The record fell. The Prague developer will pay half a billion crowns for the school and park
The representatives of Prague approved the change in the zoning plan of the land on Rohanský ostrov. The development company of billionaire Luďek Sekyra will pay over half a billion crowns to Prague following the change.
As part of the capital’s new rules for private investors, this is the highest contribution to date that an investor makes to the metropolis and invests funds in the city district for the construction of a public space.
According to the Sekyra Group, a substantial part of these funds is to go towards the construction of a park and new schools, which are part of the Rohan City project, while the town hall assumes that the planned school for a total of approximately one billion crowns should accommodate more than 800 children.
According to assumptions, 11,000 people will live and work in the new Prague district after completion. The total investment costs of the project will exceed 18 billion crowns.
“In January of this year, after a lot of effort, we approved new rules for developers, a fair and transparent platform for negotiations with private investors about their shares in building the related infrastructure and ensuring civic amenities in the event of land development through a change in the zoning plan,” said Petr Hlaváček, Deputy Mayor for territorial development and spatial planning, which led the negotiations on contributions (STAN).
According to Hlaváček, this is a key tool for unblocking construction in the city and at the same time creating neighborhoods with high-quality public space and sufficient civic amenities.
“Here we negotiated a joint agreement between the city, the city district and the developer, thanks to which a binding regulatory drawing was created in the case of Rohanské ostrov, and at the same time we received the highest contribution to date in the amount of 560 million crowns,” added the deputy mayor.
Although this is currently the highest contribution, private investors will pay even significantly higher amounts for the construction of Prague in the future. An example of such cooperation is the construction in the Prague area of the Žižkov Freight Station (NNŽ), in the framework of which the developers will contribute an amount of approximately 1.55 billion crowns on the basis of contracts with the city for the development of public infrastructure.
According to the new rules, Prague has so far managed to negotiate contributions worth approximately one billion, precisely in the area of Rohanské ostrov and also on Roztyle in the area of the so-called Inverlov.
“Furthermore, several other contracts were concluded according to the new rules, namely in the city districts, we know about 25 such agreements, agreements or memoranda,” added Hlaváček.
2,300 crowns per square meter
Cooperation has been debated for a long time under the leadership of the Prague municipality, and several proposals have been made over the course of two years. However, only the last one was passed in January, according to which, for projects that require changes to the zoning plan, investors will pay 2,300 crowns per square meter of gross floor area.
On the contrary, the city will demand 700 crowns per square meter for the building, which the spatial plan will allow without changes. Each year, the amount of the contribution will be valued according to the current level of inflation.
The municipality decided to differentiate the contribution, because if the city in the spatial plan changes, for example, building plots to building plots or increases the rate of land use, the value of these plots for the developer will increase significantly. At the same time, however, the territory of the city district will be burdened more and it is necessary to supplement or expand the existing civic amenities and other infrastructure.
Developers contributed to city amenities projects even before the approval of the uniform methodology, but with one difference – the amount of the contribution was purely up to the agreement of the city district and the investor.
According to Ondřej Boháč, director of the Institute of Planning and Spatial Development of the Capital City of Prague (IPR), after the introduction of a unified methodology, the volume of funds that developers invest in public space has increased significantly.
“Agreements between the city and the private sector to unblock development and brownfield sites have accelerated greatly. The amount of the contribution, which increases every year by inflation, turned out to be reasonably set,” added Boháč for SZ Byznys.
Clearly defined rules are now being welcomed by developers, several months after the methodology was approved.
“Even though we consider the amounts per square meter to be exaggerated, especially for some locations and projects, more important than just the amount of the contribution is their delimitation, which gives us a clear framework when planning investment plans when purchasing,” says Renata Vildomcová, spokesperson for the residential developer. Skanska.
However, as Skanska, for example, acknowledges, the financing of public construction is still to a certain extent achieved in the wallets of end customers who purchase real estate in the projects.
“The city’s contribution is one of the cost items in the development of the project,
and, logically, it is also reflected in the sale price of the apartment,” says Vildomcová.
Recently, more and more Czech cities are preparing rules for cooperation with investors. At the end of 2020, Jihlava was the first statutory city to accept them, and since the end of March last year, Brno has also accepted them.
The city of Rohan
Sekyra Group started construction on the Rohan City project in the neighborhood of the historic core last fall. The company will build approximately 380,000 m2 here2 mainly residential, but also administrative and commercial areas.
The project will include residential towers and the new headquarters of Sekyra Group by architect Eva Jiřičná. There will also be shops, cafes, services, medical facilities, areas for relaxation and sports.
This will create a modern district, including a kilometer-long coastal promenade, on which there is an important park, which is to be partially financed precisely from investor contributions. Parks and public spaces will make up half of Rohan City. The project is scheduled to be fully completed by 2033.
A long-term solution
Despite the fact that, according to experts, the adoption of the new methodology will partially help to solve the financing of urban infrastructure, representatives of the sector are looking for a more permanent option to secure more financing for municipalities. One solution would be, for example, to reduce VAT on new apartments from 15 to 10 percent. And the remaining five percent would then be transferred by the investors in the form of a local fee directly to the cities and municipalities where these new apartments are built.
“The current situation is such that municipalities do not have enough money from the state for the necessary infrastructure, and therefore often block new housing construction,” said Ondřej Šťastný, head of the analytics section of the residential builder Central Group.
The value added tax on new apartments has increased over the years. Since 2007, it has risen from five percent to the current 15 percent, and in apartments over 120 square meters to 21 percent.
This, together with the general growth of apartment prices, is significantly reflected in the amount that the state collects for VAT. Today, the average new apartment in Prague collects six times more than in 2007, but not much is returned to municipal budgets.