Document of The World Bank
FOR OFFICIAL USE ONLY
Public Disclosure Authorized Report No. 9853-POL
STAFF APPRAISAL REPORT
REPUBLIC OF POLAND Public Disclosure Authorized
HOUSING PROJECT
MAY 29, 1992 Public Disclosure Authorized
Infrastructure Operations Division Country Department II Europe and Central Asia Region Public Disclosure Authorized
Thisdocument has a restricteddistribution and may be used by recipients only in the perfonnance of their official duties. Its contents may nototherwise be disclosed without World Bank authorization. CURRENCY AND EOUIVALENT UNITS
Currency Unit = Zloty (Zl)
AVERAGE EXCHANGE RATES (Zlotys per US$) May 1987 1988 1989 1990 1991 1992 US$1.00 = Zi 265 430 4,000 9,500 11,000 13,700
WEIGHTS AND MEASURES
Metric System
POLAND: FISCAL YEAR
January 1 - December 31
ABBREVIATIONS AND ACRONYMS
ARM = Adjustable Rate Mortgage BGZ = Bank for Food Economy BUDBANK = Housing Development Bank DIM = Dual Index Mortgage EBRD = European Bank for Reconstruction and Development EC = European Community ETP = Economic Transformation Program FRM = Fixed Rate Mortgage HFPO = Housing Finance Project Office GDP = Gross Domestic Product GOP = Government of Poland IBRD = International Bank for Reconstruction and Development MF = Mortgage Fund MOF = Ministry of Finance MOSEC = Ministry of Spatial Economy and Construction NBP = National Bank of Poland PKO BP = National Savings Bank FOR OMFCIL USE ONLY STAFF APPRAISAL REPORT
POIANP
HOUSING PROJECT
Table of Contents
Pace No.
Loan and Project Summary ...... i
I. THE HOUSING SECTOR
A. Overview ...... 1 B. The Housing Stock ...... 1 C. Housing Supply ...... 4 D. The Fiscal Problem ...... 6 E. The Financial Problem ...... 6
II. THE GOP HOUSIOG STRATEGY AND WORLD BANK SUPPORT
A. The Challenge ...... 9 B. The Approach ...... 9 C. Reducing Subsidies on New Housing Production ..... 10 D. Reducing Subsidies on the Existing Housing Stock.11 E. Managing the Public Housing Stock ...... ll F. Redefining the Role of Supply Agents ...... 13 G. Revising the Legal and Institutional Framework ...13 H. Summing Up ...... 15
III. THE PROJECT
A. Introduction ...... 17 B. Project Objectives and Description ...... 18 C.' Project Components 9. ... 19 D. Criteria of Sub-Project Eligibility .20 E. Project Cost and Financing ...... 21 F. Environmental Impact .24 G. Project Implementation ...... 24 H. Procurement ...... 26 I. Commitments and Disbursement .28 J. Supervision, Reporting and Monitoring ...... 29 K. Accounting and Auditing .30
This reportwas preparedon the basis of a May 1991appraisal mission by a tem comprisingGian Cado Guarda TCaskManager), Mrgret Thalw (Eomist), Pete Doty,Lubom. Fiindd li,Han Matrasad TimothSmit (Consdlta). EC2 frastructure is dt resone division(Hans J. Apiz, Chid, EC21N)in the C;etral Empe Departmni (Kn Deris, Director,EC2). BertrandReaud AMT and Robot Bkley INURD) acd s Peer Reviews. L"raie Ftgerad, Hes Fros, Per Wag, and Jams Lacr asemMedthe report.
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Table of Contents (cont.)
Page o2.
IV. THE FINANCIAL INTERMEDIARIES
A. Current Structure of the Financial Sector ** ...... 31 B Ongoing Reform of the Financial Sector ...... 31 C. Housing Finance Issues ...... 32 D. The Mortgage Fund ...... o_...... 34 E. The Participating Banks ...... 37
V. PROJECT BENEFITS AND RISKS
A. Benefits...... 40 B. Risks ...... 41
VI. AGREEMENTS REACHED ...... **42
VII. LIST OF TABLES......
Table 1: Occupied Dwellings by Type of Investor-- and Location ...... o . , .2 Table 2: GOP Housing Expenditures in 1990 and 1991 Budgets.. 7 Table 3: Project Costs ...... 22 Table 4: Financing Plan for Construction Component ... 23 Table 5: Financing Plan for Mortgage Component ...... 23 Table 6s Consolidated Financial Plan ...... 24 Table 7: Project Procurement and Dlabureement.- ...... 27
ANNEXES
Housing Policy Statement ...... *9*A Legislation Affecting the Housing Sector ...... Ordinance of the Council of Ministerss March 25, 1991 ...... C-1 Ordinance of the Council of Ministers: October 1, 1991...-C-II Resolution No. 2 of BUDBANK Assembly of Shareholders ...... D-I Resolution No. 3 of BUDBANK Assembly of Shareholders ...... D-11 Operational Manual Contents...... E Application for Construction Credit F...... 1' Standard Contract Forms ...... *-*. Cash Flow Projections of the Mortgage Fund ... Dual Index Mortgage Amortization Table ...... Project Profiles ...... , *; Analysis of Project Costs ...... Technical Assistance Program...... L Reporting and Monitoring System ...... Estimated Schedule of Disbursement ...... Selected Documents and Data Available in the Project File ...... O .. . .. REPUBLIC OF POLAND
HOUSING PROJECT
LOAN AND PROJECT SUMMARY
Borrow rs Republic of Poland
Executina Ministry of Spatial Economy and Construction of the Republic A&encies: of Poland; BUDBANK
Beneficiaries: Approximately 27,000 individual households purchasing homes or flats under mortgage arrangements; private developers, participating municipalities
Amounts US$200 million equivalent
Terms: Seventeen years, including a four-year grace period, at the Bank's standard variable interest rate.
Relendina Terms: BUDBANX's Mortgage Fund would finance up to 80 percent of the value of mortgages issued by the participating banks at a variable interest rate at least 300 basis points above the Basic Interest Rate of the National Bank of Poland. Repay- ment would be linked to the cashflow of the underlying indexed mortgages.
Proiect To support the transition from heavily subsidized, centrally Obiectivess controlled housing production to more efficient, market- based supply through private initi$tive. The project objectives are: (i) creation of banking services to finance mortgages; (ii) greater private sector role in housing production; (iii) incentives to split existing cooperatives into smaller home-builder associations; (iv) competitive bidding for construction contracts; (v) pricing of land as part of housing costs; (vi) removal of legal and regulatory constraints to private initiative; and (vii) greater efficiency in the use of scarce local Government resources.
Proiect A Line of credit for Mortaaaes: To alleviate the risks of pescrihtion: long term-lending when inflation is high and volatile, the mortgage instrument would be one that charges a variable market rate of interest while regularly adjusting payments to changes in nominal wages (a Dual Index Mortgage or DIM). When payments are less than amortization due, the unpaid part would be added to the loan balance to be paid off over the lifetime of the loan. The onlending banks, therefore, should be able to bridge the resulting liquidity gap. The special credit program supported by the proposed loan would finance some 27,000 dual index mortgages. - il -
A Line of Credit for Construction: A line of credit (up to three years) would finance construction of about 15,000 new dwelling unlt- in projects to b- carried out by developers. Costs may include civil works, land, smaller infrastructure and worklng capltal. A first-year pipeline of sample sub- projects has been identified in fourteen cltiea throughout the country with an estimated aggregate cost of US$210 mlllion.
Technical Aseistance: The principal reciplents of Technical Assistance would be: i) the Mortgage Fund; Li) the Project Unit within the Ministry of Spatial Economy and Construction; iii) participating banks willing to engage in mortgage lending; and iv) municLpalitLes undertaking reform of land use practices, financial management and urban infrastructure planning.
Benefitg and The principal benefits of the project would be efficiency Rieks: galns from a market-based system of housing production and finance. The project would contribute to the recovery and restructuring of the sector and would increase mobility and choice in the housing market. Competitivepricing would stimulate productivity and help contain unit costs. Additional benefits would accrue from the extenslve program of technical assistance to local governmente, banks and investors. The project's principal beneficiarieswould be families of middle and lower-middle income.
The project has been designed to offset the following rikes:
(L) relatively high inflation rates and slow growth in real Lncome would be neutralized by the mortgage instrument;
(ii) interest rate subsidies would be eliminated to protect development of market-baoed housing finance;
(iii) inexperiencedbanking inetitutions,central and local administrations,and private investors would receive technical assistance to apply new policies, instruments and procedures;
(iv) escalating constructloncosts should be contained through price competition so as to preserve affordabilityto the original target group; and
(v) obsolete municipal regulations would be revised to encourage private initiatlve. - itii -
Prolect Costs: Local Forelon Toal - In USSmillions-..
Construction Caxpownt 164 70 234 Mortgge C"ponmnt 227 97 324 Technicat Assistance Comporent - 10 10 Design, Supervision, Ariinistration 19 9 28
Base Cost 410 186 5 Physicat .antingencls 17 7 24 Price Contingences 13 6 19 ,otat Project Cost 44 199 63
Interest During Corntruction (IDC) 27 11 38 Total Financing Required 467 2 A7Z
FioMnoPa13IBRO 200 200 EBRD 67 67 Goverr,cnt 133 - 133 Partic ,ating Banks 100 - 100 Investors 167 - 167 TA Donors - 10 10 Total Ffnoncfna Reauired 463 int
IBRD fiscal Year
Estimated Z 52 2& 21 26 It 21 DfstLrsemmits ------in USS,Ilions--...... Annual 13 16 32 36 36 39 28 Cuawlative 13 29 61 97 133 172 200
Economic Rate of Returns Not applicable
Not applicable Chapter I. THE HOUSING SECTOR
A. Overvie
1.01 The Leaacv of th Past. Housing used to play an important role in Poland'sa economy throughout the 1980's: it accounted for approximately 6 percent of GDP and 18 percerLt of total investment; construction jobs hovered around 7 percent of total eAployment while between 8 and 13 percent of the central government's expenditures were devoted to housing subsidies.
1.02 Until the adoption of the Economic Transformation Program (ETP) of January 1990, housing used to be considered as a social good which the State should provide to all citizens at only a notional cost. In fact, most households received an administratively assigned dwelling for which they paid only 3 to 6 percent of morithly incomes. As long as the consumption of housing bore no relation to income, nor to production costs, demand outstripped the delivery capacity of the state-controlled supply system. Housing became en issue of national policy because of enduring shortages, exorbitant "greyw market price., waiting lists of 10 to 15 years, low turnover rates and misallocation of living space.
B. The Housina Stock
1.03 Poland's Housing Stock is currently estimated at nearly 11 million dwellings, about 10 percent short of the number of households1 . Four basic types of investors have operated during the past 40 years: the state or communes, the enterprises, the cooperatives, and the private sector. Only 46 percent of all units are privately owned, and most of those (2/3) are located in rural areas (see Table 1). In the cltLe_, about forty percent of the housing stock consists of rental units, which are subject to strict rent control 2 .
1.04 Public Housina: More than a fourth of urban housing is owned by the State and managed by the Municipalities or ominas. Half of these units consist of nationalized property which dates back to the pre-war era. Another 39 percent were built by public authorities between 1945 and 1970, while only 11 percent have been produced in the past tweni- years. To a large extent the "age" of public housing reflects its physical conditions and relative endowment with modern amenities such as a separate bathroom or central heating. In general, the quality of public housing is poorly correlated to the income of its occupants because considerations of relative economic welfare did not influence housing allocation until 1965 and the criteria for eligibility were often circumvented even after. Rents are still set
In 1988thre we,e 1.12households per occupieddwelling unit In Poland,as comparedto 1.10in Czechoslovakia,0.97 In Hunger,and BulgarIa, 0.93 In Romaniaand 0.91In Yugoslavia.
2 Poland'spopulation is about60 percent urbanized. The country has a ratherbalanced urban structure withffie citiesabove 500,000 Inhabftants Waraw, Lodz, Krakow, Wroclaw and Poznan),and many mediumsize cities. Admninistraively,Poland is dAvdedin 2,5Wmunicipalities (gminas) and 49provinces (vohodshfps). - 2 -
administrativelyby central authorltie according to a national rate per m2 of usable space which, despite perlodic adjustuents,consistently falls short of the expenditures incurred in the operation and maintenance of the stock (subsidies are estimated to cover 65 percent of such expenditures). Attempts at divestitureof public housing were initiated as early as 1970, when units were offered for sale to sitting tenants at prices well below current market prices (often as low as one-twentieth). After some response during the first two years, purchases declined rapidly only to pick up again towards the middle of the 1980's when inflation accelerated. According to official estimates, no more than 15 to 20 percent of the public housing stock (possiblythe most attractlve portion) was privatised during the last two decades.
Table ls OCCUPIED DWELLINGS BY TYPE OF INVESTOR AND LOCATION (1988 CENSUS)
(ThousandDwelling Units)
Private Cooperative Enterprise State/Munic Total
Urban 1,670.1 2,586.6 830.2 1,953.0 7,039.8 Rural 3,007.5 19.4 525.3 124.7 3,676.9
Total 4,677.6 2,605.9 1,355.5 2,077.7 10,716.8
(PercentageBy Investor) Private Cooperative Enterprise State/Munic Total
Urban 23.7 36.7 11.8 27.77 100.0 Rural 81.8 .5 14.3 3.4 100.0
Total 43.6 24.3 12.6 19.4 100.0
(PercentagiBy Locatlion) Private Cooperative Enterprise State/Kuwic Total
Urban 35.7 99.3 61.2 94.0 65.7 Rural 64.3 .7 38.8 6.0 34.3 =mum= ...... =mr=m =,mm=nw =MM= Total 100.0 100.0 100.0 100.0 100.0
NOTE: The cties concentrae 99 percentof cooperatve housing,2 percentof State/Communalh3using and 61 percentof enterprse housing. Prvate d%%ilingsare 64 percentrural. Cooperative,enteprise and cate housingcombined constitute'scar housing.
1.05 Enterprise Housin : This category of dwellings, built and a"ifniltaeed by the otate enterprise. for their own employees accounts for about 13 per-.nt of the existing housing stock. In the old system, the proviston of housing in proximity of the workplace was consideredan obligation of the enterprisess a fringe benefit awarded to the worker to complement generally low wages. Enterprise flats are subject to the uame rent - 3 -
control regulations au communal flats, leaving the enterpriseswith a heavy burden of operation and maintenance costs. This approach diverts resources from one sectorof investment to another and tends to tie labor to a given job and reosidenceover a lifetime. The occupants usually remain in the units after thair employment contract has expired, and their rights of tenancy are strongly protected.3 As many of the enterprisesare now expected to be privatized,their housing assets would become a natural target of divestiture. A significantportion of enterprise housing (43 percent) was built over the past two decades and is therefore of generally better quality compared to communal housing. The purchase option (made available in 1970 also for this type of accommodation),was taken up lese frequently than in the case of public housing even though the buyers could got freehold property title and could rent or sell the units at market prices.
1.06 Cooverative Housino: Cooperative housing accounts for 37 percent of al?.dwellings in the cities, where large estates of multi-story apartment blocks have been provided by this kind of investors during the past Occupants of cooperative flats can be either 'tenants'or 'owners',depending on the type of contract and down payment they enter into,S cooperative dwellings have benefitted from large subsidiesthrough grants and preferential interest rates. Unlike the holders of state flats, who pay minimal rents only, couperative members have traditionally been charged for a small portion of the capital costs and a fee to cover the operation and maintenance costs of buildingn. While still very low compared to housing costs in a market economy, the monthly charges on cooperativehousing used to be somewhat higher than those of public housing occupants.
1.07 Private Housina: Most of the private stock (64%) is found in rural or semi-rural setting and is made of farm-houses. Although less endowed with modern amenities, rural housing tends to be roomier in size (the average living space is of 70 m2 against 54 m2 for urban dwellings). Private housing in cities consists basically of multistory apartments,townhouses and relatively faw single-familydetached. No privately owned housing built after
Undilvety recently,a siatng tnant could not be evicted legally unless suftablealternate, socommodsWon was provided. Now an eviction law has been Introducedbut there is no exoerienoeyet of its enfoement (AnnexB).
In 19, the cooperatve waitng lists Included 874,000members, of which two thirds had been enlisted for 7 years or more. In addition, housingcooperatives kept lists of 1,147,000stand-by applicants. However, 70 poecentof those in the latter categorywere less than 18years of age. A 1987survey of cooperative housingapplicants In Warsaw,Gdansk and Wroclaw,showed that 37%of them were students, 85% were livng with family and 50%were reasonablywell housed (each havingmore than 7 m2 of living space). Besides the waitinglists for cooperaive housing, there were in 1989some 295,000applicants for enteofrlsehousing and 110,000for public housing.
5 A surge of loan pre-paymentstook place in 19 when many cooperatve tenas co se to become owners,paying off the outstandingbalance of their housingloans to aoid high interest payments. This resultedin a checkeredpaftem of tenure within the same building block wlth tenants and ownersoften bickering over their respecive obligatons. However,most cooperativehousing units are now of the 'ownership Wmpe(poss.by 86 percent of tota). the war in subject to rent-controlor other restrictionsto sale or to rent at market prlc-e.
C. Housina Supplv
1.08 Production Trends. Housing production peaked at about 280,000 units in 1978, but contracted to 180,000 per year by the mid 1980's because inflation and budgetary constraintsrequired major cuts in public outlays (private investment accounted for no more than 15 percent of new dwellings over the decade). Constructionoutput declined further in 1989 (to 150,000 units) and averaged 135,000 units)in 1990 and 1991. At the beginning of 1992 about 132,500 dwellings were under conetructionby the social sector. Most of these were cooperativeor enterprise housing ;the municipal participation having become virtually negligible),which had been started under construction contracts signed in 1990, 1989 and even earlier, while actual new starts in 1991 were only 50,500, In short, both the number of units completed and the number of new starts in social housing have dropped dramaticallycompared to previous years. In the private sector the decline of production has been less dramatic. Some 40,000 units were completed during 1992 (30 percent below the 1985 level), while over 300,000 units were still under construction.
1.09 The Buildino Industry. The constructionof state and cooperative housing used to be contracted directly to large, state-ownedenterprises (kombinats)generally establishedon a territorialbasis. 6 Kombinats are huge, vertically integrated companies comprisinga large number of activities, from the design and production of standardizedbuilding elements, to their transport and assemblage, the maintenance of the housing stock and community facilities, as well as the operation of a variety of services. Uneconomic company size and monopolistic control of either a product or a geographical area have induced poor efficiency. The Kombinates construction costs per m2 are high by international standards and are reported to be 30 percent above the costs of private firms. Since new loans to housing cooperatives have beccme scarce, Kombinat activities have collapsed to less than 50 percent of capacity with considerablelose of workers.7 Some former Kombinat workers have started their own independentcontracting. These new initiatives are small in size but have been proliferatingever since the economic reform program opened up access to short term credit and eliminated bureaucratic control on the allocation of building materials.
1.10 The Ministry of Scatial Economy and Construction tMOSEC) was created in 1987 through the merger of the Ministry of Constructionwith that of Municipal Economy. It now employs about 300 people (220 professionals)in a dozen departments. A staff at least as large works in five affiliated
The Ste cons&rucionenterprises a8wmd in 1I 989 ior 54%of dth housing output and for 81% of the saw- igW employm.nt4estmatd then at 1,731,000workers. TheprAte constructon firms Included some 130,000enterprises of very small size.
