and especially in our country, this fee is considerably lower than the volumes of dwelling price growth.

It is important to point out that the option is a derivative security, inseparable from a concrete commodity. In the questions related to the real estate, this feature gives the opportunity to «tie» concrete security to the concrete apartment or office, with all this going it is impossible to issue option for the square larger than the square of the real estate object being sold. So the option protects the buyer.

Options in our country is still not widespread type of securities. However «ІТТ-Management» has developed for you an efficient alternative of applying options in the sphere of financing construction.