Construction and real estate developer Impact had to cancel 19 contracts this year, which triggered losses worth 2.2 million dollars of the 11.2 million-dollar contracts. Most clients are claiming that the payment capacity is lower, since the VAT for house building will be re-introduced as of next year.
“The lack of strategic partnerships and investments at the local and regional level makes any development commitment of a company meaningless. This situation also hurts Romania’s international commitments,” reads an Impact press release.
According to the press release, “corporate governance cannot be enforced within an economy conducted and deeply hurt by measures that destroy business plans, contracts and financial commitments.”
Impact management considers that a programme to educate and make the small investors aware of the need to direct population savings to the national capital market should be enforced.
The company’s Board warns the investors that the downturn of the construction market might be worse in 2002, following the excessively high taxes levied on the economy.
Impact is a joint-stock company with entirely private capital, established in 1991 by public subscription.
The company has been listed on the Bucharest Stock Exchange (BVB) since 1996. Impact builds villas within its own residential areas and has five such areas in the northern region of Bucharest.
The Government included the measure to cancel the VAT zero quota granted to construction activity in the VAT draft law.
According to Public Works minister Miron Mitrea, the enforcement of construction VAT could be postponed for January 1, 2006 or 2007, if the IMF and European Commission officials agree with Romania’s request regarding a respite.
The companies operating in this field warned that, in addition to the 19% increase in the house prices, this measure would prompt a larger black labour market and higher prices of the buildings that have already been built.