In two komblnatsvisited by the mission, employmenthas dropped from 5,000to 1,000workers durlng the Iast few Yms. research institutes 6 and sevoral cmaller research unit. which are partly funded through MOSC'"s budget. During the past two years, tho MLnistry has been under reorganization but has drafted sevoral new bills which have been submittedto the Parliament by the Council of Hinisters (para. 2.15, 2.16 and Annex 8). As the government agency responuible for housing policy MOSEC makes every year its recommendationsto the Ministry of Finance concerningthe size and structure of the housing budget and the proposed lovel of subsidies for each type of housing. However, only the subsidies destined to cooperatives are carried in the budget of the Ministry, which determines the yearly amount to be given each cooperative. Housing subventions for municipalitiesgo directly from the Ministry of Finance to the provincial authorities (voivo2dhLos)as part of intergovernmentaltransfers. MOSEC used to manage also the Development Fund for Municipal Water and Sewerage Syatams and a DevelopmentFund for New ConstructionTechnologies, which was based on a special tax on building enterprisesnow abolished. In addition, the Ministry is a main shareholderof the Housing Development Bank created in 1990 and act- as the 'foundingbody' of some 300 enterprises for indastrial construction. The equivalent role for hgu ing constructionenterprises Li played instead by the provincial authorities.
1 1 New Municlal Powers and Resoonsibilities: The Local Self- Government Act of M3arch1990 has transferredthe responsibilitiesof urban developmentcontrol knd public services provision to the newly established, elective local governments. Assets previously controlled by the state, including land, Lnfrastructure,public housing, utilities and service enterprises,will be conveyed to the municipalities. Local authorities should take charge directly of the spatial organizationof urban development,the use of land within their boundary and the -otection of the environment. The interactionbetwnen MOSEC and the gminas Is therefore changing from one of direct interventionto one that is basically advisory and supervisory. The Ministry remains responsible for establishingthe legal parameters and general policies for housing and land developmentbut each municipality is now empowered to revlie its own master plan and to spell out its own approach to specific problem. and condLtions. Ominas differ in land availability, infrastructureendowment, financial resources, quantity and quality of housing stock, population growth and housing needs. Municipal housing strategies need to take these circumstances into consideration when addressing the interrelated problems of the land market, the financing of housing and infrastructure,the constructionindustry, the administration'scapabilities, the current costs of housing and the income of resident households. While most communitles lack sufficientbudget revenues and investment capital to extend the infrastructureand services network over new sites, or to rehabilitate (and even to maintain) the housing estates transferred to them, the budgetary support from the central government is expected to be further reduced. As a result, the now municipal authorities need tn becomc more self reliant &nd mncre efficat in their use of limited resources, developing realistic action plans and investment strategies that place increasing emphasis on private participation and cost recovery.
Te thme rWgetrsearch Instt ae thoseof UrbanPlanring and MunicipalEconomy; Consuction Techology and Geodey andCtc ;p-hy. -6-
D. The Fiscal Problem
1.12 The Subsidy Issues Subsidies in support of housing are very large. Part of theue subsidies are on the budget and can be easily identified. They have accounted for some 2 to 3 percent of GDP and between 8 and 13 percent of total budget *xpendituresduring the 1980. Presently, they represent the single largest item of consumer subvention that is left on the Government'sbudget and one that is clearly counterproductiveto the country's stabilizationobjectives. In addition, housing also bears substantial subsidies that go unmeasured,the most important being the difference between the rsnt actually paid by the household and the rent it would be charged if the price mechanism were to clear the housing market. These subsidies are regressive and mainly benefit urban dwellers of cooperativeenterprise and public housing irrespectiveof family income and size. Rural dwellers enjoy very little housing subsidy if any.
1.13 Forms of Subsidy: Subsidies to the sector have taken three distinct forms (i) below-marketrents for tenants of rent controlled housing; (ii) low charges for utilities, especially for centrally supplied heat and hot water; and (iii) grants and interest subsidies for cooperative flats (Table 2). Traditionally,these subsidies have been financed through an implicit wage tax: workers are paid low wages and in turn they are entitled to low cost housing. However, high inflation and interest rates in the past two years have exposed the budget to uncontrollablyrising subsidies on housing loans (para 2.04). Housing finance has, therefore, become the focal point of the Government'shousing policy in the past year.
E. The Financial Problem
1.14 Past Housina Finances Until 1988 housing finance was simple. The National Bank of Poland (NBP) provided investorswith 43-year loans at 2 percent interest, financing those loas with transfers from the state budget. After a three year grace period in which the interest during construction was capitalized,loans were converted to a repayment basis over 40 years. With the exception of a small portfolio of loans issued to individuals (less than 4 percent of the total), housing finance consisted mostly of loans made to approxlmately4,000 housing cooperatives. These tended to be large, with the 500 largest loans accounting for 85 percent of total credit.
1.15 The 1989-1990 Shock: In 1989, the NBP transferred all cooperative housing loan to PXO BP, the N&tional Savings Bank (para. 4.22), along with the inflation-strickenpassbooks of 2.5 million enlisted members of housing cooperatives. PR0 was soon overwhelmedby the now burdens. Problems arose with rapidly escalating constructioncosts, acute general inflation and the sharp lncrease of interest rates, which became adjustable in January 1990. These events had an immediate effect on the housing portfolio and forced the Government to intervene because of the ensuing crisis of affordability. In addition, most constructionloans had to be renegcoiatedfor ever increasing amounts because building costs were rising even faster than inflation. - 7 -
Table 2t GOP HOUSING EXPENDITURES IN 1990 and 1991 BUDGETS
1990 executed 1991 latest revision Main Categories zloty US$ zloty Us$ billion million billion million
A. INVESTMENT RELATED EXP. 6,801 716 39.7 12,000 1.040 44.4
Pohibursement to PKO 2,500 263 14.6 3,500 304 13.0 for partial write-off on loan pre-payments
Interest subsidies 2,000 211 11.7 7,300 635 27.0
Re-evaluation of 130 14 .8 1,200 104 4.4 personal housing saving accountob
Capital grants to 2,171 228 12.8 - - Municipal Funds for Land, Infrastructurec
B. CURRENT EXPENDITURES 10,311 1,085 60.3 15,057 1,585 55.61
Maintenance & Repair 4,136 43 2-4-2 8.040 846 29-7
- public housing 4,083 430 23.9 7,435 783 27.5
- cooperative housing 53 5 .3 605 63 2.2
Heat/Hot water subsidies 5,67S "I 33.1 5 917 623 218
- public housing 588 62 3.4 902 95 3.3 - cooperative housing 5,087 535 29.7 5,015 528 18.5
Housing Allowance Scheme 500 53 2.9 1100 116 4.1 for low income householded
A+B: TOTAL EXPENDITURES 17,112 1,801 100.0 27,057 2,625 100.0
AS % OF GoVERNMENT BUDGET 8.4 10 8 AS % OF GDP 1.9 3.0
Notes: a. Credit remissions or grants taling place when building works are completedand loan repyment begins. The benefit is intended for 'nant' membersbut applies also 'owner' membersthat decide to py off the outstandingloan balance. Wite oaf on pre-1988,1988 and 19 contoats are of 5O%,40% and 30% |especely. Theywere eliminatd on contractssigned In 190 or later. b. Premiumpaid to re-establishthe real value of deposits when housingaccounts are cleard. Thesystem is based on the level of prices In tie constructionIndustry as announcedby NOP (with about a year's delay). Discontinuedfor contacts signed after December31, 1990. . Transferschanneled through the HousingFund and th Land Econorty Fund as well as through th general rwenue-shaing scheme. d. Peadout to dte Muniiplities which must administerte housing allowanceschemes. - 8 -
1.16 Temorary Remedie-s Tho st-ep rise in interest rates made virtually all housing loans unaffordable. The Government responded by assuming the payment of 32 percent of the interest due, while asking the banks to capitalize 60 percent. Thus, the cooperatives,which are the borroweru of these loans, had their payments reduced to only 8 percent of their dues, which was relatively affordableto their individualmembers. However, since all housing loans were granted a grace period of three years during the constructionperiod, a full 68 percent of interest due on these loans was capitalized by the bank, while the remaining 32 percent was meant to be paid to the bank from the budget. Given the fact that about 85 percent of PRO's housing portfolio consisted of loans still under disbureement,most of the cash payments the bank received during 1990 consisted in Government subsidies on the Lnterest accrued on constructionloans. With interest rates well into the two-digit values, the large amounts of interest capitalized on housing loans have strained PRO's ability to fund these loans and exposed the budget to rapidly growing obligationsvis a via PRO. In late 1991, the Government reacted to this situation by passing a decree (Annex C-II) which substantially modified the terms for all future housing loans. While this action was essential to change the direction of housing finance in Poland, it cannot contain the future fiscal pressures that stom from PRO's existing loan portfolio. In early 1992 the Government has begun to confront this particular issue (para 2.06). Chapter II. THE GOP HOUSING STRATEGY AND WORLDBANK SUPPORT
A. The Challenge
2.01 Policy makers in Poland are aware of the fact that persistent housing shortages, low production levels and high nominal interest rates may unleash political pressures for continued subsidies. They are also aware that uncontrolledand untargeted subsidies could derail the adjustmentprocess in various ways: they can accelerateinflation by breaking through fiscal and credit ceilings; they can soak up domestic resources which are badly needed to restructurethe economy; they can hamper the mobility of labor by tying up householdsto administrativelyassigned dwellings;and they can slow down new constructionactivities if most of the subsidies go to existing dwellings. Central Government expendituresfor housing have risen from 1.9 % of GDP to an estimated 3% between 1990 and 1991, mainly on account of the budgetary implicationsof the existing housing loans. The immediate challenge faced by the Government is, therefore,to find a non-inflationaryway to restructure the current housing finance scheme, which is not sustainablein its present form. In a financial system that is still infant, it is important to do so without inducing interest rate distortions,while at the same time providing the housing sector with sufficientliquidity to resume a minimum level of production.
B. The Anproach
2.02 The Economic TransformationProgram adopted by the Government of Poland in January 1990, implied the rejection of the traditional system of housing production (centrallyplanned and supply driven) in favor of one that should become largely private and market based. Therefore, the GOP has developed a comprehensivestrategy for the sector, parts of which have already been approved by the Parliamentwhile others are still under discussion. The housing reform package, presented in greater detail in Annexes A and B, is clearly inspired to market principles, limiting public assistanceto the safeguard of social equity. There are five major challengesthat the Government wants to address:
(a) reducing and redirecting housing subsidies; (b) developinga sustainablesystem of housing finance; (c) managing the public housing stock; (d) redefining the role of supply agents; and (e) revising the legal and institutionalframework.
2.03 The Need for Policy Coordination: Coordinationof policy changes in all these major areas will be crucial to achieving an efficient supply of housing and the proper sequencingof reforms. Moreover, the Government recognizes that the process of restructuringthe sector will be linked to reforms in other areas of the economy and will, therefore, be lengthy. In particular, it is acknowledgedthat: (i) monetary and credit policies and banking regulationswill have a bearing on the mobilizationand use of long- - 10 -
term resources for housing and on the banks' incentives to compete for these resources; (ii) mortgage banking skills must be developed to support establishment of an efficient houuing finance system; (iii) property and foreclosure rights must be redefined to grant security to the new mortgage lenderas (iv) construction kombinats and cooperatives must be restructured to favor growth of an entrepreneurial and competitive supply sector; and (v) the cooperation of the central and local governments is needed to implement more officient public rental policies.
C. Reducina Subsidies on New Housina Production
2.04 The Transition to a New Housing Finance System: The first major steps have been to raise the interest rates on housing loans to positive real levels and to move any remaining credit subsidies into the budget (para 1.16). Next, the Government eliminated the payment of up-front grants for all housing loans signed after January 1, 1990. Moreover, in March 1991 the Government adopted a decree which changed the financing terms of these loans in a fundamental way. The new terms require that payments be kept at about 25 percent of the householdls current income and that any portion of interest not covered by the monthly payments be added to the outstanding loan balance. The interest rate charged on housing loans continues to be a market rate as in 1990. The current system obliges the Government to fund 40 percent of the interest capitalized on disbursina loans (during construction) and 100 percent on renavina loans (after construction). The Ministry of Spatial Economy and Construction (MOSEC) has been asked to process the requests by the banks, primarily PKO BP, and has been allocated a budget for this purpose. However, the terms at which the Government funds part of the capitalized interest have never been agreed between the Ministry of Finance, the Ministry of Spatial Economy and Construction, and the National Bank of Poland as stipulated in the decree. This left on the budget an exponentially growing interest subsidy which was of the order of 0.8% of GDP in 1991 and is estimated at more than 1% of GDP for 1992.
2.05 Substitutina Interest Subsidies with Finance: Realizing that the wrong housing sector policies can pose a serious threat to fiscal and financial stability, the Government has started to lay the foundation of a sustainable, non-subsidized housing finance system. In September/October 1991, it has changed the cooperative law to allow mortgages to be issued to individual members rather than to the cooperative at large. It has also adopted the principle of dual adjustments for all housing loans entered into after October 1, 1991 (paras 4.06-4.08). These decisions imply that a clear distinction will be made in the future between construction and mortgage loans and that the borrower of a construction loan (e.g. a cooperative) can be distinct from the borrower of the mortgage loan (i.e. the buyer of the house or unit). More importantly, banks will now be required to include in the assessment of their credit risk the borrowers' ability to pay, a principle not hitherto applied to cooperative housing loans. The mortgage instrument adopted by the Government requires a source of long term capital, such as the one proposed under this project. - 11 -
2.06 Problems with the Current Portfolio. While recent decisions concerning ne housing loans are consistent with market policies and represent a definite break with the traditional housing finance system, they do not solve the fiscal and financial problems arising from the large portfolio of 2ld housing loans which is being held by the National Savings Bank (PXO BP) (paras 4.22-4.24). Most of these loans are unlikely to be fully repaid. In early February the Parliament accepted the Government'sE drastic proposal to cancel all housing loans on which construction has not been completed as of March 31, 1992. The amendment was formally ratified by the President and is expected to reduce housing subsidies by about 1.0% of GDP in 1991. The Government might also consider discontinuing the practice of capitalizing interest on PKO's outstanding housing loans which are not likely to be repaid (about 75% of 3.5 million). Treasury bills could be issued for the amount of provisioned loans as has been recommended by the auditors. To be expected, public controversies are still raging to revoke such measures, but the current government is determined to stay the course.
D. Reducing and Redirecting Subsidies on the Existing Housing Stock
2.07 Eliminatina Rent Controls The Government liberalized rents on Private housing in 1991 and increased the rents on public housing more than tenfold during the past 20 months in order to lower operation and maintenance subsides and to make ownership of housing a more attractive alternative. While rent increases have been considerably higher than domestic inflation, they only caught up with the erosion of real rents which had occurred during the late 1980s. Thus, the average household still pays about 3 percent of its income for a flat of average size. The proposed housing bill (Annex B) emphasizes the elimination of administrative control on rents over a two year period and suggests that a housing allowance would be payable when rents rise above 18 percent of household income. These are ambitious targets which may be difficult to achieve during the short time envisaged because of economic, social and political reasons. Balancing the social and economic issues of the rent reform package has generated intense debates in Parliament. Raising rents to market levels in publicly owned houses is likely to be a lengthy process in an environment in which real incomes are stagnant or even declining, housing conditions remain poor, and no housing allowance system has yet been established. Several prerequisites should be put in place to make rent increases politically more palatable and to generate an elastic supply response to rising rents. These include: (i) a housing allowance scheme to safeguard lower income groups and large families against the potential loss of suitable housing; (ii) affordable mortgage instruments to encourage homeownership and mobility; (iii) legal procedures for subletting and exchanging flats, and (iv) fully enforceable property rights. The Government has begun to work on these issues but has still to develop detailed action programs and timetables to accomplish the overriding objective of reducing and redirecting current subsidies.
E. Manaaina the Public Housina Stock
2.08 The Main Options: The problem of managing the public housing stock cannot be separated from housing ownership and rental policies. The local authorities have an understandable concern in this respect because some - 12 -
40 percent of urban housing is entrusted to their direct administration. The manner in which this large patrimony will be handled can have deciuive influence on the development of housing market. Policy options include: (i) the radical privatizationof the public stock; (il) the renovation of obsolescent housing (wheneverthe costs can be recovered through sales, leases, or rents); and (iii) the contractingto private agents of its operation and maintenance (improvingthe efficiency and lowering the costs of these services). The local governmentshave been charged with working out their own strategy for these problems as part of the decentralizationpolicy. Nonetheless,the responsibilityfor setting rents and charges for maintaining and operating the public stock still rests with the central authorities9. Decentralizationof these responsibilitieshas become an urgent concern. Ultimately, the Central Government may want to withdraw from direct involvement in social housing and limit its own assistance only to those families whose incomes are insufficientto pay for an adequate dwelling.
2.09 Privatizinq the Manacement of the Public Stock: One way to reduce the maintenance burden of municipalitieswould be to encourage the break up of the housing management enterpriseswhich they now own into smaller private companies or user associations. Little progress, however, has been accomplishedso far in this respect. The principal reason quoted is that the level of current charges is so low that no private business could make a profit by taking over extended management and maintenance contracts. The current Government's Housing Bill (Annex B) recommends to raise rents to a level that fully covers the cost of operation and repair within two short years. As discussed above (para 2.07), the Government's schedule would require the immedLatedevelopment of parallel schemes of assistance to low income families, but the details of such housing allowance scheme have not been worked out as yet. Nonetheless,possible delays in the deregulationof rents should not deter the Government from starting to privatize the management of some housing estates.
2.10 Privatizinathe Public Housina Stock: Successful privatization of the public stock, one other point on the Government'sagenda, will largely depend on the efficiency with which rent reform and allowance schemes will be introduced. Without reforming the rent and homeownershippolicies, the divestiture of the public housing stock may not generate the expected adjustments in the housing market. The recommendationto sell the public stock to the current inhabitantsmay seem attractive from a fiscal point of view because it would generate revenues and eliminate the heavy burden of maintenance. However, given the poor physical conditions of the premises they occupy, few tenant households would consider purchase unless the prices were heavily discounted or the financing terms made quite soft. Furthermore,even in the case of a virtual give-away, the owners of the dwellings may not be able to carry the correspondingmaintenance and renovation costs.
Thisis an Inevitablelegacy of thesubsidy policy. as longas the Slateis expectedto contibute substantallyto 0 & M expenditures,the Statehas theright to set the minimumcontibutions It epects from thebeneficiaries and the localgovemments towards such expenditures. - 13 -
F. Redefining the Role of Supolv Aaents
2.11 PrLvatizina the Building Industry implils major changes in the way housing is being supplied today. Constructionkombinat- will need to give way to a more diversified and competitive supply structure including smaller and specializedconstruction companies, developers, and home-builders' associations. Ultimately, the role of the public sector should be relegated to regulatory functions concerning land use, building standards, property rights, contractingpractices and provision of infrastructure.
2.12 Private constructionfirms, architecturaloffices and joint ventures with foreign constructioncompanies are already emerging, but the old supply structure continues to operate, albeit at sharply reduced volume. The cost advantage of private contractors rests mainly in the use of traditional, labor intensive materials, such as brick and mortar, as opposed to the poor quality, prefabricated, capital intensive components of the public enterprises. Other advantages are the lower overhead and greater adaptability of the new enterprises. Should constructionand mortgage finance become available, the new contracting firms could grow rapidly and absorb part of the labor released by dismantlingthe old kombinats. Price competition can help induce the privatization and restructuringof some kombinats into smaller and more efficient enterprises. However, this will require increasing emphasis on competitivetendering for the award of constructioncontracts.
2.13 Restructurinathe Housina Cooperativesmay prove more difficult. Cooperativeshave been traditionally (and will likely continue to be) a principal housing investor. They have undergone major changes during the past 40 years. The original, self-governingbodies had been grouped into a hierarchy of regional and central unions whose activities had become heavily influenced by the State. In January 1990, the Cooperative Law was revised returning to the three basic principles of self-management,independence and self-financing. Other positive changes include: abolishmentof the regional and central unions; provisions for breaking up a large cooperative into several smaller ones; and reinstatementof free elections in all primary cooperatives. Moreover, a new cooperative law is now under consideration which will provide guidance for the operation of new or restructured cooperatives (para. 2.16). Approval of this new law is urgent for several reasons: (i) cooperativeshave been allocated valuable land sites which remain underdevelopedfor lack of investment fundsl (ii) most cooperatives have long waiting lists of paid-up members whose acquired rights and obligationsneed clarification;and (iii) as non-profit organizationsthe cooperativescould be well placed to provide affordable housing for lower and middle income families, while private developers are more likely to cater predominantlyto higher income groups.
