Despite being one of the fastest growing activities in the Dominican economy, many complaints are being made in the country’s construction sector, ranging from the use of inappropriate materials, leaks and breach of contract, the latter being described as an “attack” by the Executive Director of the National Institute for the Protection of Consumer Rights (Pro Consumeror), to increase it in recent months.
“In February 2019, I signed a contract in dollars or its equivalent in pesos. It is stipulated in the contract that when the dollar rose a point and someone was going to pay, they would revise the price, but the construction company (LVP) made some adjustments that did not correspond to reality, which I have engineer Jose complains Medardo, who signed a contract for the purchase of an apartment in the Altos de la Colombia project.
Inconveniently, Medardo asserts that of the 4.1 million pesos the property cost in February 2019, according to the contract, currently, with modifications made by the builder LVP, is about 4.7 million pesos.
Buyers contacted by Diario Libre confirmed that prices agreed with said builder now ranged between $10,000 and $15,000 above what was signed.
Two years ago I signed the contract. In January of this year, I called the construction company to find out what the project was about to achieve. They never answer me, never make an appointment for me; Which does not allow visiting the project due to security controls. Then, about two weeks ago, they sent me a statement that the project had been halted due to a new price adjustment and new delivery date, says Ironels Morita, MD, a specialist in perinatal pediatrics.
They recently sent you an email saying that you will have to pay an additional $5800. “I will fight to not pay it, because they were abusing one of them, they don’t show their faces. I already paid over $13,000 and they don’t tell you how it goes,” said Morita, who was upset as she recounted her situation.
Jan Reina, one of the affected on the Altos de la Colombia project, told Diario Libre that they sent an invoice in 2019 and promised to deliver within 18 months until he completed the initial payment, but that LVP construction benefited from the pandemic even by not progressing in handing over the property.
“From the moment we made the down payment, it took nine months to get the condominiums going. In other words, they already knew they were going to be late in delivery. And then we have all the emails delivered to them on such a date that the date has now been moved Delivery, and we’re waiting. We got a typical apartment, it’s a penthouse. They call us for pre-delivery of the apartment, when we go he is “completely different from what we bought in plans,” the citizen said.
Among the offenses Rina denounced were: “The staircase was L-shaped and what they did was a spiral staircase that costs no more than 50,000 pesos in a typical apartment of 4,100,000 pesos and we don’t want to receive it that way. The laundry room is on the roof and when they did it in the kitchen part. They took space for the stairs. They did what they wanted with the apartment distribution, which wasn’t what we bought in the blueprints and the camel’s back straw that they were raising us 496,000 pesos for an incorrect exchange rate too.”
He assures that he and his wife have had a real journey with the company and unfortunately, they have recently realized that there are many people who are having issues with the construction company.
“They want to return the pure and simple money to the people, the money you have been paying for two years and the money is being devalued. What they want to do is a circular business. That is, you give me money to earn,” said the client who came from Higuay to Santo Domingo in search of a better life.
He asserts that: “I work in microfinance, my wife is a professional and human management director at a production company, and we never imagined that after spending so much work together, life would punish us by falling into the clutches of the LVP construction company.”
And: “Our children, two years old, ask us daily. In fact, they have piggy banks, saving up to buy things for their rooms, ooh! Imagine yourself, I am a tough guy, but actually I had to cry because I’m out of this situation, and believe me, I’m a tough guy. “.
Complaints on the rise in Pro Consumer
Like Medardo, Reyna, and Moreta, there are also hundreds of people across the country who turn to Pro Consumidor for help.
“In the past four weeks, we have received many complaints regarding increases in housing prices with pre-signed contracts. In this regard, we have had to start developing standards based on this four- or five-week-old onslaught of consumers denouncing increases they understand to be disproportionate, according to Why is it signed with builders or builders,” Pro Consumidor CEO Eddie Alcantara told.
He explained that when the consumer goes to the establishment to file a complaint, the inspectors visit the project to see its progress. He pointed out, for example, that if the block costs 25 pesos, then inflation has increased it to 30 pesos, which has already been put in the house, then inflation cannot be applied.
