Construction sector

May 11, 2007 at 10:08 am Leave a comment

Although limited by its harsh winter climate, Mongolia’s construction sector continues to flourish. While Mongolia’s total population remains small at 2.6 million, 55% of the people reside in cities, creating a larger than expected housing market. Most of the cities, particularly Ulaanbaatar, have grown phenomenally over the last 7 years. Ulaanbaatar has more than doubled in 7 years from 450,000 to over a million. Residential stock is in short supply and demand shows no signs of slacking. By 2010, the population of Ulaanbaatar is expected to increase by over 60%, bringing a demand of 700,000 additional family units.

Growing industrial, service and tourism industries contribute to strong construction demands. By mid 2003 construction had grown by 10% over the same period in 2002. Most commonly, the building of private apartments, shopping complexes, and small hotels. In the country, builders and buyers appreciate the financial and environmental benefits of energy efficient techniques. However, construction methods need improvement. Companies are still learning to utilize these technologies efficiently.

Mongolia needs expertise and technology, specifically in the areas of concrete and cold weather construction, and heating, ventilation and air conditioning installation. At its Soviet-era peak in 1989, the construction sector made up ten percent of the gross national product of Mongolia. Once Soviet subsidies vanished, building projects stopped. Until 1996, the state undertook all construction activities. By 1998, Mongolia privatized its construction industry. In 2004 a mix of private and public companies are learning how to work and prosper in the free market. In addition, the privatization of apartments has inspired a host of renovations and additions to buildings. Rather than build or buy new homes, apartment owners improve what they have, creating a market for American home improvement materials and concepts.

Today Mongolia has 100 architectural and engineering design companies and over 800 construction companies. Of these, 40 are considered large operations with their own in-house design and engineering units or have a close relationship with one or more companies that either manufacture or import construction materials. The private sector can now initiate real estate development projects.

Therefore, there’s an increasing demand for taking a complex measure within a short period of time, to increase the number of citizens living in suitable apartments, decrease unit costs for apartments, create more jobs, take decrease poverty, and enable them to have regular income source.

The Government of Mongolia has proposed to implement “40.000 housing units” program taking consideration the Government housing policy , “Housing Law”, National “Housing” program approved under the resolution No.58 of the Government of Mongolia , the Government Action Plan for 2004-2008 and the Strategic Action Plan developed by the Ministry of Construction and Urban Development and other related laws and regulation.

The purpose of the Program lies in ensuring provision of apartments for citizens of the basis of supply and demand ratio through implementing appropriate policies for urban development taking the national features of Mongolia into account, introducing land into a market economy, creating favorable economic and legal environments for construction field an long-term credit system, constructing housing infrastructure in ger areas and in vacant sub-urban area of the city. The program will implemented during next 5 years and approximately 90 percent out of the planned 40.000 housing units will be constructed in the capital city and the rest 10 percent will be constructed in the regional pillar centers and provinces.

With the purpose of allocating requirement of US$6.00 million for the project implementation, the Government will create favorable business environment for the foreign and domestic investors.

Within the framework of the program, we are aiming to form a legal and economic favorable condition by making amendments in the existing laws of Mongolia to exempt from the value added tax of the activities such as : infrastructure for the apartments, service providing water supply to the ger areas, income coming from selling apartments, housing units and project design work.

The Parliament of Mongolia has approved Laws for exemption of the Value Added tax and Custom Taxes for major construction machine and mechanisms and other equipments that to be imported for purpose to implement the Government “40.000 Units of Housing program” and the Law for exemption of the Value Added Tax of the project works in the field of construction development, infrastructure construction and sales of units in frame of Government Housing Program.

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Information contained in this web site are partly derived from a CD-ROM "Guide to Investment and Trade-Mongolia", produced by Foreign Investment and Foreign Trade Agency (FIFTA). All trademarks are properties of their own respective owners.

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