G. Revisina the Leaal and InstitutionalFramework
2.14 DecentralizingLand DevelotmentControl: The Local Self Government Act of March 1990 has assigned to the local governments the responsibilities for the control of urban development and for the construction, operation and maintenance of public utilities, housing and other local services. In addition, the Land Management and Real Estate - 14 -
Expropriation Act of December 1990 defines the role of local authorities in land use planning. A separate, but na lose important aspect of the anticipated legal reforms concerns the no fiscal/financial arrangements in intergovernmental transfers, which are heavily dependent upon the general overhaul of the tax system which Poland will begin next year. These changes are only at an early stage of development and their ultimate impact on the powers and autonomy of local governments are not yet transparent1 o.
2.15 Pending Lgaislation: Implementation of the Government'e housing strategy require the routing of several recent innovations in the legal system. The main issues are the equal protection of ownership rights, the definition of public purpose as a basis of expropriation and clear foreclosure rules to support a viable system of construction and mortgage finance. In view of the fact that most real property transactions are ruled again by Civil Law, there is also a need to strengthen the Judiciary and to provide for procedures of appeal and independent review. The large scale transfer of State property to the local authorities requires development of Notarial Offices and of Land and Mortgage Registries. In addition, a new Banking Law and a new Law of Collateral Security are under consideration. The current draft of the latter intends to extend security interest to all types of property including real estate. New accounting and auditing standards consistent with international practice were introduced in May 1991.
2.16 Five Critical Bills: Recently, the Council of Ministers has submitted five important bills for ratification by the Parliament: (i) the Housino Act which will complement the revised Civil Code on a variety of provisions concerning rental contracts and includes the highly controversial two-year scheme to de-control rents in communal housing (now in its eighth draft); (ii) the Anti-Crisis Act which addresses the most urgent issues facing local government in the areas of land-use planning, investment permits and provision of serviced residential land (approved); (iii) the Limited Real Riahts Act which introduces new forms of credit collateral for cooperative flats, amends the Civil Code accordingly, permits individual mortgages to be issed to the future owners of cooperative flats, and enables the recovery and transfer of mortgaged debt (approved); (iv) the Eviction Act which abrogated the entitlement of a delinquent mortgage-holder to a replacement dwelling in case of foreclosure (approved); and (v) the Procurement Act which institutes rules and procedures for competitive procurement of goods and services in investment projects bearing a contribution of the central or local governments (in preparation). A more detailed account of the status of progress of these legislative initiatives is supplied in Annex B.
to A sepaat sectorstudy on intrrgoemmenteaagements has bon just caled out. SeePoland: Deentralizalonand Reform of theState GreenCover Report No. 10446-POL Infrastructure Operaons, CentralEurope Departbnent April 27, 1992 - 15 -
. Summing Up
2.17 Seauencing Reforma: The adoption of an aggressive policy of rent de-control would call for simultaneous real wage increases, which may be inappropriate in the current circumstances of the economy. On the other hand, high social risks are involved in sharply increasing rent. in an environment of declining real wages, because a large proportion of the population may be unable to meet the required payments and no housing allowance system iu yet in place to complement the contributions that poor households can afford to make. Therefore, the Polish Government emphasis on developing a market for future homeowners suggests that the introduction of housing finance will tako precedence over the more gradual changes in rental policies.
2.18 Removing Sectoral Constraints: On the supoly side there is a need to improve construction management, cost estimates, cost control and procurement practices. One must allow also for free options in the technology of construction (including the revival of traditional building methods) and for a diversity of housing types and design solutions. It is also important to revise the current, over-restrictive practices of land allocation, development control, licensing, building standards and zoning regulations all of which are matters that come increasingly under the discretion of local governments. In addition, local authorities must earmark sufficient sites for residential development where the needed services and infrastructure are available or can be provided at a reasonable cost. Excessive rationing of urban land, high building standards and similar requirements raise investment and transaction costs unnecessarily, discourage private developers and increase pressure for budgetary subsidies. on the demand side there is a need to increase the affordability of long-term housing finance and to encourage investment in rental housing and home ownership. Thare is also a need to make people realize that the consumption of housing services is not unlike that of other private goods: it is exclusive and rival, and should be charged directly to the consumers so that the quality and quantity of housing services they purchase would be determined by the level of payments they are willing to make. Important steps in this direction have been the decisions to charge the real cost of money on housing loans and to increase the share of household income devoted to the payment of rents or mortgages (March 1991).
2.19 The Government Role in Strateav Implementation: The Government has carved out its own role during the transition period in the following areas: (i) continuously monitoring the housing markets; (ii) revising property rights, physical planning laws and building regulations; (iii) encouraging competitive participation of a variety of housing suppliers; (iv) privatizing and restructuring construction komoinats and facilitating entry of new private firms into the sector; (v) servicing land for housing development; (vi) promoting housing allowance schemes for low income households; and (vii) developing an efficient housing finance system, based on sound banking regulations and well separated from targeted budget subsidies. (Policy Letter of March 2, 1992).
2.20 World Bank Assistance: The Bank's assistance strategy in Poland has focussed on the implementation of the government's Economic Transformation Program which is being explicitly supported by the SAL. The core of the - 16 -
strategy is the successful implementationof the Polish multi-track privatizationprogram, the development of a modern and efficient financial sector, and the implementatlonof an effective social safety net.
2.21 The approach to the housing sector follows this strategy by creating the basic conditions to develop private construction enterprises, to attract private resources into housing lnvestmentsand to strengthen the mechanisms of financial ietermediation. Bank staff has collaborated with the GOP in working out the general strategy of housing reforms that has been outlined above. It is recognized that such strategy is just beginning to take shape and that its implementationwill require a long period of sustained Bank assistance, both in form of policy advice and in form of subsequent lending operatLons. It is now proposed to fund a First Housing Project that would provide iprate investorswith resources for constructionand mortgage loans, while addressing those institutionaland regulatory problems which still hamper their participation. Moreover, the Project would reduce the sector's demand on scarce public funds by fostering the growth of a stable source of long term finance. However, more needs to be done to fully reform the housing sectors public housing subsidies need to decline and any remaining subsidies need to be better targeted to needy households. Dialogue on those issues will be pursued during project implementationwith central and local authorities in form of technical assistance and special studies. - 17 -
Chapter IIIs THE PROJECT
A. In&rod&ction
3.01 Backaround. In the spring of 1990, the Government of Poland expressed interest in receivlng Bank assistance in reforming the housing sector an part of its ongoing Economic Transformation Program (ETP). During discussions between the Prime Minister and the Vice President of the Bank it was decided to create for this purpose a Joint Task Force which, established in April 1990, concluded its activities six months later. The Project Preparation Team started its work at about the same time, focussing on the operational aspects of a first housing loan. The present report condenses the overlapping experiences of the two groups.
3.02 Coordination. The proposed project underscores the importance of a functioninghousing finance system in a market based economy. To ensure consistency between this operation and other Bank activities, close coordination was maintained with the Bank teams working o reforms of the financial sector and the commercial banking system. The proposed project took into account the policy framework established under the Structural Adjustment Loan of July 1990 (3247-POL) and the Financial InstitutionsDevelopment Loan (5535-POL). Project preparationbenefitted also from discussions with IMF staff on the acceptabilityof dual index mortgages.
3.03 A Housina Finance Proiect office 1HFPOI was established in November 1990 to prepare the Project under the authority of the Economic Committee of the Council of Ministers (KERM). The Office gathered a group of Polish and expatriate experts with experience in housing policy and design, urban planning, economic and financial analysis, banking, law, and training. In November 1991, the Office became attached to the Ministry of Spatial Economy and Construction which was designated as the executing agency of the Bank loan. Bank staff has been working closely with the HFPO on all aspects of project preparation.
3.04 Policy Contributions. The HFPO has been advising the Government on how to move towards a market-based housing system. A major achievement was the change in housing finance terms which the Government adopted in two stages, first with the decree of March 25, 1991 (Annex C) and then with the subsequent decree of October 1, 1991 (Annex D). The new terms link mortgage payments to both the current income of households and the market rate of interest (paras 4.05, 4.06 below). More recently, the HFPO has also advised the Ministry of Spatial Economy and Constructionin drafting the Government's Housing Policy Statement which has been discussed in the Polish Parliament (Annex A). Bank staff has reviewed the current version of the document and agrees that it includes necessary elements for a market-basedhousing system.
3.05 Missions. Project Preparationmissions took place in October 1990 and January 1991 and the appraisal mission in May 1991. Negotiationstook place in Washington from April 13 to April 17 1992. The Polish Delegation was led by Mr. Andrzej Diakonow, Secretary of State, MOSEC. Mr. Jerzy Zrdlalka, Secretary of State, MOFIN, acted as Chief Negotiator. - 18 -
B. Proiect Obiectivee and DescriDtion
3.06 The Main Purpose of the Prolect is to support the GOP's efforts to develop a housing system based on private supply and market finance. The project's approach represents a major break with past policies, aiming at the following objectives:
(a) to oncourace orivate supply and demand for houuina b:v
(i) developing a source of unsubsidized, long term housing finance; (ii) stimulating initiatives of private developers and contractors; (iii) encouraging changes to laws on home tenure, purchase and rentall
(b) to strenathen housing finance institutions by:
(i) introducing a mortgage instrument which can preserve cost recovery and affordability under unstable economic circumstances; (ii) creating a fund to help banks issue mortgages in an environment of high inflation; (iii) developing the institutional capacity to appraise proposed housing investments through training and technical assistance; and (iv) promoting new administrative, financial and accounting practices;
(c) to adiust housino production to Consumer needs and preferences by:
(i) assisting private and public agents in all aspects of housing development; (ii) providing advice on construction management and cost efficient technologies; and (iii) introducing programs to upgrade dilapidated housing and re- allocate rehabilitated dwellings to potential users.
3.07 Proiect Profile. The project consists of two lines of credit to the Mortgage Fund to be established in the Housing Development Bank (BUDBANK) by the Ministry of Spatial Economy and Construction and a large Technical Assistance program to develop mortgage financing and to support private initiative in housing construction. BUDBANK would be the main financial intermediary while commercial and savings banks, developers, cooperatives and private contractors would be the implementing agents. The Ministry of Spatial Economy and Construction will be the executing agency on behalf of the Government, and counterpart funds would be appropriated within its yearly budgets (para. 6.01 i). Local governments would also play a critical role as facilitators of private sector activities and suppliers of building sites and infrastructure. The Technical Assistance component would be financed through a substantial grant from the government of the United States, and contributions from the UNDP and other official sources. Technical assistance - 19 - should help build a firmer institutionalbase and the financial expertise required to address the needs of housing sector development. It would be provided at the local and central levels of government,to the HFPO, the Mortgage Fund and the sub-borrowingbanks in order to develop suitable operating capacities and institutionsto assist private initiatives.
3.08 J2gJJco2,p2. A US200 million Bank loan is proposed to partially finance subloans that the Mortgage Fund would make to the participating banks underwriting mortgages. Proceeds of the proposed loan would be available to participating banks also for financing housing construction in order to jump-start this activity which slowed down sharply as a result of Poland's recession and economic restructuring (paras. 1.08 and 1.15) It is anticipated that demand of IBRD fundr for construction would diminish oncs a new building cycle is underway and banks become familiar with the policies and operations of the Mortgage Fund.
3.09 Sub-ProjectsPi2eline. The size of the proposed loan has been estimated on the basis of projected activities and the expected commitment of loan proceeds during a three year perlod (1992 to 1994). An initial pipeline of about 50 representativesub-projects has been preliminarilyidentified in two dozen cities throughout the country amounting to a prospective investment of over US $200 million (Annex J). These sub-projectsrepresent a sample of divarsified sub-borrowers,demand and constitute the basis for the project appraisal. They include constructionof new single- or multi-family buildings, densificationof underdevelopedurban sites, improvementof vacant lots interspersedin the urban fabric, re-developmentof existing downtown blocks, and upgrading/remodellingof communal flats for sale. The investment program for the first year of operation has been reviewed by the Bank prior to negotiations. Subsequently, the proposed investment programs would be presented to the Bank each year by the Borrower in cne course of joint program reviews (para 6.01 ii). However, definitive appraisal of credit applications would remain the responsibilityof the participatingbanks albeit under the supervisionof the Mortgage Fund and the HFPO.
C. Pr4niectComoonents
3.10 Mortaaae Loans. At least half of the Bank loan (US$100 million), and an equivalent counterpart contributionwould be onlent to banks issuing dual index mortgages to individual households (para 6.01 iii). Access to such long-term funds is essential to induce banks to engage in constructionand mortgage lending under the current economic conditions. The Mortgage Fund is expected to support the financing of about 27,000 mortgages, during the disbursement period of the Bank loan.
3.11 Construction Finance. The other half of the Bank loan (up to USS 100 million) would help finance housing constructionloans through a. special window of the Mortgage Fur.d. It is expected that these construction loans would be converted into mortgages upon the sale of the unit. Based on current costs, one can expect this component would support construction contracts for about 15,000 dwellings unite. - 20 -
3.12 Technical Asistancets Grant funds are expected from a variety of sources to finance consultants,studies, training and office equipment in order tos (i) help develop new policies, instrumentsand institutionsfor the individualborrowers; (ii) train banking staff in new practices and procedures; (iii) train municipal staff in housing related matters; and (iv) train private developers in project evaluation,market analysis and estimates of constructioncosts. Forms and recipientsof Technical Assistance are specified below (para. 3.25).
D. Criteria of Sub-ProjectEligibilitv
3.13 EliaibilityCgiteria for ConstructionSubloans. Construction works financed under the Project would be subject to the following eligibility criteria (para 6.01 iv):
(a) construction loans would be made only for sub-projectsconducive to individualmortgages being issued to the households, and shall not be made to public enterpriseswhich have no prior experience in construction; (b) at least sixty percent of the units in each constructionproject should be pre-sold to identified,eligible buyers; (c) all constructionloans financed under the project should be committed within 3 years of the date of loan effectiveness; (d) constructionloans should not exceed 75 percent of the estimated total constructionvalua; (e) the size of each constructionloan should not exceed 100 dwelling units; (f) the expected constructionschedule of subprojects should not exceed 18 months; (g) all units financed should be built with valid building permits and comply with the building requirementsof the local authority; (h) adequate sanitation, water supply and energy conservation standards should be adopted and access to public services and community facilities ensured; (i) the award of construction contracts should be based on competitive bidding procedures, satisfactoryto the Bank
3.14 Bligibilit Criteria for Mortaage Subloans. Whether or not already financed through the Project's construction loans, all subprojects for which mortgage financing is sought should meet the following criteria (para. 6.01 v):
(a) mortgages would be issued under the Project only for individual and qualifyingborrowers;
(b) prospective buyers would need to demonstrate a capacity to pay; the size of individualloans should not wxceed 36 times the monthly income of the borrowing household; and the maximum payment expected would be 25 percent of the household's income; - 21 -
(c) dwelling units financed should not exceed 100 M2 of net usable floor area for one apartment in a multi-familybuilding and 150 M2 for a single-family,semi-det-.ched building;
(d) to avoid double financing of constructionand mortgage loans by the Mortgage Fund, any amount advanced in form of a construction loan would be deducted from the mortgage loan; and
(e) the dwellings financed with resources from the Mortgage Fund would meet the criteria specified in points (g) and (h) in para. 3.13 above.
E. Project Cost and Financing
3.15 Total Proiect Costs are shown in Table 3 and have been estimated at US$677 million equivalent. The direct and indirect foreign exchange costs, estimated to be slightly over 30 percent, would be financed from foreign sources. These includes a grant-fundedTechnical Assistance program of US$10 million of which about half has been already appropriatedby the corresponding agencies.
3.16 Co-financing: The European Bank for Reconstructionand Development (EBRD) has just negotiated with the GOP a loan of ECU 50 million* (US$67 million equivalent)which would be disbursed against construction subprojects financed under the World Bank loan, partially substitutingfor counterpart financing. Supervisionof these subprojectswould be carried out jointly by staff of the two banks.
3.17 Parallel USAID Financing: The US government has authorized a program for US$25 million housing guarantees to be issued by US banks under Federal Government guarantee. This would also be administeredby BUDBANK under a separate account. Subprojectswould comply with the same terms and conditions as in the World Bank project. USAID has also signed an agreement to finance the principal share of the technical assistance needs of both projects.
3.18 ConstructionFinancing. Constructionsub-projects would be financed 75 percent with medium term loans (3 year maximum) and 25 percent with investors' funds. The proposed IBRD participation would cover all the foreign exchange requirements,while local costs would be met by the Government, the domestic banks and the investors. The agreed financing plan for this component is shown on Table 4 on page 23.
*Atnegoations (which took pace aftrcompleton of our documonts),th EBROIwn was aised to ECU54 million (US$6 millionequivalen). In addition,th EBRDCooporaton Fund will grn ECU1.8 million (US $2.3 million equvalen for chnicalasan to thepwtclpang bank. - 22 -
3.19 Construction Cost Estimates shown in Table 3 were based on the experience of private construction companies and consulting firms monitoring the construction sector in Poland (Annex K). 1 To minimize distorttons from fluctuating inflation and exchange rates all estimates are presented in USS. Local costs were converted into Dollars at the official exchange rate which prevailed at the end of May 1991 (21 11,000 - US$ 1.00). Physical contingencies were set at 10 percent of the base case estimate for the construction component only. The corresponding price contingencies have been calculated on the US$ base costs assuming the following rates of international inflation ratest 1991: 5, 1992: 1.8%, 1993: 1.9%, 1994: 3.9%, 1995 4.9%, 1996: 4.2%.
Table 3: PROJECT COSTS
------US$ million------__------___ Local Foreion Total
Construction Component 164 70 234 Mortgage Component 227 97 324 Technical Assistance Component - 10 10 Design,Supervision, Administration Costs 19 9 28
Base cost (May 1991 prices) 410 186 596
Physical Contingencies 17 7 24 Price Contingencies 13 6 19
Total construction cost 440 199 639
Interest during Constr. (IDC) 27 11 38 Total Financing Required 467 210 677
MOSECproduces periodic estimatesof housing 'constructioncosts which are adopted by NBP to establish unit cost cellings for housing loans. In March 1990the unit cost was set at Zl. 1.5 million per square meter of net usable floor area. Since then, the ceiling has been revised severaltmes upwards and reachedZl. 4.0 million In the last quarter of 1991. However,this Index often conJusesthe construcon gs (materIals,labor, use of equlpment,possibly Interestduring constructionand contractor'soverhead and profi with sale prlces of no usable area. The latter should prorate the cost of land, Infrastructure and other administratveand marketingcosts. The mission estimatesat appraisal time assumed US $287 x m2 for constructioncosts and US $416x m2 for sale price on January1, 1992(Annex 19. Only the latter estimate correspondsroughly to MOSEC'slatest value, when expressedIn dollars according to the correspondingrate of exchange. - 23 -
Table 4: FINANCING PLAN FOR CONSTRUCTION COMPONENT
(USS million} % of Local Foreign Total Total …------__------Investor/Developer 83 83 25 Medium Term Loans GOP 33 - 33 10 IBRD - 100 100 30 EBRD 67 - 67 20 Participating Banks 50 - 50 15
Total construction 233 100 333 100 ==m, W= ==mm = m, ......
3.20 Mortaace Financino: This component of the Project would finance 80 percent of the mortgages issued by the participating banks which would finance the remaining 20 percent using internal funds. The mortgage would cover up to 75 percent of the sale price of the unit 12; the buyer will contribute the remaining 25 percent as down payment. The agreed financing plan for the mortgage component is shown in Table 5.