“Last month we received about 125 or 130 complaints, but we actually came up with other cases before last week that were increasing, and we made the decision based on the criteria we mentioned,” he said.
The official explained that the inflation that should be reflected in real estate prices is the inflation set by the Central Bank. “For these months, it’s 17 percent – plus – so an increase above 17 percent cannot be translated to the consumer, but 17 percent must also be proportional, not overall.”
They draft complaints will continue
For Eliseo Christopher, president of the Dominican Federation of Small and Medium Construction Enterprises (Copymecon), complaints that have been registered in recent months in the country will persist due to the increase in building materials.
“This onslaught we are going through with regards to costs, we have to pass part of it on to the buyers, and the buyers, at the moment of receipt, discover that the prices of the apartments have changed. (It is) a situation that is not the buyers’ fault, but it is not the builders’ fault either,” the businessman argued.
He explained that the builders bought the stick 24 months ago for 35,000 or 36,000 pesos a bundle, and today they buy it in some hardware stores for 85,000 pesos. “About a month ago, we had 73 thousand pesos, today it is 85 thousand pesos.”
The Dominican Association of Home Builders and Promoters (Acoprovi) reports that since mid-2020, Acoprovi has been promoting dialogue and advocating for public-private synergies to address one of the main causes of real estate inflation: the oversupply of building materials. Which is that the increase in basic building requirements, such as cement and steel, has a significant impact on the cost per square meter of construction.
Indeed, Akoprofi points out that when talking about increases in the case of cement it has risen more than 56% since the beginning of the epidemic and in the case of steel about 74% in that period. Other products with significant increases are also added to these products, such as electrical materials and PVC, which have increased by more than 100% in this period.
For this reason, during the period from March 2020 to March 2022, the cost per square meter increased by about 29%, according to the Housing Cost Index (ICDV), which is published monthly by the National Statistics Office (ONE) and which monitors the price per square meter of housing construction, but in its report for the month of May It saw an increase of about 8%, the highest in a single month in many years, due to recent increases in cement and iron which were more than 12% and the minimum rate of construction labor adjusted by 21%,” explains Akoprofi.
Akobrovi explained that the epidemic was one of the reasons that affected the real estate market in terms of cost due to various factors. One of them, the logistical disruption in shipping, the inflation generated since the beginning of the epidemic in March 2020, and the recent war between Russia and Ukraine, which significantly affected the rise in building materials.
However, thanks to the monetary and fiscal measures implemented by the authorities from 2020 to 2021, the construction sector was able to recover, becoming one of the heroes of the revitalization of the Dominican economy. In addition, he notes that one of the reasons for this growth is that interest rates on construction loans and mortgages have reached historic lows, with the sector growing by 23.4% in 2021.
As for actions taken by the construction sector and increases in housing, Akoprofi notes that many housing developers initially bore a large part of the increase. However, the rise in materials has become a major challenge for the sector, a reality that has led to the need to transfer a large portion of project costs to housing unit prices.
About home buying recommendations
According to the recommendations of the Dominican Association of Home Builders and Promoters (Acoprovi), the ideal situation is to consider the increase clause based on the housing cost index, an official indicator, published and managed by the National Statistics Office (ONE). . It understands that its use allows for a fair parameter to be used, for both the Promoter and the Buyer.
In terms of raises, Akobrovy adds, it is important to foster a friendly and conciliatory dialogue. In these cases, the ideal would be to sit down with the originator and look for alternatives, with a view to benefiting both parties, as sometimes the acquirer may be able to obtain more financing or the promoter may bear part of the increase so that the buyer can complete your purchase of the unit
Finally, Acoprovi points out that it should be borne in mind that due to these increases, the property’s market value is higher and it may be worth making an effort to preserve it, as it is still one of the best investments at this time.
The Central Bank of the Dominican Republic recently reported that construction activity increased by 3.2% in the January-May 2022 year-on-year period, a result influenced by the significant increase in construction input prices and the statistical impact of construction inputs. Base for comparison, where in the same period of 2021 this sector recorded a significant expansion of 53.0%.