The increase of state duties in the field of building permits has led to a number of institutional and local problems. Gurgen Grigoryan, the chairman of the “Armenian Association of Builders” NGO, announced at the hearings on the topic of raising building permit rates in the National Assembly.
According to him, one of the problems of a local nature is the setting of the 2024 rates of local duties and fees set in the Yerevan community, which are relevant to the Yerevan community, there are also problems of a nationwide scale, which are related to the daily activities of the people who carry out construction both in Yerevan and outside of Yerevan.
Gurgen Grigoryan, before addressing the problems of increasing the state fees in the sector, noticed that there are two positive considerations from the Yerevan Municipality, and only two of their manny proposals were satisfied: the privilege regarding the started projects of the developers and the privilege set this year for the agreed fee for architectural construction. And the main proposals were not accepted.
He specifically mentioned that they studied the experience of the capitals of post-Soviet countries and other large cities and found out that Yerevan is the only one that stands out with such taxes. In the mentioned cities, all urban progress permits are free of charge or symbolic amounts are set.
“However, it is becoming increasingly impractical to carry out construction in the peripheral zones, because economy-class construction is being carried out there and the weight of the tax plays a big role,” he noted.
“There are zones where all construction fees and fees together amount to 109 percent of the estimated profit. However, letS not forget that, for example, the profit tax is 18 percent. In other words, the local fees and fees together make up the profit tax 5-6 times. it turns out that the developers will either have to considerably increase the prices of property units, which is not very realistic in the current market conditions, conversely, the development will no longer be profitable for business, businesses will either relocate to other countries, or they will move to the field,” said grigoryan.
Gurgen Grigoryan continued to mention the problems. According to him, from the point of view of foreign investors, an atmosphere of mistrust has also formed. “Many investors have warned in recent months that they refuse to invest as they do not have the predictability of the business environment.
He gave an example. “The mentioned situation is similar to a phenomenon where a person buys a Yerevan-Moscow plane ticket for $200,but finds out in the middle of the flight that,such as,the price of getting on the plane is set at $50,000 and he has to pay,” he said.
The representative of the sector mentioned that their request is to show special attention to the construction activity, as it is indeed a locomotive branch for the economy.
“If recessions occur here, the entire interconnected economic system will experience a domino effect. from banks to agriculture. All of us will feel the consequences of this, even the grandmother selling sunflowers on the street will feel the economic effect on herself,” he said.
Grigoryan emphasized that it will also be a result of the demographic problem. “The main goal of the state policy is to ensure demographic growth. Today, we are in a situation where, according to the people, they are coming here from other countries. If this industry declines, Armenian men will have to leave again,” he said.
What are the main challenges facing local authorities in processing building permit applications due to increased state duties?
Interview between Time.news Editor and Expert Gurgen Grigoryan on Building permits and State Duties
Time.news Editor (TNE): Welcome, Gurgen, and thank you for joining us today. There’s been quite a stir around the recent increase in state duties related to building permits. Could you give us a brief background on why thes changes were implemented?
Gurgen Grigoryan (GG): Thank you for having me. The increase in state duties was ostensibly aimed at generating more revenue for local governments and streamlining the permit process. however,the reality is that it’s created a ripple effect of problems for both institutions and local communities.
TNE: that’s quite concerning. What specific institutional problems have arisen from this increase in duties?
GG: One significant issue is the bureaucratic backlog. many local authorities are struggling to process the growing number of permit applications amidst increased fees. This has led to inefficiencies and delays,frustrating both developers and residents.Additionally, there’s a disparity between the resources available to different regions, which exacerbates the problem.
TNE: It sounds like there’s a big gap between intention and reality. How are local communities affected by these changes?
GG: Absolutely. Local communities are feeling the pinch in several ways. For one, higher permit fees can discourage small businesses and individual builders from undertaking new projects. This stagnates economic growth in certain areas. Furthermore, delays in obtaining permits can increase costs for developers, which often get passed down to consumers through higher housing prices.
TNE: That sounds like a classic case of unintended consequences. have there been any responses from the government or local organizations regarding these issues?
GG: Yes, there have been calls for a reassessment of these duties. Some local governments are advocating for a tiered fee system that would consider the size and impact of a project. There’s also been discussion about increasing resources for processing to prevent backlogs. However,actual changes have yet to materialize.
TNE: What do you see as the most effective solution moving forward?
GG: I believe a multi-faceted approach is necessary. Streamlining processes, improving resource allocation, and possibly reevaluating the fee structure to ensure it’s both fair and sustainable would be a good start. Engaging with community stakeholders in this conversation is crucial to ensure that the voices of those impacted are heard.
TNE: That’s a comprehensive viewpoint, Gurgen. Are there any examples from othre regions or countries that we might look to for inspiration?
GG: Absolutely. Some countries have implemented successful frameworks that integrate community feedback into the permit process, which helps ensure that both growth and community needs are met.Cities that prioritize transparency around duties and fees tend to foster better relationships with developers and residents alike.
TNE: It certainly sounds like there’s a path forward if effective interaction and strategic planning are prioritized. before we wrap up, do you have any final thoughts on the current state of building permits considering these developments?
GG: I simply urge stakeholders to engage in a dialogue. Finding a balance between creating a robust economy and fostering community development is essential for the growth of our cities. the latest changes should prompt us to rethink our strategies to build inclusive and sustainable communities.
TNE: Thank you, Gurgen. Your insights are invaluable, and we appreciate your time today. We hope to see positive changes in the building permit landscape soon!
GG: Thank you for having me!