Table 5: FINANCING PLAN FOR MORTGAGE COMPONENT
(USS million) % of Local Foreign Total Total ------Down payment 84 84 25 Long Term Loans GOP 100 - 100 30 IBRD 100 100 30 Participating Banks 50 - 50 15
Total Mortgages 234 100 334 100 =mm nu~mm mm. mm.
3.21 Consolidated Financial Plan. All construction loan. are expected to be repaid when due, most of them through term conversion into mortgages. Thus, the construction and mortgage components of the Project can be consolidated into a single financing plan, as shown in Table 6.
12 The value of mottgagesis set below the total sale value of the unit which, besides consftction coss, Includes those of the land and other pro-ratedcosts such as mwketing expensesand other overhead charges of the developer which could not be reimbursedwtth Bank funds. Howeverthe low percentage of cost sharng by the Bank in this loan (30percent rles out that proceeds of the foreign exchangeloan might cover any of the above items. Similarconsideratons appty to the constructioncredit component where land Is generally part of the Investor's25% contribution towardstotal Investmentcosts. - 24 -
Table 6s CONSOLIDATED FINANCING PLAN
(US$ million) % of Local Foreign Total Total
Investors 167 - 167 25 Long Term Loans GOP 133 - 133 20 IBRD - 200 200 30 EBRD 67 - 67 10 Participating Banks 100 100 15
467 200 66710
Various TA grants - 10 10 1
Total 467 210 677 101 IW..IN ......
F. Environmental Inmact
3 22 No adverse environmental impact is expected from the proposed project which would offer valuable opportunities to enhance environmental benefits. Care would be taken during the appraisal of each sub-project to ensure that adequate sanitation, water supply and energy conservation standards be adopted, and that development sites afford adequate access to public services and community facilities to the future inhabitants (para 6.01 iv). Urban upgrading projects in areas of historical or cultural significance should clearly support conservation values. The proposed project has been reviewed and placed in environmental screening category "C" consistent with the provisions of Operational Directive 4.00, Annex A, "Environmental Assessment".
0. Proiect Implementation
3.23 Institutions: The Ministry of Spatial Economy and Construction will have overall rosponsibility for project implementation. The proceeds of the Bank loan and the Government counterpart funds will be channeled through BUDBANK's Mortgage Fund which will onlend to participating banks. The Mortgage Fund will be created under the Project (paras 4.09-4.20, and Annex D- I).
3.24 Operational Manual: A draft operational manual has been prepared by the Borrower with the assistance of Consultants. This Nanual has been reviewed and agreed by the Bank. The document details the institutional arrangements and the policies and procedures to be followed in the implementation of the project, setting out official guidelines for investors, developers, participating banks and the Mortgage Fund. The outline of the 53 pages Manual is presented in Annex 3 to this report. It is divided in four main sections: 25 -
1. Overview of the Proiect (objectives,policies, institutional arrangementsand credit programs).
2. Flow of Funds, (creditterms and responsibilitiesof local banks);
3. ConstructionCredit Program, (requirementsfor borrowing and repaying constructioncredits); and
4. Mortaaae Credit Program, (requirementsfor borrowing and repaying mortgage credits). The main text of the Manual is accompanied by several annexes including sample contract forms, credit application forms and other guidelines which are intended to assist the borrowers and the lenders under the project. Formal adoption of the Operational Manual would be a condition of effectiveness (para 6.02 ii).
3.25 Technical Assistance: Technical assistance would be provided to:
(i) the Housina Finance Proiect Offices The HFPO is currently involved in the analysis of housing issues and in the formulationof new policies. During project implementationits capabilitieswill need to be supported in the following areas: the mobilizationof private resources for housing; the monitoring of recent initiatives (e.g. the introductionof indexed mortgages); the legal and regulatory implicationsof applying the new mortgage instruments;the agenda for further reforms in housing finance. It must be noted that this subcomponentof the project is well underway, thanks to the prompt assistance granted by the UNDP and by the U.S. and Japanese Governments for the preparation of this project.
(ii) the Ministrv of Spatial Economy and Construction: The Ministry will need assistance in promoting changes in the regulatory framework for land and housing development and in guiding local authoritiesin the revision of norms and standards concerning site selection, land acquisition, land use, development permits, design, tendering and contracting civil works, supervision of construction, marketing of new units and re-allocation of existing ones. In addition, the Ministry is in the process of changing the laws governing rental and management of the public housing stock.
(iii) the Mortoace Fund: The newly created Mortgage Fund will need assistance in several areas: (a) credit control including loan administration,accounting and auditing, reporting, control, and servicing systems; (b) credit appraisal and risk management including loan origination, processing and settlement policies, risk management and quality control; and (c) design and management of informationsystems, including evaluation of the extent to which existing systems are suited to the demands of the new mortgage lending instrument; design of new or enhanced systems for reporting and control, construction scheduling, management of default, loan origination and servicing. Since mortgage banking will be a new business in Poland and little expertise is available in this field, the appointed manager of the Mortgage Fund will be supported by a senior, experienced mortgage banker and four additional experts who will help develop a viable loan portfolio and information systems to forecast and monitor the Fund's activities (Annex L). - 26 -
(iv) the ParticiloatinqfBanks: The Mortgage Fund will provide assistance in loan origination, borrower approval, loan proceseing, loan servicing, risk and default management through detailed guidelines and loan approval procedures. In addition training will be provided to all participating banks through specialized short-term courses. Finally, specialized technical assistance will be given to banks with particular needs. The National Savings Bank (PRO BP) which holds to date about 80 percent of the country's housing loans and almost half of all private-savings deposits is expected to play a major role as sub-borrower in the project along with the nine commercial banks. To this end PRO will need training and advice in three key areas: (a) credit control; (b) credit management; and (c) design and management of information systems. The need for such assistance has been established by the recently comoleted diaanostic study of PKO which included an audit, a portfolio review and a management assessment. The Government is now in the process of developing an action program to restructure the institution, which may call for tailored assistance. Should PRO requirements exceed the scope of the Housing Project, complementary assistance can be obtained as part of the Financial Institutions Loan.17
(v) Local Authorities: The current policy of decentralization calls for development of institutional and managerial capabilities at the sub- national level. New procedures for lending, resource mobilization, and project appraisal ought to be disseminated throughout the country. Municipal staff and local developers would be trained ins (a) the management of the public housing stock; (b) the management of urban services; (c) the revision of municipal regulations in regard to town planning, land development and construction permits; and (d) the preparation of housing projects and credit applications. Substantial activities have been initiated already under this component with the sponsorship of USAID and UNDP. Resident experts are at work in various municipalities and a series of training seminars have taken place.
H. Procurement
3.26 Mortaace Loans: Although mortgage contracts finance civil works and goods, they do so only indirectly and retroactively. Therefore, the transactions covered by this component would not be technically suitable for competitive bidding according with the Bank's Guidelines for Procurement.
3.27 Construction Loanes The construction component, however, would partially finance civil works and purchases of goods and services. New laws and regulations regarding local procurement procedures and practices are presently being drafted (para. 2.16 v and Annex B) and will be reviewed by the World Bank in order to reach a judgement whether the local procedure. are acceptable for World Bank financed contracts. The findings of that review will be discussed with the Polish authorities and agreement will be sought to make the procedures acceptable to the Bank. Meanwhile, assurance should be sought at negotiations that, for civil works contracts of greater value than
Is * TheFinancial Instiutons Loan (P-5635-POL)Includes resources which could be used in a technical assistanceor a twinningprogram for PKOBP. - 27 -
US$1.0 million equivalent, the technlcal staff employed by the participating banks would supervise the application of locally advertised competitive bidding (LCB) acceptable to the Bank (para. 6.01 vli). This implies that: (i) a bidding document will be iseued; (ii) adequate competition would be encouraged to obtain reasonable prices; (iii) the procedures to be followed in bid evaluation and contract award would be made known in advance to all bidders; (iv) such procedures would not be arbitrarily applied; and (v) foreign firms would be allowed to participate if interested to do so. Moreover, the first three procurement documents in this category (including bid invitations, evaluation report and contracts) will be reviewed by the Bank to ascertain that acceptable procedures are being used. For civil works and purchases of lesser or equivalent value to US$1.0 million, procurement by comparative price quotations (local shopping) would be acceptable to the Bank, provided that at least three separate quotations are obtained and that the contracts be awarded to the lowest evaluated price. The participating banks would retain the relevant documentation for review by supervision missions.
3.28 Force Account procurement of civil works by public investors would be justified only in those cases in which works are small and scattered or remote in location so that mobilization costs would deter contractors from tendering for their execution. The total aggregate amount for thie type of contract is not expected to exceed US$33 million equivalent or 10% of total construction financing (5% of total project cost).
Table 7: PROJECT PROCUREMENT AND DISBURSEMENTS
IUSS millionsi Project Component Procurement Method Total _CB LCB Other NA Cost
Mortgage Loans - - - 334 334 (100) (100) Construction Loans - 250 83 333 (75) (25) (100) Technical Aseistance - - 10 10 10
(-) (-)
Total - 250 93 334 677 _ (75) (25) (100) (200)
Note: Figure in parenthesis show amounts financed by the Bank.
3.29 Single Family Houses: A certain share of project expenditures (up to US$50 million equivalent or 15% of total construction financing) would finance construction works carried out directly by individual borrowers. These individual loans would be converted into paying mortgages at the end of the construction period. Borrowers may execute works themselves or purchase materials and services by shopping locally for the lowest price. This - 28 - fragmentedpattern of transactionsprecludes packaging or wholesalepurchase of materialsand servicesand is also consideredunsuitable for formal tenderingprocedures.
3.30 TechnicalAssistance: The technicalassistance component would be financedthrough multilateral and bilateralgrants. Consultantswould be contractedeither as individualsor as firms in accordancewith the practices of the sponsoringagency - or the World Bank guidelines(in the case of the JapaneseGrant Facility). Terms of Referencedrafted by the donor agencies would have to be approvedby the Borrowerin consultationwith the Bank. I. Commitmentsand Disbursements 3.31 SubsidiaryAgreements: The proceedsof the World Bank loan and the Borrower'sequity contributions would be made availableto the Mortgage Fund under a SubsidiaryAgreement to be enteredinto by the Borrowerand BUDBANKon terms and conditionssatisfactory to the World Bank (para.6.02 i). This Agreementwill includeprovisions to the effectthat subloansto ParticipatingBanks would be denominatedin Zlotys (para6.01 vi) and that the net revenuesto the MortgageFund (afterservicing the World Bank loan and coveringthe Fund cost of operation)would be used for reinvestmentin the Fund'sactivities (para. 6.01 ix). In turn, BUDBANKwould-nter into FinancingAgreements with each ParticipatingBank for the purposeof financing the Constructionor MortgageSubloans that the ParticipatingBanks may want to underwritewith developersand/or households (the Beneficiaries).At least one ConstructionFinancing Agreement and one MortgageFinancing Agreement enteredinto betweenthe and a participatingbank would be requiredas a conditionof effectiveness(para 6.02 i). 3.32 Commitmentof Loan Proceeds: By November30 of each year, would submitto the Bank its financialprojections for the followingyear and the expectedcommitments from the Projectlines of credit. These yearlyprograms would be reviewedjointly to establishthe magnitudeof expectedBank commitmentsand the requiredcounterpart funds (para 6.01 ii). It is expected that the beneficiarieswould submittheir projectsand negotiatesubloans with the participatingbanks. Individualsub-loan agreements between the Mortgage Fund and the participatingbanks would be sent to the Bank for prior approval only when the constructioncost of sub-projectsexceeds US$1.0 million equivalent.Through its own staff and consultants,the HFPO would continueto offer technicalassistance as neededduring the three stagesof identification,preparation and evaluationof subprojects.The MortgageFund would be mainlyconcerned with the generalmanagement of the program,the final steps of sub-loanapproval, and the monitoringof overallresource commitmentsand disbursements. 3.33 The two linesof credit(total US$400 million including the World Bank, the Governmentand EBRD funds)are expectedto be committedover three years (1992-1994).However, the final date for submissionof sub-projectsto the Bank has been set at June 30, 1995 to providesome leeway. 3.34 Disbursement: In the absenceof disbursementprofiles for comparableoperations in CentralEurope, the scheduleshown in Annex N has - 29 -
been patterned on the experience of Infrastructureand IDF projects in the ENENA Region that is of 26 quarter duration. This is coneiderably longer than the historical profile of similar housing finance operations in other regions (especiallyin Latin America) for which th- period of disbursement in of the order of five years. The longer perspective has been adopted in view of the weaker institutionalbase and managerial know how available in Poland. This conservativeprofile allows for prudent assumptionson the growth of the mubproject pipeline, the gradual acceptanceof the mortgage instrument, a moderate pace of implementationand minimum pressure on the budget for counterpart funding. The date of December 31, 1989 has been assumed ae Closing Date for the loan account.
3.35 The disbursementpercentages proposed are as follows:
constructionlcans: 30 percent of total constructioncosts which is equivalant to 40 percent of a construction subloan
mortgage loans: 30 percent of the value of a newly constructed unit which is equivalent to 40 percent of a mortgage subloan
3.36 For the disbursementof the mortgaae component,the Borrower will submit Statements of Expenditures (SOE's) documentingto the Bank the amounte onlent by BUDBANK to participatingbanks on account of DIM mortgages. identificationof the correspondingbanks, sub-borrowersand sub-projects would be required to support disbursementapplications.
3.37 For the constructionloan component, disbursementswould depend on work progress and would be based on full documentationof expenditureson all subloans above US$1.0 million value, which are subject to ex-ante review. For all contracts of lesser amounts, Statements of Expenditures (SOE's)would be submitted by the Mortgage Fund, identifyingthe type, location, size and unit costs of corresponding sub-projects.
3.38 To expedite execution of the constructionloan component, it is proposed to establish a Special Account at the National Bank of Poland with an initial deposit of USS11.0 million (5.5 of loan proceeds),which represents the estimated maximum requirement of a three month period. The Borrower would withdraw the Zloty equivalent of the Bank's share of expenditures made by the local banks on eligible sub-projectsaccording to the exchange rate in effect at the time the Borrower's disbursementswere made. The Bank would replenish the Special Account upon submission of withdrawaldocuments by the Borrower.
J. Supervision. Reeortina and Monitorina
3.39 The participatingbanks would be responsible for supervisingthe execution of sub-projects,which would be carried out mainly by private contractors. Representativeoof the banks would periodicallyvisit each sub- project and review the constructionprogress in view of disbursementneeds. This information would be reported to the banks in a format allowing for close monitoring of project advances and authorization of payments. Technical - 30 - assistance in this respect would be supplied to the banks by the HFPO. Bank supervision of this prc-ect in not expected to require excessive staff time and should fall within he norm of 2-3 field misions per year. The HFPO will continue to evaluate t}) impact of the project according to a program satisfactoryto the Bat , and would regularly forward its monitoring reports to the Bank.
K. AccountLna and Auditing
3.40 The project accounts would be audited annually by a firm of independentpublic accountantsacceptable to the Dank, and the audLt would be submitted to the Bank within six months of the end of each fiscal year. The auditor's opinion would include certificationthat the Bank loan funds have been used for the project work identified,and that the underlying files and documents support the disbursementrequests made through the Statements of Expenditure (para 6.01 viii). The Borrower would retain all required documentationto support the SOE's and the disbursementrequests and would keep a record of all expenditures for review by the auditors and the Bank's supervisionmissions. - 31 -
Chapter IVs THE FINANCIAL INTERMEDIARIES
A. Current Structure of the Financial Sector
4.01 Poland's financial system is not as well developed as one would expect of an economy of its size. This is because the functions of financial institutions were quite limited under the former centrally planned administration. Reform of the financial sector began in January 1989 with the adoption of a new Banking Law and with the Act restructuringthe National Bank of Poland. The NBP Act separated lending from central banking functions and transferred credit activities to newly created banks (9 commercial and 5 specializedbanks). One of the latter, the National Savings Bank (PRO BP) controls most of the current portfolio of housing loans. Beginning in early 1990, about 100 banking licenses have been awarded to new banks but only a few of these, usually very small in size, are operational. The Housing Development Bank (BUDBANK)has been established in late 1990 by the Ministry of Spatial Economy and Construction. (para 4.10).
B. Ongoing Reform of the Financial Sector
4.02 The Government aims at developing a largely private and competitivebanking system which should allocate credit to those borrowers which offer the best combination of low risk and high return. However, the new banks are still suffering from limited autonomy, weak portfolios, lack of real competition,poor banking skills, and inadequate financial structures. A separate World Bank operation (the Financial InstitutionsDevelopment Loan (No. P-5535-POL))was approved in June 1991 to support continued reforms in the following key areas:
(a) Leaal and InstitutionalAspects of the Bankina System: (i) bank licensing, (ii) bank regulation and supervision, (iii) ownership transformation,(iv) deposit insurance, (v) bank solvency, and (vi) debt recovery and bankruptcy issues.
(b) Accounting and Auditina Practicess basically technical assistance by the IMF and the Banque de France to attune Poland's accounting rules with those of the EC.
(c) Credit Policiess shifting from administrativecredit allocations to the use of monetary instruments (interestrates, reserve requirements and open market operations) to influence the growth and allocation of credit.
(d) Interest Rates: Periodic adjustments in the NBP refinancing rate to reflect changes in inflation. The NBP rate has become the key instrument of interest rate policy.
(e) Financial Institutionsstrengthening the commercial banks through twinning arrangementswith foreign banks. Some of the specialized banks (e.g. PRO BP) could be included in this program once they have been audited and have submitted an action plan for reform. - 32 -
C. Housino Finance Is2ues
4.03 Houring finance should not only benefit from the current systemic reform in the banking sector but also increasinglycontribute to the considerableprogreus that has been achieved already in controlling the growth of upecializedcredit schemes, in reducing their share of overall credit and in curbing the segmentationof the financial market. To-date however, housing credit 'hasbeen growing faster than any other epecialized credit scheme even after the adoption of the ETP: the portfolio of housing loans rose from zl 3.3 trillion at the end of 1989 to zl 40 trillion by the end of 1991. Over half of this sharp increase has been due to the capitalizationof most of the interest accrued on outstanding loans (para. 1.16). At the end of 1991, the housing debt exceeded 50 percent of total preferentialcredit.
4.04 Recent and proposed changes in sector policy should confer a decisive role in the allocation of housing credit to market factors. Nonetheless,this sector is likely to remain dependent on directed allocation of resources as long as long-term financing,which is required to meet the high cost of a home relative to household income, is not available in Poland's capital market. In addition, with the help of special lending instruments, the affordabilityproblems of conventionalmortgages will be overcome by deferring payment of interest. Financing such instruments requires that a certain share of domestic credit be earmarked for this purpose, at least during a transition period. Establishing a well-designedand closely monitored program of specialized credit may then be warranted by the distinctive social and economic characteristicsof the housing sector and by the need to avoid the adverse effects (fiscal, allocative and distributional) which would be induced by the continued dependenceon budgetary and extra- budgetary subsidies.
4.05 The Mortaace AffordabilityProblem: Conventionallending instruments are ill-suited to address the affordability problems caused by high and volatile interest rates and/or falling real wages. When inflation and nominal interest rates are high the payments required by Fixed Rate Mortgages (FRM) or Adjustable Rate Mortgages (ARM) can rise quickly to levels which are not affordableto most first time home buyers. The underlying issue (commonlyreferred to as the "tilt" problem) is that the loan repayments are heaviest in real terms at the beginning of the repayment period and therefore increase the risks of default. Conventionalmortgage instruments simply do not provide sufficientprotection for either the lender or the borrower and are unlikely to persuade financial agents to volunteer long term resources for housing if the financial environment is very volatile.
4.06 The Dual Index Moqrtaae (DIM):14 To overcome these problems, several high inflation economies in Latin America have experimented with price
14 A gooddiscussion of te DIMfeatures Is foundIn INURDpaper No. 62: MortoapeDesign under Inflation and RealWaae Unoertalnt: Me Us. of a DuwIndex Mothaae by R. Buckley,G. Upman,and T. Persaud, WorldBank, 1990. Seealso AItfnat MotoaqeInstruments in DistortedHousing Svstems: How Useful Is mte DfAM? unpublishedEMTIN Regional Study by L Chiquiserand B. Renaud,World Bank, January, 1992. - 33 -
or wage adjusted mortgage. One of the most reliable of such instruments has been the DIN, which has been applied in Mexico, and also in France, to reduce the ricks of loan default when inflation and interest rates rise. The outstanding features of the DIM are that the annuity payments are periodically adjusted (say quarterly or even monthly in highly unstable environments) to an index that appropriately reflects changes in household income (e.g. a wage index). The interest rate charged on the loan's outstanding balance varies with changes in the market rate of interest. These features make mortgage lending immune to inflation and greatly increase affordability. Any unpaid portion of interent and principal is capitalized and repaid eventually as the value of annuity payments rises in line with wage increases. Thus, in contrast to the traditional mortgage instruments, the DIM requires nominal payments to be increased regularly in order to amortize the loan. The maturity of the loan is flexible to accommodate fluctuations in real interest rates and real wages which delay or accelerate the pace of loan repayment. For example, an increase in the real rate of interest at constant real wages will require a longer maturity for the loan to fully amortize. To summarize, the DIM is a flexible instrument that bears automatic, pre-negotiated adjustments to changing economic conditions and thus reduces risk for the lending institution. The appeal of the DIM is that the monthly payments are predictable for the borrower as a constant share of income, while the lender is assured a reasonable, positive return on the asset. A typical DIM amortization table simulating repayment under the conditions now prevailing in Poland, in provided in Annex I.
4.07 Implicit Risks: Nonetheless, the proposed lending instrument is not without financial risks. Two cases have been analyzed in which DIM loans might fail to amortize. Both, real interest rate and real wage shocks could prolong the DIM repayment period well beyond its normal maturity of 20 to 30 years, possibly making a portion of the loan non-recoverable. Sensitivity analysis, however, shows that these shocks have to be deep and prolonged and should occur in the early years of the loan in order to present a serious danger of loan lose. This means, that only a portion of the housing portfolio would be fully exposed to those risks at any point in time. Moreover, over a longer period the volatility of rmal interest rates or real wages tends to be less than that of nominal interest and wage rates, which should help to recover potential losses in the early years of the loan. Finally, it was found that a deteriorating loan-to-asset ratio poses only a small risk of default, even under extreme conditions, if the borrower makes a 25 percent equity down payment.
4.08 Funding Dual Index Mortaaaes: Resort to the DIM implies that the interest accrued during certain periods is not paid in full but is partially capitalized by the lending bank. In practice, this means that, in order to fund such a lending instrument in Poland today, an element of directed credit will be necessary. This can be justified on the following grounds: (i) the chosen instrument would not introduce distortions in the financial sectorl (ii) borrowers would compete for the allocation of project funds; iii) under prevailing economic conditions, no traditional mortgage instrument can make housing credit accessible to a sizeable proportion of the population; (iv) no alternative source of long-term funds is available on the Polish market, and (v) major fiscal and credit policy objectives would be achieved by replacing - 34 -
the prevailing interest rate subsidies with a financial instrument that charges market rates and allocates resources according to the borrowers' ability to pay. The proposed Project recommends to finance dual index mortgages by creating a Mortgage Fund which would make long term loans to participating banks on commercial terms.
D. The Mortaace Fund
4.09 Obiectives of the Fund. The Mortgage Fund is expected to provide a stable source of long-term capital for housing investments and to induce the commercial and savings banks to underwrite mortgages for individual borrowers. Although the Fund would finance only a portion of the country's housing needs, it would introduce and develop mortgage instruments generally suitable to the economic conditions now prevailing in Poland. The appraisal criteria adopted by the participating banke would be conducive to a gradual restructuring of the housing sector and should support the growth of private enterprises (paras 3.13, 3.14).
4.10 Establishment of the Mortoace Fund in BUDBANK. One possibility considered during appraisal was to create the Mortgage Fund as a new legal entity, possibly in the form of a Government Foundation or a Trust Fund. However, such solution was considered undesirable by the Borrower, as it would have put the Mortgage Fund outside the discipline of banking regulation and supervision. Instead, the Borrower proposed (and the Bank agreed) that the Mortgage Fund be established as the preeminent activity of BUDBANK, S.A., the bank created in mid 1990 by MOSEC and PKO-BP, each contributing 43 percent to its capital15 . The adoption of BUDBANK as the intermediary of the Bank Loan recognized the bank's focus on housing finance as well as its special relationship to MOSEC. However, such decision calls for substantial modifications in BUDBANK's ownership structure, internal organization and scope of activities which could only be settled with the concurrence of a majority of its present shareholders.
4.11 Resolutions of BUDBANK Shareholders. Two resolutions were passed on April 25, 1992 by a qualified majority of BUDBANK shareholders, specifying inter-alia that construction and mortgage financing in accordance with the Project's Operational Manual would become the sole activities of BUDBANK within a period of three years during which all non-conforming activities of the Bank would be phased out and no new ones undertaken unless otherwise agreed between the Bank and the Borrower. Furthermore, the resolutions intimated that no participating Bank could hold more than a 10 percent share of BUDBANK capital and that before entering into a financing agreement with BUDBANK they should relinquish their voting rights so as to avoid a conflict-
15 Th remaining 14 percent sharesbelong to somepublic enterprises,voioodships and a few private indiwduals. BUDBANKopertons sared on October 1, 190 and its accountshave been audited by KPMGfor the period ending December31, 1991receiving a clear opinion in accordancewith Polish and InternationalAccounting Standard. At the end of 1891,BUDOBANIs general loan portfollo totalledZl. 198.8billion (about US $15 million) Includingprovisions for doubtful debts of ZI. 01.6 billion or 11percent of poAYollo.During its first 15 months of operation,BUDBANK earned a profit of ZI 86 billion (US$0.7 million) after making provisions,which is equivalentto 19 percent of the bank's equity which totalledZI. 46.2 billion. About 66 percent of BUDBANKloans were for a term of under one year. BUDBANKhas a staff of 133,Including 65 professionalsand is headqua,teredIn Warsawwith branchesin Ton,n and Poinan. - 35 -
of-interest situation. This also implies that the shareholdingparticipation of PKO BP has to be substantiallyreduced if it is to become a principal sub- borrower. The details of the two resolutionsare presented in Annexes D-I and D-II.
4.12 The Fund Resources would come initially from the Government, the World Bank and other multi- or bilateral sources which might be interested in co- financing. The Bank would supplement the Government'sannual contributionsto the Fund on the basis of annual reviews of the Fund's ongoing and planned investments. After several years of successful operation, the Mortgage Fund may start raising resources through the sale of bonds.
4.13 Access to the Fund Resources: The Mortgage Fund would channel its resources to the final borrowers through any retail lender which meets given eligibilitycriteria (paras. 3.13, 3.14). The intention is to counter the possible segmentationof the mortgage market by favoring competition among retail lenders. However, the single most importantborrower in the early years is 'ikely to be the National Savings Bank (PKO BP) because of its familiarity with the sector and its extensivepresence in the country (para 4.22). Other banks are expected to follow suit as -hey gain confidence in the new system of mortgage loans and find it attractive to diversify their portfolios.
4.14 Management and Staffing: A Draft Statute for the proposed Mortgage Fund, outlining the proposed inter-institutionalarrangements, has been reviewed by the Bank. The Fund, as a separate department of BUDBANK would be governed by the bank's Board of Directors and would be steered by a senior management team. A statute (Bylaws) of the Mortgage Fund satisfactory *tothe Bank has been adopted by BUDBANK shareholdersin their general assembly of April 25, 1992. (Annex D-I). Conclusion of Inter-InstitutionalAgreements satisfactoryto the Bank, including delegationsof authoritywould be a condition of effectivenessof the Bank Loan (para. 6.02 i). The HFPO is curre.tly engaged in the following: (i) developing the organizational structure of the Fund's during the first years of operation, (ii) preparing draft legal contracts for onlending arrangements;(iii) developing detailed guidelines for the Fund's operations;and (iv) identifyinga qualified manager and staff for the Fund. In the first year, the Fund is expected to employ a permanent staff of 8 to 10 people including office support. In addition, the Fund would receive substantial expatriate assistanceunder the Project's TA component (para. 3.25 iii).
4.15 The Fund's Onlending Terms: As explained above (para. 3.31) the participatingbanks would enter into Financing Agreements with the Mortgage Fund which would also specify eligibilitycriteria for the Constructionand/or Mortgage Subloans (paras. 3.13 and 3.14) against which Fund financing is requested. Having determined that their applicationsmeet these eligibility criteria, the Fund would lend to participatingbank at the following terms and conditions (para. 6.01 x):
(i) Currency: All loans would be denominated in zloty (para. 6.01 vi).
(ii) Interest rates: variable and no less than 300 basis points above the Basic Interest Rate of the National Bank of Poland (presently defined as the refinancing rate). - 36 -
(iii) Reoavment terms: constructi2n loans would be repaid at maturity in a single payment including principal and interest. Mortgaae loan. would be repaid according to a schedule tied to the payments received from the ultimate borrowers and reflecting the cashflow of the underlying indexed mortgage.
(iv) Fund Participation: The Fund would finance up to 80 percent of a conutruction or mortgage loan.
(v) Collateral: The Fund would have a fit lien on the mortgage in case the sub-lending bank defaults.
(vi) Credit Risks The interest rate charged to the end-borrower would include a premium for the bank which will take the risk on both construction and mortgage loans.
4.16 Financial Projections: The cash flow of the Fund has been projected over a period of 20 years, somewhat longer than the repayment period of the World Bank loan. The projections presented in Annex H trace the growth of the Fund, assuming that its resources are limited to the Government's capital contributions, the proceeds of the World Bank loan and cash reflows from the subloans. The estimates were made in US dollars assuming a constant average international inflation rate of 4 percent to year 2000, in line with World Bank projections.
4.17 Exoected Results: The projections assume that the Fund will have diebursed about US$400 million at the end of the first six years ($200 million from the Bank loan plus the contributions by the Government and EBRD). Thio also includes reinvestment of about US$40 million received by the Fund as loan repayments. Some 27,000 new units would be financed during this period. If construction costs and house sale prices remained constant in real terms, the Fund's assets would continue to grow to some US$1.9 billion even if no additional capital or loan funding would be forthcoming. Over 20 years, the Fund could develop into a buoyant source of finance, enabling the financing of some 76,000 new dwellings out of its net revenues alone (para 6.01 ix) after meeting its own current costs and the repayment of the World Bank loan16 (for details see Annex H).
4.18 Risk Sharino: The onlending terms of the Fund to sub-borrowing banks are assumed to match the cashflows of the underlying mortgages. To give an example, if a mortgage bank borrows from the Fund, 80 percent of the mortgage loan, it muet pass on to the Fund 80 percent of the current payments received from the beneficiary until the loan ie fully paid off. Thus, the Fund's cashflow and returns behave in the same way and share the same risks as the underlying DIM's which, as explained above (para 4.06), are related to variations in real interest rates and real wages. Special arrangements (e.g.
16 This Implies that both the re of exchangeand the domesticInterest rafe continue to adjust to changes In domestc and IntemationalInflaion, If this were the case, the Fund would be able to cover the costs of Its foreign borrowing out of Its own resources. However,it i* recommendedtha the exchangerat risk be caffled by th Govemment - 37 - a first lien on mortgages) will be introduced to protect the Fund againet the risk of default by participatlngbanks.
4.19 Start-up Eauity: An inltial capital contributlonby the Government iL necessary to help manage the cashflow of the Fund including the obligatLon to repay the Bank loan. 17 A favorable debt equlty ratio in the early years would leave room to raiLe reuources on the long term capital markets in the future, especially if interest rates decline and real wage. rise. As part of BUDBANK,the Fund should be able to access these markets in the future and assist banks in managing the maturity and liquidity riske of mortgage loans.
4.20 Subsidies: At prevailing market rates of interest neither the onlending terms of the Fund nor the underlying mortgages would involve subsidies to the borrowing banks or the ultimate beneficiaries. Government aosistance to the operation of the Fund would be limited to wavering any charge for interest or dividend on its quity contributions,thus allowing the Fund to re-lend all net cashflow from its operatlons after meeting its own operating costs and the debt service on the World Bank loan (para. 6.01 ix).
E. The PartLcipatincBanks
4.21 The, c rmneialBank:s All nine commercial banks have been audited during the preparation of the Financial InstitutionsProject Loan and will benefit from the large and inteneivetechnical aseistance program envisaged in the implementationof that loan (para 4.02). The staff of commercial banks could also benefit of specializedtraining in the approval and management of constructionand mortgage loans which would be provided under the Technical Aseietance program of the housing project (para 3.25 iv).
4.22 PKO BP: About 80 percent of the social housing portfolio ie now in the hands of Powuzechna Kasa OszczednosciBank Panstwowy (PKO BP), a 18 prominent savings bank which iL fully state-owned. The 49 regional offices and 316 local branches of PKO hold now approximatelyhalf of the country's private savings deposits in about 40 million passbook accounts and 6 million time deposit accounts which are all cnvered by an explicit State guarantee. Significantly,about half of PRO's deposits are made of the houeing savings accounts of the 2.5 million cooperativemembers who keep their passbooks for an average period of 15 years. In the short and medium term, PRO ie likely to
17 Underth projectsassumptions, dh followingcontibutfons are expectedfrom the Govemment$20 mililonIn 192 $25million In 1993;$34 million In 1994;$36 million In 1905;$37 million In 1996;$38 millionIn 1997;and $10 million In 19. However,th Govemment'scash oudasy may be substantally reduoedby EBRDpawtcipaton In financingth conutrucffoncomponent as follows:$11.0 In 1992,$10.0 in 199Z$19- In 199; $22.0In 1905;$30.0 in 19; #26.0In 1907,and $17.0 In 1998. Thebalance of thwhousing pochilo Is held by th Bankof FoodEconomy (BGZ) and by manysmaller cooperet bak. UnlikePKO, which cotred nainlyto uran coopertves, BGZe*ended creditto the ,iul cooperaem or to IndIdual famers buildingon hir ownland. - 38 -
continue functioningas a princlpal window for housing credit applications.19
4.23 PRO Portfolio and Financial Performance: At the end of 1991 PKO's housing portfolio amounted to the equivalent of some US$3.5 billion (ZI. 40 trillion). Thiu representedabout 46 percent of the bank's total assets and 68 percent of all its loans made in 1990, up from 27 percent and 60 percent respectively in 1988 and 1989. An of June 30, 1991 most of PRO'e housing portfolio (76 percent) consisted of loans still under disbursement,which are vulnerable to the combined effects of high interest rates and inflated constructionprices. An audit and a diagnostic study of PRO completed in September 1991 have shown a significantproportion of the current housing loan portfolio not to be fully recoverable. This is mainly so because loans used to be made to the housing cooperativeas a whole without regard to the ability of its individual members to meet the share of loan repayment corresponding to the flats they receive. At present, cooperative loans account for 92 percent of PKO housing portfolio.
4.24 Need of an Action Prooram for PRO: Past housing policies have undermined the financial viability of the country's largest savings bank. It has become urgent to restructure PKO portfolio of outstanding housing loans to recapitalizethe bank and to introducemajor institutionalchanges. The Government has already moved to correct many of the inefficienciesof the old housing finance system, most notably through the adoption of the Dual Index Mortgage as the standard current lending instrument (Decrees of 03/25/91 and 10/01/91; see Annexes C-I and C-Il). In February 1992, the Parliament has approved the Government'sproposal to cancel all constructionloans still under disbursementas of March 31, 1992 in order to reduce the destabilizing financial and fiscal effects of the old housing portfolio (para. 2.06). For 1992 alone, this measure is likely to yield a reduction in the order of 1 percent of GDP in the housing subsidiesproposed in the Budget Plan. However, additionalmeasures must be taken to relieve PKO of the burden of a non- performing portfolio as part of the broader effort to restructure and strengthen the financial system at large. This issue ie being addressed jointly by the Government of Poland, the World Bank, and the European Bank for Reconstruction and Development (EBRD).
4.25 Secaration of Proiect Accounts: One should expect that strengthening PRO's financial position and implementcing the necessary managerial and administrativechanges will require some time. Since it would be unrealistic to exclude PRO from participatingin the proposed project during such period, the accounts of loans financed with resources from the Mortgage Fund would have to be separated from all other PRO activities. Therefore, PRO and other sub-borrowerswould be requested to operate a special
19 It mustbe notedSt PKOhas been and continuesto be sublectto a argedegree of Influenceby the NatonalBank of Poland(NBP) and theMinistby of FRnance(MOF). Contols apply to: a) Its productfocus (th bankIs requiredto makeat leat 7% of its hans for housing);b) Its lendingterms and conditons (perlodicelyset by theCouncil of Ministers);c) thevolume of Its aggregatecredit, mandatory reses andrefinandng credit (set by NBPfor all Me-owned banks);and d) the salarylevl of Its 34,000 empyees (contoolledas In adlstat-owned Instttons). Othr sowoesof Influenceon PKOare the hosing cooptvs and theMinistry of Consouction(MOSEC). - 39 - window through which all future loans supported by the Mortgage Fund would be handled and which would be independentlyaudited every year (para 6.01 xii). The special windows would benefit from the Technical Assistance Program outlined for PXO (para 3.25 iv above). The twinning option would also be pursued upon request by the Government.
4.26 ,Financina Terms to the Flnal Borrowers Whether issued through PXO or any of the commercial banks all constructionand mortgage subloans bearing Mortgage Fund financing should meet the eligibility criteria listed in paras 3.13 and 3.14 above. All mortgages financed under the Project would be dual index mortgages, with repayment being adjusted to changes in the average wage index and interest accruing according to the real rate of interest. The starting interest rate would be the prevailing market rate but no less than 300 basis points above the Basic Interest Rate of NBP (para 6.01 x). Mortgage payments would be on a monthly basis; the adjustments to changes in the indicee would be made on no less than a quarterly basis. There would be no grace period. Any unpaid portion of interest and/or principal due would be added to the outstanding loan balance. - 40 -
Chapter V: PROJECT BENEFITS AND RISKS
A. Benefits
5.01 Standard economic rat- of return analysis is not applicable to the proposed project. Imputing shadow rental values in order to estimate the stream of benefits would be fraught with problems because, up to very recently, prices have played no role in the demand for and supply of housing services. However, the very scarcity of housing in Poland suggests that market rents should be high and that housing investmentswould yield a high rate of return.
5.02 Transformationof the country's economy implies also that housing prices should be determined by the market rather than set administratively.As discussed in Chapter 2, the Project supports the Government'sgradual strategy of sector reforms which starts with the development of a homeowners-market. However, the efforts in this direction will need to be sustained and extended beyond the disbursementperiod of this loan.
5.03 The principal value of the Project is to generato a source of long term finance for housing, which would offer unsubsidized,sustainable lending to future homeowners. The housing investmentsto be financed under the project would be selected according to market principles by a financial intermediarywhich uses truly commercial criteria in allocating it. funds to prospectiveborrowers. Trading-offthe current, unpredictableinterest rate subsidies with scheduled and relatively small budgetary transfers to the Mortgage Fund would be a more efficientuse of public resources (para. 6.02 i). Efficiency gains would arise also from design improvements. The Fund, the participatingbanks and the investorswill receive technical assistance in the evaluation of proposed projects and the management of loans.
5.04 Distributional ImDact. The proposed Project aims at developing a private supply of housing and strengtheninghousing finance institutions.It has been designed to minimize subsidiesto future homeowners, who are expected to repay in full the borrowed amounts. The project will, therefore, serve that segment of housing demand which can support development of a market-based supply. As long as the Project would achieve full cost recovery from its beneficiaries,it would also bring about a more equitable system than the one being replaced, which allocates subsidies in an indiscriminatefashion. In order to ensure that households in the middle to lower middle income brackets20 could benefit of the Project upper limits have been set on both the size of construction loans and the floor area of units that can be financed with proceeds from the Mortgage Fund.
20 Up to very recently, the cuNveof Income distNbutdonfor Polandhas been relatvely flat up to the 8th decile (an evident resuftof past equalizationpolicies). Also, there appearsto be an tnverse correlationbetween householdIncome and dwolling tenure: more than half of families In the two poorost dectles are homeowners(42% of them are sole occupantsof their own premises). See Poland: A Strateovfor the Housina Sector.report of the Joint Bank-PolishTask Force on Housing,July 1990. - 41 -
B. Risks
5.05 The proposed project has required considerable institutional, regulatory and policy changes to enable a quick supply response. However, these represent but a few first steps towards the more systemic reforms which would be needed to offset the current market distortions. Subsequent Bank operations may be necessary to consolidate the progress made under this project and to pursue the longer term objective of restructuring the whole housing sector. The institutional framework in which the proposed operation would take place is one of transition, which makes the project vulnerable to external events. Both the financial intermediary (the Mortgage Fund) and the implementation agents (the participating banks and the developers) would be laboring under a climate of uncertainties as far as prices and interest rates are concerned, while the real incomes of households may continue to fluctuate, possibly jeopardizing the affordability of the finished dwelling to the customers they were originally intended for.
5.06 The proposed project has been designed to reduce some of the above risks through the dual index mortgage which defers part of loan repayments (para 6.01 iii). With an initial infusion of capital from the budget, the Mortgage Fund could help offset the cashflow shortages incurred by the banks by capitalizing unpaid interest, maintain sufficient liquidity to repay the World Bank loan and reinvest net revenues in new mortgage loans. It is expected therefore, that the government would confer sufficient priority to the project to assure the needed equity contributions over the first five years of the Fund's operation (para 6.01 i).
5.07 One measure of success would be the clear separation between the financial mechanism of the proposed project (which should be consistent with the credit policies adopted for other sectors of the economy), and any parallel housing scheme funded with public resources (which may include an element of subsidy as long as it is kept explicit, well targeted and predictable)(para 6.01 x). Continuity and coherence of government policy in this respect would be essential and an official Statement of Housing Finance Policy has been required for future reference.
5.08 The dwellings built under the project will be bought by those households w4ich are more able and willing to mobilize personal savings into sizeable downpayments and can meet corresponding debt-service payments. Should economic conditions deteriorate, higher income households than those originally intended might become the principal project beneficiaries. This might secure longer term distributional benefits from the project, when conditions improve and lower income beneficiaries become again eligible.
5.09 Other operational risks stem from the lack of experience of the sub-borrowers with the chosen mortgage instrument, a slower than expected progress in clarifying property rights, in revising obsolete land development regulations and in the possible shortage of developable land sites. Most of these risks should be reduced through the substantial injection of technical assistance, hands-on advice and training of personnel which is considered under the project. - 42 -
ChaRter VI: AGREEMENTSREACHED
6.01 During Negotiationsthe following agreements have been reached:
i) Counterpart financingwould be appropriatedannually according to an agreed schedule in the budget of the Ministry of Spatial Economy and Construction (para 3.07);
ii) Joint reviews of commitment/investmentprograms would be held yearly (paras 3.09 and 3.32);
iii) Only Dual Index Mortgages issued to individual households would be eligible for financing under the Project (paras 3.10 and 5.06);
iv) Constructionsubloans would be appraised by the ParticipatingBanks according to agreed criteria including environmentalimpact criteria (paras 3.13 and 3.22);
v) Mortgages would be issued by the ParticipatingBanks according to agreed criteria of eligibility (para 3.14);.
vi) Subloans to ParticipatingBanks would be made in Zlotys (paras. 3.15 and 4.15);
vii) Work contracts above US$1.0 million value would be awarded according to locally advertised, competitivebidding procedures acceptable to the Bank (para 3.27);
viii) Annual reports by qualified independentauditors would be sent to the Bank covering the Special Account, the Mortgage Fund and the accounts of any ParticipatingBank (para 3.40);
ix) Net revenues of the Mortgage Fund,(after servicing the World Bank loan) would be used for reinvestmentin new subloans (paras 4.15 and 4.17);
x) Financing of new housing starts under parallel programs supportedwith public resources would be compatible with the terms and conditions of the Mortgage Fund (para 5.07);
xi) The interest rate charged to participatingbanks would be variable and at least 300 basis points above the Basic Interest Rate of the National Bank of Poland. The interest rate charged to final borrowers would also be variable and no less than 300 basis points above the Basic Interest Rate *of the National Bank. (paras 4.15 and 4.26); - 43 -
xii) The ParticipatingBanks would keep separate accounts in respect of the activities financed under the Construction and/or Mortgage Financing Agreements, such accounts to be separately audited every year (para 4.25).
6.02 Loan Effectivenesswould be contigent upon satisfactorycompliance by the Borrower with the following conditions:
i) A Subsidiary Agreement would be entered into between the Borrower and BUDBANK on terms and conditions satisfactory to the Bank (para. 3.31). At least one ConstructionFinancing Agreement and one Mortgage Financing Agreement would be entered into between the Mortgage Fund and one participating bank (para 3.31);
ii) BUDBANKD shareholderswould take a resolution restricting the scope of BUDBANK's activities to the financing of constructionand mortgage loans in accordance to the OperationalManual (para 3.22) under terms and conditions acceptable to the Bank and the Borrower would make a $11 million equity contributionto the Mortgage Fund (para 4.19).
With these assurances and conditions, the proposed project would be suitable for a Bank loan of US$200 million equivalent with a term of 17 years, including a four-year grace period at the standard variable interest rate. -44-
ANNEXES
Housing Policy Statement...... A
Legislation Affecting the Housing Sector...... o B
Ordinance of the Council of Ministers: March 25, 1991...... C-X
Ordinance of the Council of Ministers: October I, 1991 ...... C-UI
Resolution No. 2 of BUDBANK Assembly of Shareholders...... D-X
Resolution No. 3 of BUDBANK Assembly of shareholders ...... D-XI
operational Manual Contents......
Application for Construction Credit ...... F..
Standard Contract Forms...... 0
Cash Flow Projections of the MortgageFund ...... H
Dual Index Mortgage Amortization Table ...... *.O.9e
Project Profiles ...... * ...... J
Analyoio of Project Costs ...... K1
Technical Assistance Program ...... L
Reporting and Monitoring System...... K
Estimated Schedule of Disbursement ...... N
Selected Documents and Data Available in the Project File ...... O - .45. AN~NEXA Page 1 of 6
HOUSING POLICY STATEMENT
(Summary of the document submitted to the Parliament by the Ministry of Spatial Economy and Construction, Spring 1991)
The document:
1. Outlines the Government's role in promoting change from administrative to market-base allocation of housing. This implies the following tasks for the various levels of government;
- making projections of housing demand and supply; continuous by monitoring the housing markets;
- adapting physical planning to the needs of a market economy;
- acquiring and serviclng land for residential use; exercising some control over land prices;
- carrying out buLlding inspections;
-. providing low-cost rental housing for the poor;
- establishing housing allowance schemes for low-income groups;
- granting tax relief to mobilize savings into housing investment;
- adopting deferred payment schemes on houslng loans during periods of high inflation and establishing a budget-supported credit facility to finance capitalizationof interest;
- developing the regulatory frameworkand monitoring the performance of the banking institutions operating in the housing sector;
- facilitating systematic information;
- assuring competition among housing suppliers.
2. Makes recommendations on particular areas of houslng policy and housing management. These include:
Ownershin richts to cooperative aoartments. The tenancy rights to cooperative apartments should be converted into ownership rLghts. The current ownership rights (described in the Polish law an "limited right to real estate propertyw) should be converted into condomLnium-typeownership rights. -46- ANNEX A Page 2 of 6
Rents in communal housing. Some control over the rent levels may be necessary as long as housing supply is insufficient. Rent control has to be balanced agaLnst the disincentivesto potential housing investors. Due protection should be assured to tenants, securing the stability of rental contracts without excessive restricting the rights of the owner. Landlords must be able to exercise eviction rights Ln cases of persistent violations of contrac' agreements. Tenants must be protected from situations in which 'unreasonable'rents are demanded (for details of the rent decontrol proposal, see the overview of the Housing Act in Annex B). The budgetary resources currently spent on maintenance of communal housing will be spent on housing allowance schemes and on now construction (some of which will be low-cost communal housing).
Manaaement of communal and coolerative housinq. The management structure of communal and cooperative stock management companies should be diversified. Both public and private bodies can be considered.
Privatizationof communal housina. The purchase option should be offered to sitting tenant or to members of the family living in the apartment. Vacant communal and enterprise units should be auctionedoff.
Physical lahnina and desian. A new 'SpatialEconomy' Act, regulating physical planning, investment permits and land markets, is being drafted in the Ministry of Spatial Economy and Construction. Some immediate solutions have been developed in the 'anti-crisis'legislation, currently in Parliament *(Acton Special Conditions for Realization of housing Construction in Years 1991-1995 and on Amendments to Some Acts - see Annex B). The urgent issue is to move away from rigid design standards. The current standards result in unduly high constructioncosts and do not account for regional differences.
Financina of infratructure. The primary infrastructurewill be financed byt (i) own resources of the utility enterprises; (ii) budget resources of the local governments, communal development bonds, taxes and fees from land sales, and advance payments of non-residentialusers; (iii) funds obtained through revenue-sharing scheme; and (iv) credit to be repayed through user fees and other budgetary revenues of local governments.
Reforms of the buildina sector. The restructuringand privatization process must be speeded up to bring down construction cost and to diversify housing supply. Privat_zation should be preceded by the subdivision of Kombinats into smaller units. The entry of new housing suppliers and the adoption of competitive bidding should assure a more appropriate level of prices and increase efficiency in the sector. The new standards should conform to those used by the European community to guarantee adequate technical quality of new housing. These standards will be limited to considerationof safety and health, energy saving, environmentalprotection and appropriate solutions such as access to buildings by handicapped persons. ANNEX A Page 3 of 6
Housing finance. It will be necessary to make a distinctiorbetween the medium-term construction credit and long-term mortgage credit For mortgage credits, the loan amount will be related to the income of the borrower. Down- payment should not be lower than 20% of price/cost, and maturities should not exceed 30 years. Interest rates should be ajustable. With the current price- to-income ratios, deferred payment solutions must be used. Unpaid interest could be capitalized and partially financed with public funds. The government must assure the effective implementationof mortgage credit by: (i) assuring the appropriate legal environment,particularly an enforceable foreclosure law; (ii) stimulating the mobilization of savings by paying real positive interest rates to depositors and by creating contractual saving systems; (iii) assuring competition among banks participatingin housing finance; (iv) creating the institution for mortgage credlt insurance; (v) creating mortgage banks, and secondary mortgage markets; and (vi) continuing with the anti- inflationary policy. The system of medium-term construction loans with guarantees of long-term mortgage credit has been adopted by PKO at the beginning of 1991.
Fiscal ooliey and housgng finance. The bill on personal income tax (to be introduced in 1992) is currently in Parliament. The bill proposes to allow generous deduction of housing expendituresfrom the taxable personal income. Some other tax relief measures will be introduced in 1992 for investors in rental housing. The new tax will also be introduced to prevent hoarding residential plots without building. This tax will be a part of the system of local taxes and fees (act being drafted).
Low-cost communal housina. Low-cost communal rental housing could be partially subsidized from the central budget. The central budget would participate under the following conditions: (i) cost per m2 below the provincial average; (ii) budget participationshould not exceed 50% of construction costs; (iii) rents should cover maintenance costs; (iv) access to these units would be limited to low-income families; and (v) the budget would participate in financing no more than 40 m2, regardleso of the actual size of the units.
Housing assistance. The increases of rent and utility charges will necessitate the development of housing allowance schemes. These schemes will be part of social assistance program and will be further developed by the Ministry of Labor and Social Policy with the cooperation of the Ministry of Finance and the Ministry of Spatial Ecnomy and Construction.
Other 'anti-crisis'measure. In future, a general 'real estate' tax can be introduced to generate funds.
Apart from the legislativeacts already in Parliament, three acts are still being drafted in the Ministry of Physical Planning and Construction:the 'Soatial Economy' At, the Buildina Code and the Act on the Office of Minister of Housina and Spatial Economy. -48- ANNEX A Page 4 of 6
POLAND- PInRg HMOSWNPRIXECT - HOUSINGSECTOR POGM
Arec of RFleformleaue Actn. Akredv Taken xt S Futum Aton
A. HousingSuboMeld
1. ouin suies have Govmrment has dafted a Approvervisd housing Developconcrste acton programs ecountad fo 8.1O% of Housing Poky pawhh po and nowHousing to Iplement new poles budgetay expendituree I beingdscussed In Aal and 241% of DP cusing Parlment Poy proposl mor setor and eono emphasies grear efficiency. widedtrtIns. and reducedsubide
2. Subeid hae been tnterset raes on housing Developschedule to tmplment rent reforn polic untageted and we cane raid to mat bveIs () phesoout rent control, Monitortho useof DIM* probabl cgraIv. Unpaid Itt 1 cspltasd, (i) protec those who and nubsidIud by tho budget oanot pay marketrnts (ill oreatsMortgage FRndto help banks Onanc DIMs.
a. SubsidIe he Adoption of canmeml ConvertInteret subidleo Mako mortgagelendg Into Inflated houeingdemand mortgageIsaiding chteri Into a viable sourceof an attractIvebualneu whle productionwas Dusl IndexMortgag DOW) credit reviw tho for the baiking sectr controlled throughsimt should eliminat subidle revlewtho regunlay prfvatz the buidng credit alloction aid 11mitdemnd frmework eneoumging Industry competiti mong uppper of housing
IL RmntalPooleis
1. Rentehae been overment h ned wntn Ronoverulone deterring Re n two-yer plan tightly controlld prlodiaCy duing the sitno toenntafom to reach mt nt and amount to no moe paetyoe but net enough elast rmponee to higher ontext of wagepolic than 2 parnt of an to sahleve real h-orsones. prics includo market and new forms of targeted averageohorshold ktom Noewhoung GMpepad hIto In admnbted support rentn
2 Support fo Only a veryrudinlfntay Cony out *tudy of design intoduoe houing alnowe low icme rental etem of diret housng and feature of houing In step wHh rent de-control housing allowanceexitt. Rent aowce system mssuree end rent hncress oontrolhas been tie principalmechanism
C. Manacemwntof public houslno
1. PubgI stockh None ntrduce competitionby Prlvae the managementof munagedby nefficdent Housing Poky Stament aowing smallerpvt publi houing public agenm mntpidos pfiatzto Nrim to take pet of the reponsble for nt objective managmnt funtons codolon, O&J
O. P dletiom
1. 2% of the ta and Ohiedture remains Provdeafforde long Avold faet priaatilon 40% of the n housing stated objectiveof term financeto aclte at housing slackfo short stock ae owned by the Govmment poiy. Prevous pruvalixationand tem flow reasons: rent publc and entetptiss attempte at low pr renovationof pubc stock reformend cos to secw. OUlM l thes divetitur notvvy ftinno mut co"efir t dwellO i seIi succssfu burden on Governmt -49- A'NEX A IVage 5 of 6
Ar of Reformllsuse AftionsAlradv Taken Next Stene FutureActbn.
E. Tenan Rbhtt t. Cunent tancy ight. IN preventedto Parliament Adopt now legislation BaJano.the hnteret ogley*pectd propoed rptolng the No expernce yet GI of ownern nd rentem and tum adrninistratlveallocation of Implementatonof tanantnright. Into fi Wmn dweigs with H evctin law renewable Igh.Maintain renta ontrmte. New adequatetenant protcton wiction law abollhee rile that evctd tenant automaticallybe given substte housing
F. HoushinRnance
1. Ulordabft of Dual IndexMortgae (DIM Implment DIM fuiy. set up eyntem to monitor Lending bnewument adoptedby Dec In prowideTA to banke inplenwenttiLonand rdak October 1UI to pprae and of DMlU ontrol rsks of now blndlng insvunmnt
2. Fnancing DIMe Agreeet to setup a Recrultocoptent aff DevolopMortg Fund Into a Motgage Fund to finance to strt up the competent. oommrnlaly part of themortgagee MortgageFund pating sourceof howiing flnance Issuedto houeholde Fund by tho banks
3. Old huslg loa Paymentson housing khn Defineteemw for Evaluateposlbty to convert portfoio homebeen Inked to bcrrowees Govenment ptil prt of old housng loan Into payg hicomecspitang anyunpaid purche of capitaized mtgage. Cancel dsburewants for al1 porin of Intereotdue. Interest; negotia lo"n st under construction C mvernmentllnnOsepart Intest ratesand grace s of 411119U2 of the coRilnd Intresti perod b n th Mink"ry on rant tbems.Rk of of Finance ad FlKOBP *xoWe subdldygrwtrh becausethe underlying lon portio l not peffarming
4. Rewoue Uobill2ation Contact.Initiated to Continueongoing reseth Strtw nplmentation of for housing *xperece In rsure developpolcy prposl apprcwd policy mobilizaton of other counties suitble for Polad by mld-102
S Renovati, home Mos Impnovent loans Prepar pro,ts fr Upgrade, privatiz the pubio i vrovembnta IncludedIn houing upgrding tho pubic houstngstock fance pakago housng stock
Q. Lal Fantewoek
I. Poory defined mostmal property Stngthen the judbl Deeo land and morw prpety ight. i transaons ruled agai * Sale proedurse reg se, ntuetfloe anslonmnt of by cl law. Lmited Wrionofpubic predominantysqt Rght Act Evtion purpc_. potetn of or qusaesto ownerhip Law ownerhip rIghta.
2. iadequate ocard OMf Law to pro Finalz draft lw Approveand Imptment newlaw on bntk bn problmatic banks with CoPIater through proe at entorcment GI deting Scuety ior sll kinds inteinteeWl reiw blegislation of ommral aeet. In and Prllamentary simple end quick manner Ratfication withoutret to ocurts. RePlestat propsety IncludedIn dratt lw -50- ANNEX A Page 6 of 6
Areaof Rfcrmflleue ActionsAlready Taken Next Soes FutureActions
Bankinglaw and New BankingLaw and Act on the Producenew guidelines Inplementnow guldoen*e; regulatbonsoutated NW introducedIn January160 for prudentbanking kIprov bankingsupervision and Incomplete Amendment.to Lawapproved by regultion, lensing, Parlunent on lsptt 20, 1901 portfolo eonontrtion, capitaladequacy, loan oeaafoation, provIsIonIng, Interestaocrual, acoountIngand auditing. liquldity requirements,ad bankingsuperAsion
4. Obsoleteland AntS-rIss Act approved RevhI mactsrplne, Intensitydevelopment hI ares developnwnt gution by Patlament L ndtUeoand zoning andsubdSlion with pubi servboe Exprfprlatn Act approved regulations e suitabble infratructure
6 Coopemthressitng Olcusene of lgd Revie legal baisP Revokeconcessions; put lnd an unused,developod land vaidity of conoetons for concesin back on thomarket
H. ConstructionInduotr
1. c-adty of bu£dOin Price liberalzed Introducesome new Continuediversification matneia frehmports product of buldIng matrdab
2. Constructon enterprises,mainly W-gp, E3oiu'sti rlghts Inked Restructureend privatiu AdJustrgultory fmewk Inefficient,state owned to Oither esor vlabts enterpr; ntroduce to oncourgo growthof enterpris whichusod ps Ofbuidtnog competitiv,bidding compettiiveoonstrueon to have regionalor mwket hav been removed technkbl assostnce Indus" nonopolle
S. Budling Technology TradMonal tolmdogy Increase comtition Let pr nd onum conakting predominantly ncouragedhI smah amongbuldere to foster preferenoodetermine choioc of heavy.pre-fabriated muWfamily andsingle greaterdiverity and of bulding tchnlogy concretepanoos, rquiring fwny hous choie of buDding heavy equipmentand technolbee captive, lrgo mawrkt
4. Lack of cost and Inceasd acountablty Improe onstrution Encourg Jontventure. qualt control of eontrco managent, oosdno with foreignfirmaon and prikcngpraoso lag e ontacs -51-
Annex 8 Page 1 of 5
LEGISLATION AFFECTING the HOUSING SECTOR
I. Laws of particular relevance to the housing sector:
1. Tho Constitution (as amended) arts. 6 and 7; and arts. 42-47.
2. The Civil Code, 1964 (as amended) (including amendments proposed in March 1990 and October 1991).
3. The Acts on Local Autonomies, March 1990.
4. The Housing Act, 1974 (as amended)
5. The Land Use and Expropriation Act, 1985 (as amended).
6. The Spatial Planning Act, 1984 (as amended).
7. The Building Code, 1974 (as amended)
8. The Real Estate Mortgage and Registry Act, July 1982 (proposed amendments 1991).
9. The Act. on Cooperatives, 1982 (as amended, incl. proposed amendments 1991).
10. The Act on Change. in the organization and Activity of the Cooperative Movement, 1990.
11. The Act on the Systematization of Credit Relations, December 1989.
II. overview of recent dee]oomen=3
A. Bills submitted to the Parliament by the Council of Ministers which are awaiting ratifications
1. Rental Housina and Tenant Protection Act. The 1974 Housing Act contained guidelines governing the administrative allocation of housing. The proposed act is considered a supplement to the provisions of the Civil Code regarding civil contracts for rental housing. It includes a two-year scheme for rent decontrol of 1 communal housing . The original draft of the HoujinL Act has now been reconciled with its counter-proposal, the Parliament-
Theprovisions of is Act would not apply to enterprisehousing for which the rents would be regulatedby the ChIl Code. -52-
Annex B Page 2 of 5
submitted Tenant Protection Act (see footnote on page 3). This latest version of the draft will be reconsidered by the Parliament after elections.
2. The Anti-Crisis Act (Act on Special Conditions of Realization of Housing Construction in Years 1991-1995 and Amendments to Some Acts). Provides temporary regulations on most urgent issues facing local governments in the area of physical planning, investment permits, and provision of serviced residential land. The law has been approved by the Parliament and the Senate and is expected to be signed by the President shortly.
3. The Act on Some Limited Real Prooertv Riahts. Allows the use of limited property rights (such as cooperative ownership) as collateral for housing credit. The draft has been approved by the Parliament: objections raised in the Senate will be addressed by the Parliament after the elections (they can be overridden by a two third majority vote).
4. The Eviction Act. Make mortgages an adequate loan security by removing the obligation to provide alternative housing in order to evict a person upon foreclosure. The act was approved by the Parliament in October 3, 1991.
S. The Soatial Plannina Act. Seeks to make zoning and land development control regulations and investment permit procedures more flexible and supportive of the market economy. Accepted by the Council of Ministers and submitted to the Parliament; first reading to take place after elections.
6. The New Buildina Code. Redefines the minimum acceptable standards for construction. Accepted by the Council of Ministers and submitted to the Parliament; first reading after elections.
B. Other legislative developments:
1. The Procurement Act. This bill is intended to institutes rules and regulations for bidding procedures in the procurement of construction works in investment projects with the participation of central or communal funds. The narrow scope of the bill caused its rejection by the Council of Ministers. A new version, addressing the procurement of all goods and services in publicly funded projects, is being drafted. Temporary regulations will be provided with the Budget Bill.
2. The Imolementina Reaulations to the Land Use and Exorooriation Act (amended 1990) have been enacted. -53-
Annex B Page 3 of 5
III. Overview of the Bills
1. Rental Housina and Tenant Protection Act
The general provisions include: (i) moving away from the administrative allocation of dwellings to rental contracts based on civil-law; (ii) making the housing sector self-financed through rent increases, with a housing allowance paid to low-income households; (iii) granting extensive control over the public housing stock to the local governments, including control over rent levels and management service contracts; (iv) redefining the rights and responsibilities of landlords; (v) assuring strong tenant protection, but limiting tenancy 'inheritance' to the spouse of the main tenant; (vi) permitting individuals or married couples to rent only one dwelling built with state subsidies, but also to own more than one; (vii) more efficient processing of compensation claims by private owners of rent-controlled multi- story buildings and by former owners of real property taken over by the state; and (vii) abolishing the current design and overcrowding standards to permit more efficient use of the stock through exchanges and construction of low-cost housing. (These provisions would not apply to the enterprise-owned stock, for which rentals would be regulated by the Civil Code).
The most important (and politically controversial) feature of the Bill is the two-year rent-decontrol elan which proposes to increases rents on the entire controlled stock up to a ceiling corresponding to 3% of (current) replacement cost. Also, rents would be better related to dwelling characteristics. Meanwhile, the inflation of prices in municipal services has forced the Government to increase rents by administrative decree. However, the February and July increases have been largely offset by inflation, so the subsidy for the maintenance of the municipal stock (without heat and hot water) has effectively remained at last year's level. The next increase (100%) is planned for January 1992.
The Ministry's first draft of the Rental Housing bill met last year with strong opposition. A Parliamentary group has presented a counter-proposal to the Housing Act called the Tenant Protection Act. MOSEC Department of Housing Policy has now produced a second version of the Rental Housing bill. This second version has recently been reconciled with the Tenant Protection bill under the new name of The Housina and Tenant Protection Act and should be brought to the attention of the new Parliament.
2. The Act on Special Conditions of Realization of Housina Construction in Years 1991-1995, which has become known as the "Anti-Crisis Act", has been issued on a temporary basis in anticipation of the regulations mentioned under 5 below. The rationale for issuing the Anti-Crisis Act at this time was based on the perceived needs tot i) facilitate the supply of land to encourage house building, ii) simplify and accelerate the granting of building permits, iii) allocate land at subsidized conditions to particular social groups, and iv) offer fiscal incentives to support investment in housing. The Act confers to municipal councils the authority to approve 'action plans' which can amend, update and substitute the official Master Plan of a city, specifying now sites -54-
Annex B Page 4 of 5
and subdivisionregulations for land and infrastructure development. Only the conversionof agricultural land into residentialurs would require approval by the financial administration. The Act also empowers Municipalitiesto issue bonds (generatedby the State) for land purchase or infrastructuredevelopment and envisages central budget funding (throughthe voivodshiQa)to subsidize municipal expendituresfor those purposes. The main beneficiariesof the Act are two social groups: i) those willing to purchase municipal bonds, and ii) those belonging to the waiting list of a housing cooperativeswho are ready to leave it in order to build their own house. A controversialfeature of the bill war the proposed 50 percent deduction from the corporate or personal taxable income for expenditures incurred in construction/extension/remodelling or upgrading of homes. These fiscal recommendations have recently been removed from this Act and included in the Personal Income Tax legislation instead.
3. The Act on Some Limited Real Property Riahts (Cooperative Property)
The general consensus among legislativegroups working on Cooperative Law is that i) the subject of housing cooperativeshas to be considered in conjunctionwith the Housing Act, still being drafted; ii) the future role of housing cooperativesin the housing delivery system is not clear; and iii) the current cooperative system presents many legal problems that need to be addressed separately (ownershiprights, waiting lists, cooperativecandidates pool). For these reasons, a separate Act on Some Limited Real Property Rights has been introducedwhich would accord new forms of credit protection on the ownership rights to cooperativeflats, amending the relevant provisions of the Civil Code and permitting issuance of individual mortgage loans to future buyers of cooperative flats as well as the recovery and transfer of mortgaged debt.
Some objections to this Act have been raised in the Senate pointing to the alternative choice of convertingthe cooperativelimited real property rights into full, condominium-type, property rights.
4. The Act abrocatino Restrictions on Eviction upon MortaaQe Foreclosure. Approved by Parliamenton October 3, 1991, as an Amendment to Artiele 65, para. 5 of the current Housing Law of 1987, this measure introduced a highly desirable change wheroby a person loosing his/her ownership or cooperative right to a dwelling due to the foreclosureof a mortgage (hipoteka)is no lonaer entitled to a replacement dwelling in case of eviction. This represents a significant exception to the general rule prohibiting any eviction unless another place of abode of adequate standard is provided. The new ruling makes a mortgage an adequate security for a loan in Poland. Without this provision mortgages were practically unenforceable.
5. Imolementina Reaulations of the Land Use and ExnrolriationAct
The full text of the Land Use and ExpropriationAct, incorporatingthe September 1990 Amendments and previous changes,has been issued in May 1991. Currently, the following implementingregulations have been enacteds -55-
AnnexL Page 5 of 5
(i) Regulations concerningsales and all form. of lease of land belonging to municipalitiesor the State Treasurys general procedur-o and condition.of disposal, related fees and payments;
(ii) Rules and procedures governing zgnino of areas for *ingle-family housing, sub-divisionof land into building plots, transfer of ownership or lease rights onto individualplots, related fees and cost accountingprocedures;
(iii) Regulations detailing appropriate methods for cost recovery of infrastructureinvestments, focusing on procedures to prorate infrastructure costs in the sale price of dwellings and forms of possible finance assistance;
(iv) Regulations for determiningcrices for the acauisition of Municipal and State -ropertv.
6. The Soatial Plannina Act
The nint=hversion of the Spatial Planning bill has been sent to the Parliament. The main concern is that some measures in the current act lag behind or are inconsistent with those contained in the new Land Use and Expropriation Act and may continue to hinder, among other things, the development of housing markets.
Two salient issues in the current legislationare being mingled out to receive temporary solutions in the current situation. The first one is the inflexibilityof the local 2lans, their detailed contents and the cumbersome procedures needed in case of changes. All municipalitieshave received an advisory planning manual from MOSECs the recommended course of action is to undertake a one-time revision of the existing master plan into a les detailed one, based on the most general zoning scheme. The second issue is the process required to obtain an investment permit, a lengthy and redundant three-step procedure. The Anti-Crisis Act will bring some temporary solutions to both of these issues.
7. The Buildina Code
The text of the new Building Code is not as yet available. It is unclear whether past controversiesover the set of regulations referred to as ,architecturalnormativeo', has been settled. These normativeswere originally issued by the Ministry in 1975. Apparently, many such regulations, although inconsistentwith current policies, have not been formally revoked, while many municipal architects think that they no longer need to be adhered to. This issue requires clarificationas it may contribute inefficienciesand cause delays in new constructionprojects. -56- ANNEX C-I Page 1 of 3
ORDINANCEof the COUNCELof MINISTERS dated March 25, 1991
On the rules and procedures for financing the monies due to-the banks, resulting from the capitalizationof the interest on housing credits during 1991.
On the basis of article 19 of the Budget Bill for 1991 (published in the Legal Gazette, No. 21, position 89), it is ruled as follows:
1. This ordinance defines the terms and conditions of the use of budget funds for financingthe monies due to the banks resulting from the capitalizationof interest during 1991 on those housing credits, which have been issued up to December 31, 1990, for the purposes of:
(i) Constructionof cooperativehousing;
(Li) Constructionof single-familyhouses or apartments in multi-family buildings for exclusive use of the owner of said apartments;
(iii) Rooftop additions and substantialextensions of existing buildings;
(iv) Remodelling of attics or conversion of other non-habitable spaces into residentialuse; and
(v) Major renovation,modernization and restoration of buildings and habitable spaces, excluding current repair and minor remodelling works.
All of the above shall be further called "credits".
2. Budget funds may be used to finance interest capitalizedon housing credits according to the following rules:
(i) The amount of monthly capital and interest payment arising from the debtor's obligation to the bank under the loan terms is to be determined at a level not lower than the amount calculated as the product of the number of square meters of the usable area of the unit concerned (with the reservationsof points (v) and (vi). This amount cannot be lower than the monthly payment due on account of capital. Apart from the afore-mentioned conditions the monthly payment amount can be determined individually for each beneficiary. -57- ANNEX C-I Page 2 of 3
(ii) The amount, referred to in point i), is first credited on account of capital repayment;
(iii) The debtor has the right to capitalize any additional interest which he owes to the bank and that is not covered by the amount specified in point i);
(iv) The standard payment is the quotient of 50% of the average monthly wage in the six main branches of the national economy and the standard usable area of an apartment, which is of 60 square meters. The standard payment is announced quarterly by the Minister of Spatial Economy and Construction, based on the information supplied by the President of the Main Office of Statistics about the level of the average wage the last quarter.
(v) In the case of loans granted for individual housebuilding the amount, discussed in point i), is set as a) no lower than 25% of monthly income of the household of the debtor; b) no less than the 2 product of the usable area of the building in m and the standard payment; and c) no less than the monthly capital installment. This amount is settled on the basis of the quarterly statement on the monthly income of the debtor, submitted by the debtor before the end of the month prior to the beginning of a new quarter;
(vi) When the monthly burden of the payment of interest and capital exceeds 25% of the monthly houeehold income of the debtor, the debtor may negotic;tethe payment amount individually. The negotiated amount should be 25% of the monthly household income, but no less than the amount of monthly payment due on accoant of capital. This amount is calculated on the basis of the quarterly statement of the monthly household income of the debtor, submitted by the debtor before the end of the month prior to the beginning of a new quarter. This statement should be verified by the local Social Assistance.
3. The financing of capitalized interest by the banks, under the rules specified in Chapter 2, can be made as follows:
(i) 100% of the monies due to the bank for the capitalization of interest on investment credits, after the construction has been completed; and
(ii) 40% of the monies due to the bank for the interest on investment credits, when the project is under construction, up to the amount specified in the Budget Bill for 1991.
4. The terms and conditions for the financing of capitalized interest and for the authorization to collect corresponding payments from the debtors, financing will be specified in an agreement between the Minister of Spatial -58- ANNEXC-I Page 3 of 3
Economy and Conetruction and the Minister of Finance with the President of the National Bank of Poland, acting on the behalf of the banks interested.
S. This ordinance comes into force on the day of signature,with effectiveness starting on January 1, 1991.
President of the Council of Ministers Jan Krzysztof Bielecki -59- ANNEXC-II Page 1 of 2
ORDINANCEof the COUNCIELof NMNISTERS dated October 1, 1991
Concerning the rules and procedures for the financing of interest on housing loans which has been capitalized by the banks.
On the basis of Chapter 3, para. 2, point 2 of th*,Act of December 28, 1989 on the Regulation of All Credit Relations/Journalof Laws 074, pos. 440, it is ruled as follows:
1.
1.1 This ordinance defines the rules and procedures for the financing with State Budget funds of the amounts due to banks on account of interest capltalizedon loans contracted to satisfy personal housing needs by means of:
1) purchase or construction of a single-familyhouse or an apartment in a multi-familybuilding, which is being occupied for the first time;
2) addition or expansion of an existing house;
3) renovation of attic space, drying space or any other non-dwelling space in order to create dwelling space; and
4) renovation or modernization of dwelling units or houses, except current maintenance or renovation of apartments.
1.1 The costs of constructionof dwelling units or houses, mentioned in para. 1, point 1, include the cost of constructionof wells and septic tanks.
2.
2.1 The State Budget may finance the amounts due to the banks for interest capitalized in the cases when the loan, described in Chapter 1, was granted under the following conditions:
1) the amount of the loan does not exceed 36 times the verified monthly income of the household of the borrower, calculated for the previous quarter; not more, however, than 80% of the cost of the project described in Chapter 1;
2) there is a mortgage collateral on the loan, established acording to separate rules;
3) the borrower will designate for the repayment of the loan, together with interest, no less than 25% of the monthly income of -60- ANNEX C-II Page 2 of 2
hia household over the whole period of repayment - with the reservation of paragraphs 1 and 2 of Chapter 3.
2.2 The conditions specified in para. 1 do not apply to houaing loans contracted before the date on which this Ordinance comes into force.
3.
3.1 The first installment, together with due interest, is defined as no less than 25% of monthly household income of the borrower during the previous quarter. The amount of payments shall be adjusted quarterly, using the National Wage Index (index of the increase of nominal value of salaries in the 6 basic branches of national economy).
3.2 The Borrower may request the bank to capitalize the interest that he owes and is not able to repay with the amount decribed in para. 1.
4.
The interest accrued on loans granted under the conditions specified in Chapters 2 and 3, and capitalized by the banks, is temporarily financed by the State Budget in the amount of:
1) no less than 70% of the monies due to the bank for unpaid interest on loans granted for projects which have been completed: the amount shall be specified in an agreement as discussed in para. 2.
The Borrower is obliged to repay the amount, together with interest, to the State Budget through the bank, which granted the loan.
S.
The mode of repayment, resulting from the financing of capitalized interest; as well as the authorization to ccept from Borrower's monies due for the capitalized interest, are defined in an agreement between the Minister of Spatial Economy and Construction and the Minister of Finance with the President of the National Bank of Poland, acting on behalf of the bank's interest.
6.
The ordinance comes into force on the day it is published. -61- ANNEX D-I Page 1 of 4
RESOLUTIONNo. 2 OF THE GENERAL ASSEMBLY OF SHAREHOLDERS of the Bank for the Development of Housing construction S.A. dated April 25, 1992
On the basis of Chapter 19, par. 2 p. 10 of the Charter of BUDBANK, General Assembly of Shareholders approves the enclosed Mortgage Fund Bylaws for the purpose of performing the tasks resulting from the function of BUDBANRK S.A. as a banking institution on-lending funds designated for the financing of housing construction in Poland.
This Resolution becomes effect've on the day of signing the Loan Agreement Housing Project) between the Republic of Poland and the International Bank for Reconstruction and Development (the World Bank).
Chairman of the General Assembly of Shareholders
ANNEX TO RESOLUTION No. 2.
THE MORTGAGE FUND BYLAWS
Article 1. Creation of the Fund
1.1 The Mortgage Fund (hereinafter "Fund") is a department of the BUDBANK S.A. created on the basis of the Resolution of the General Meeting of Shareholders of the Bank for the Development of Housing Construction S.A. (hereinafter "BUDBANK S.A."), dated April 25, 1992.
1.2 BUDBANK S.A. is a banking institution established according to the Polish banking law dated January 31, 1989 (Journal of Laws No 4, item 21) and is a legal entity. The scope of activities of Budbank S. A. is limited to on- lending to other banks, in the form of loans, domestic and foreign funds designated for housing financing.
1.3 The Fund holds funds designated for housing financing in performance of the provisions of the Loan agreement between the Republic of Poland and the International Bank for Reconstruction and Development (the World Bank) (hereinafter "Agreement"); as well as all other agreements entered into by the Government of Poland with international financial institutions and foreign governments. The use of resources transferred to the Fund and the activity of the fund must be in compliance with the provisions of the Fund's Operational Manual prepared for the performance of the Agreement. -62- ANNEX D-I Page 2 of 4
Article 2. The Purnoss of the Nrto_te Fund
2.1 The purposes of the Mortgage Fund are to:
(a) provide loans (hereinafter"loans") to eligible participating banks (hereinafter"Lenders") to be used, in conjunctionwith lenders' funds, to create residential constructionloans and home mortgage loans that are consistent with the requiromentsof the Agreement;
(b) stimulate private housing constructionbased on a consistent system of construction and mortgage loansl
(c) provide applied technical assistance to Lenders on lending practices and the implementation of private construction and mortgage loan systems, including assistance to Lenders in their technical training to builders and homebuyers on borrower obligations.
2.2 To asoist in meeting its purposes, the Fund will:
(a) establish and promote appropriate checks and balances and orderly, controlled management of funds and transactions;
(b) establish legal requirementsto protect private ownership of real property and clearly stated and enforceableborrower obligations;
(c) establish appropriate credit standards and credit oversight policies and operationalpractices and controls to ensure regular and timely repayment of residential constructionand home mortgage loans; and
(d) establish interest rates meeting prudent pricing principles on all Fund Loans.
2.3 The Fund shall be guided in all its policies and decisions by the purposes and objectives set forth in these Bylaws.
Article 3. Provisions Relatins to Loans
3.1 Use of resources. The resources provided to the Fund and its facilities shall be used exclusively in accordance with the purpose of the Fun'!.
3.2 Conditions on which the Fund may make Loans. The Fund will establish requirementsand procedures ensuring investmentquality lending that must be met by Lenders in order for constructionloans and home mortgage loans to be eligible for Loans. Fund Loans are subject to the following conditions:
(a) No construction or mortgage loan li-ued by the participating Lender shall exceed 7S% of the respective value of the property. This value is subject to terification and may be determined to be below the appralsal proposod by a credit appllcant,
(b) The Lenders will be responsiblefor all credit rlsk on construction and home mortgage loans. -63- ANNEXD-I Page 3 of 4
(c) The Fund Loans must have a flrot lien on the actual real estate and improvements financed by the respective construction or mortgage loans.
3.3 Interest rate on Fund Loan. The Fund's lending rate shall cover its cost of funds; the administrativecosts sufficientto ensure quality lending, servicing and loan management, Bank's profit and risk allowances. The Fund's lending rate shall not be less than the prime interest rate established by the Polish central bank.
3.4 Interest rates on Construction and Mortaaae Loans. Loan contracts entered into by the Fund shall be made in accordance with the following provisions:
(a) Constructionloans shall be made with a variable interest rate, where the rate, terms, and schedules of adjustment are set in the construction loan contract. Interest payments during construction shall be capitallzed and payable at the maturity of the principal of the loan.
(b) Mortgage loans shall be Dual Index Mortgages. The indices used will be a wage index and a prlce index.
(c) The intereat rates on the construction and mortgage loans shall be sufficient to cover, at a min$mum, the following factors: credit or self-insured mortgage risk; loan origination costs; cost of funds; administrative or servicing costs; reserve requirements; and Lender profit.
Article 4. Provislons Relatine to enders.
4.1 Selection of Lenders. The Fund will establish criteria defining the qualificationsof its Lenders. The Fund's criteria will relate to Lenders' financial status and to lenders' ability to originate, service, and manage constructionand mortgage loans in accordance with investment quality lending and servicing and generally accepted accounting principles and methods. The Fund can approve Lenders for construction lending, for home mortgage lending, or for both construction and home mortgage lending, depending upon the Lender's qualifications.
4.2 Inelioible Lenders. The followingLenders will be ineligibleto participate in the Fund programs:
(a) BUDBANKS.A.,
(b) Any person/entityexercising more than 10% of the votes at the General Assembly of Shareholdersof the BUDBANK S.A.
4.3 Suoervision of Lender. The Fund will establish procedures and standards for the periodic audit of Lenders' activities involving Fund resources in accordance with sound accounting principles. -64- ANNEX D-I Page 4 of 4
Article S.*Fund Governance and Organization
5.1 The Fund shall be governed by the Board of BUDBANK S.A. which consLts of, aside from the President and Vice-President, the Chief Financial Officer, General Counsel, Banking Specialist, Chief operating Officer and other persons appointed by the Council of BUDBANK S.A.
5.2 The Council of BUDBANK S.A. supervises the Fund in the scope defined in the Charter of BUDBANK S.A. Specifically, the Council:
(a) defines the general rules governing the Fund's activities;
(b) defines the rules for management of the funds transferred to the Fund at the time of approval of quarterly and annual financial plans prepared by the Board of BUDBANK S.A.;
(c) receives and analyses annual results of the audit of the Fund, performed by an independent auditors' firm.
5.3 The President of the Board of BUDBANKS.A. manages the overall activity of the Fund and is responsible for the Fund's management and administration, marketing and relations with outside institutions, issues internal orders and instructions; manuals, guidelines and other rules governing the Fund's activity.
5.4 The Chief Financial Officer of the Fund is responsible for internal financial control, reconciliation and reporting, including the compliance with requirements relating to submission of applications and disbursement of funds.
S.5 The General Counsel is responsible for all legal issues, as well as cooperation with legislative and government bodies in respect to regulations pertaining to housing finance.
5.6 The Banking Specialist is responsible for administration relating to Lenders; rules and functioning of the Lenders selection and approval system as well as for compliance with banking and foreign currency laws.
5.7 The Chief Operating Officer is responsible for the administration of banking services, functioning of the Fund's office as well as the development and functioning of operations systems.
5.8 The Fund has a separate credit committee - Fund Credit Committee - which consists of: President of BUDBANK S.A., Chief Financial Officer, General Counsel, Banking Specialist, Chief operating Officer and other persons appointed by the President of the Board of BUDBANKS.A. The Credit Committee is responsible for the approval of Lenders, Fund Loans and Credits and for the evaluation of financial results of the Lenders. The Credit Committee cannot assign its duties to any other person or entity.
Article 6. Amendment to the Bylaws
The Bylaws may be amended by a resolution of the BUDBANK S.A. General Assembly of Shareholders or at the motion of the President of the BUDBANK S.A. submitted for the approval of the Board of the BUDBANK S.A. -65- ANNEX D-II Page 1 of 4
RESOLITION No. 3 OF THE GENERAL ASSEMBLY OF SHAREHOLDERS of the Bank for the Development of Housing Construction dated April 25, 1992 on the basis of Chapter 19, par. 2 point 10 of the Charter the General Assembly of Shareholders approves the decision of BUDBANK S.A. to undertake the function of on-lending domestic and foreign resources for the financing of housing construction, under terms and conditions set forth in the Annex "BUDBANK S.A. as an institution on-lending financial resources designated for the financing of housing construction"
Specifically, the Assembly resolves as follows:
1. The statutory scope of activities of the BUDBANK S.A. is limited to on- lending to other banks, in the form of credits designated for the financing of housing construction, funds coming from:
(a) funds designated for housing credits under the Loan Agreement (Housing Project) between the Republic of Poland and the International Bank for Reconstruction and Development (the World Bank) (hereinafter "Agreement")
(b) funds designated for housing credits under the housing Guarantee Program of the United States Agency for International Developmekt,
(c) funds coming from other domestic and foreign sources, under the condition that such on-lending shall be performed according to the provisions of the Mortgage Fund operations Manual, prepared for the performance of the Agreement.
2. Activities of the BUDBANK S.A., other than those set forth in par. 1, shall be gradually phased out, in the following respect:
(a) BUDBANK S.A. shall not originate any new loans, guarantees or other loan transactions for new clients, from the date this Resolution becomes effective,
(b) the final deadline for entering into new commitments with existing clients is two years after the Resolution becomes effective;
(c) the outstanding portfolio to be reduced by at least one third each year to achieve the final elimination of all other activities within a three years period after the Resolution;
(d) no new accounts shall be opened from the date the Resolution becomes effective.
3. The use of liquid funds of the BUDDANK S.A. shall be limited to deposits with the National Bank of Poland, purchase of State Treasury Bonds or Short- and medium-term investments guaranteed by the Government of Poland. -66- ANNEXD-II Page 2 of 4
4. The resources of BUDBANK S.A. coming from customers' deposits shall not be used for tho financing of long term mortgages.
5. BUDBANK S.A. shall maintain separate accounts for the activities specified in par. 12 and for "other activitLes".
6. The Councll of BUDBANKS.A. shall consiat of the reprosentatLvesoft the Minister of Spatial Economy and Construction, Minister of Finance, Housing Finance Project Office and commercial banks (Lender.) desLgnated by the Minister of spatial Economy and Construction.
The Resolution becomes effective on the date it io signel.
Chairman of the General Assembly of Shareholders
ANNEX TO RESOLUTION No. 3 BUDBANK S.A. AS A BANKING INSTITUTION ON-LENDING funds designated for the financingof housing construction
I. Creation of the Mortgage Fund
1. The Board of BUDBANK S.A. shall create a department of the Bank, called the Mortgage Fund (hereinafter "Fund"), as a separate organizatLonal entity of the BUDBANK S.A. The Fund will hold all resources of BUDBANKS.A. designated for housing credits. The scope of activlties of the Fund will include all aspects of on-lending domestic and forelgn reuources designated for housing construction.
2. The Mortgage Fund shall functlon according to rules set forth in the Fund Operations Manual, approved by a separate resolution of the General Assembly of Shareholders.
II. The task of the Fund
1. The Fund shall extend loans to eligible commercial banks. Based on these loans, the banks shall extend medium-term constructlonsub-loans and long-term mortgage sub-loans. The terms of these sub-loans shall be consistent with the provisions of the Mortgage Fund Operatlons Manual for the execution of the Loan Agreement (Housing Project) between the Republic of Poland and the international Bank for Reconstruction and Development (the World Bank). -67- ANNEXD-II Page 3 of 4
2. B0th th BUDANK S.A. and the Housing Finance Project Office in Warsaw shall be responsible for informing the comercial banks on the terms and conditions for the housing credits, established by the Fund.
III. The functioning of the Fund.
1. The Fund shall be a department of 3UDDANK .A. The Fund shall prepare separate, periodical estimates of expenditures, income and results of its activities and submit reports on its performance to the Board and Council of the BUDBANKS.A. (hereinafter "Bank Council").
2. The offices of BUDDANKS.A. shall - according to their scope of duties - participate in the implementation of foreign programs of housing finance, on the basis of internal fees, included in the fees received by BUDBANKS.A. under the provisions of III-4.
3. BUDBANK S.A. chall have separate accounts for each of the foreign sources of financing, including the World Bank and the United States Agency for InternationalDevelopmnt.
4. For the servicingof housing credits, BUDBANK S.A. shall receive a fee covering a respective amount of own costs and profit in an amount specified in the agreement between the BUDBANK 8.8. and the Ministry of Spatial Economy and Construction.
IV. Technical assistance for BUDBANK S.A.
1. BUDBANK S.A. shall:
(a) organize training for the eligible commercial banks (b) participate in the creation of information systems enabling the implementationof financingprograms (c) cooperate in the implementationof financing programs (d) utilize the informationcollected in the course of permanent monitoring to increase the effectivenessof the financing programs.
2. To enable proper executions of the above functions,the activities of BUDBANK S.A. shall be supported by long-term foreign advisors and Polish specialists. BUDBANK S.A. shall also utilize the services of short-term consultants,whose work shall be coordinatedwith that of the long-term advisors. BUDBANK s.a. shall also be strengthenedby the supply of equipment (especiallycomputer hardware) and software which will enable the proper organizationof program management.
3. The activity of long-term advisors will be coordinatedby the Fund Director in cooperation with the Manager of the Housing Finance Project Office. The foreign advisors shall strive - together with Polish specialist. - toward the preparation and implementationof programs both in BUDBANKs.A. and in eligible comercial banks. They will also try to broaden the scope of the housing finance programs through increasing the number of commercial banks, investors-developers and local authorities eligible to participate in market-basedhousing finance progrms. -68- ANNEX D-II Page 4 of 4
4. It is estimated, that the long term advisors of BUDBANKS.A. shall have the following areas of activity:
(a) operations of the bank, (b) reporting and monitoring system, (c) credit policy for long-term mortgage loans, (d) credit policy for medium-term construction loans, (s) financial analysis, (f) legal aspects
5. Technical assistance for BUDBANK S.A., described in par, IV 2, 3 and 4 shall be financed with the external resources managed by the Manager of the Housing Finance Project Office, within the amounts set forth in the periodical cost estimates prepared according to par. III-I.
V. Mode of implementation.
1. The Bank Council and the Board shall implement the resolutions of the General Assembly of Shareholders on time, the final deadline being October 31, 1992. -69- ANNEX D-II Flow Chart
HOUSING PROJECT: FLOW OF FUNDS
WB Repayment GOP -3WORLD BANK 5 yrs Grace period
State Budget Loan Repayment Loan Account (in Zlotys) ot_ s -_ _ - - (in USS) | Z~~lotysequivalent,
MOSEC i NBP
Sector Budget l Special Account (in Zlotys) l (in USS)
_ | | ImS tial Initial BUDBANK Deposit Deposit Project Account 40% of Subloans (in Zlotys) 40% of Subloans
Participating Participating Banks Banks 15% of 15% of investment Cost Sale Price 20% of Subloan 20% of Mortgage
RpEntsC 6 vestmentCost 75% SalePce Rpmnt Construction P ome Borrowers Down payments Buyers Dvlprs/Contretrs Cover 25% of Sale Price 25% of 25% of Investment Costs Sale Price -70- ANNEX E ~ fPagef 7
REPUBLIC OF POLAND AND WORLD BANK
THE MORTGAGE FUND
POLICY AND GENERAL OPERATING MANUAL
February 14, 1992 -71- ANNEXE Page 2 of 7
C0N1TENTS hitroducdon
Deflnitions and Abbreviations
1. Overview of the Mortgage Fund
1.1 General Description of the Mortgage Fund 1.2 Objectives of the Mortgage Fund 1.3 Institutional Structure of the Mortgage Fund 1.3.1 Relationship to the national government 1.3.2 Relationship to the banking sector 1.3.3 Role of Housing Finance Project Office (HFPO) 1.4 Uses of Credits 1.4.1 New construction 1.4.2 Renovation Projects 1.4.3 Construction of commercial space 1.4.4 sand improvement projects 1.4.5 Home improvements 1.4.6 Purchase of a newly built house or flat 1.5 General Policies 1.5.1 Interest rate policy 1.5.2 Truth-in-lending policy 1.5.3 Financial policies 1.5.4 Technical and design policies 1.5.5 Legal policies 1.5.6 Audit policies
2. Flow of Funds and Institutional Responsibilffles
2.1 Flow of Funds to and from the Mortgage Fund 2.1.1 Inter-Institutional relationships 2.1.2 Terms of borrowing from the Mortgage Fund 2.1.3 Reporting requirements 2.1.4 Conversion of multi-family construction sub-loans to mortgage sub-loans 2.1.5 Conversion of single-familyconstruction sub-loans to mortgage sub-loans -72- ANNEXE Page 3 of 7
2.2 Bank participation in Fund Programs 2.2.1 Eligibility requirements 2.2.2 Responsibilitiesof participating banks 2.2.2.1 Review of loan applications 2.2.2.2 Loan approval authority 2.2.2.3 Cerdfication of compliance with Fund requirements 2.2.2.4 Disbursement of loan proceeds 2.2.2.5 Monitoring the progress of construction sub- projects 2.2.2.6 Loan Management and Mortgage Servicing 2.2.2.7 Reporting requirements
3. Construction Credit Program
3.1 Overview of the Program 3.2 General Eligibility Criteria 3.2.1 Eligible sub-projects 3.2.2 Ineligible sub-projects 3.2.3 Eligible beneficiaries 3.2.4 Ineligible beneficiaries 3.2.5 Maximum unit size 3.2.6 Sales of units to individuals 3.2.7 Public/private partnerships 3.2.8 Consistency with Fund policies and objectives 3.2.9 Competitive Bidding 3.3 Financial Requirements 3.3.1 Definition of total sub-project costs 3.3.2 Land status and costs 3.3.2.1 Eigible land costs 3.3.2.2 Ineligible land costs 3.3.3 Cost recovery and sales price 3.3.4 Maximum loan amount 3.3.4.1 Multi-family, renovation and land improvement sub-projects 3.3.4.2 Construction of single-family houses 3.3.5 Types of equity 3.3.6 Eligible infrastructure expenses 3.3.7 Presentation of construction costs 3.3.8 Limitation on the square meter cost of construction 3.3.9 Financial plan 3.3.10 Sale of housing units and improved lots 3.3.11 Financing plan for commercial space -73- ANNEXE Page 4 of 7
3.4 Legal Requirements 3.4.1 Local regulationsand services 3.4.2 CoUlateralrequirements 3.4.3 Collateralnot to be excessive 3.5 Credit Terms and Conditions 3.5.1 Interest rate 3.5.2 Repaymentand maximumloan term 3.5.3 Recapitalizationof unpaidinterest 3.5.4 Repaymentof constructionsub-loans to the Fund 3.6 Sub-ProjectApproval Procedures 3.6.1 Submissionof applicationand supportinginformation 3.6.2 Current values 3.6.3 Credit analysis,review and approval of applications 3.6.4 Commitmentletter and commitmentfee 3.6.5 Sub-loanAgreement 3.7 Borrowingfrom the MortgageFund 3.7.1 Maximumpardcipation of the Fund in constructionsub- projects 3.7.2 Terms and conditionsfor borrowingfrom the Fund 3.7.3 Disbursementof proceedsfrom the Fund 3.8 Sub-projectConstruction and Implementation 3.8.1 Drawdownsof constructionsub-loans in stages 3.8.2 Equityinvested first 3.8.3 ParticipatingBank Disapproval of advances 3.7.4 Fund Disapprovalof Advances 3.7.5 Inflationindex 3.9 Supervisionof Construction 3.9.1 Responsibilites 3.9.2 Frequencyof pardcipatingbank supervision 3.9.3 Contentsof constructionprogress reports 3.9.4 Constructionstandards 3.9.4.1 Codes 3.9.4.2 Materialstandards 3.9.4.3 Schedules 3.10 Sub-projectModifications 3.11 Default 3.12 Escrow Accounts 3.13 PerformanceBonds -74- ANNEXE Page 5 of 7
4.7 Loan Servicing, Late Payments and Default 4.7.1 Responsibilitiesof the participating bank 4.7.2 Date of first monthly payment 4.7.3 Late payments and penalties 4.7.4 Pardil payments 4.7.5 Reconciliation 4.8 Default Management 4.8.1 Notification to beneficiary of late payment 4.8.2 Interview with beneficiary 4.8.3. Notification of intent to take legal action 4.8.4 Default
S. Accounting Requirements (to meet World Bank standards/to be defined in kegotiations)
5.1 Fund Accounting Requirements (see above)
5.2 Participating Bank Accounting Requirements (see above)
6. Audit Requirements (to meet World Bank standards/to be defined in negotiations)
6.1 Fund Audit Requirements (see above) 6.2 Participating Bank Audit Requirements (see above)
7. Legal Issues (to come)
7.1 Precedence of Lien (subject to contractual agreement) 7.2 Precedence of Lien for Construction Sub-Loans (subject to contractual agreement) 7.3 Precedence of Lien for Mortgage Sub-Loans (subject to contractual agreement) 7.4 Property Tax Payments on Construction Sub-Loans 7.5 Property Tax Payments on Mortgage Sub-Loans - -75- ANNEXE Page 6 -of7
4. Mortgage Credit Program
4.1 Overview of the Program 4.2 General Eligibility Criteria 4.2.1 Eligible beneficiaries 4.2.2 Cooperatives and cooperative members 4.3 Eligible Properties 4.3.1 Maximum unit size 4.3.2 New construction financed by the Mortgage Fund 4.3.3 Other new construction 4.3.4 Home improvements 4.3.5 Ineligible properties 4.4 Credit Terms and Conditions 4.4.1 General description of the Dual Index Mortgage (IM) 4.4.2 Interest rate 4.4.3 Monthly payment 4.4.3.1 Fee simple property 4.4.3.2 Perpetual ground lease property 4.4.4 Defining household income 4.4.5 Changes in household compositior or income 4.4.6 Maximum amount of credit 4.4.7 Adjustments to monthly payment 4.4.8 Application of monthly payments 4.4.9 Repayment period 4.4.10 Pre-payments 4.4.11 Collateral requhi tments 4.4.12 Collateral not to be excessive 4.5 Credit Approval Procedures 4.5.1 Submission of application 4.5.2 Submission of Purchase Contract 4.5.3 Verification of household income and down payment 4.5.4 Appraisal of property value 4.5.5 Bank review of applicadon 4.5.6 Letter of commitment for mortgage sub-loan 4.6 Borrowing from the Mortgage Fund 4.6.1 Maximum participation of the Fund in mortgage sub- loans 4.6.2 Terms and conditions for borrowing from the Fund 4.6.3 Disbursement of proceeds from the Fund -76- ANNEXE Page 7 of 7
Aexes (in process) 1: Sample ReportingForms for the HousingFinance Project A. QuarterlyReports of the MortgageFund B. Advancesfor ConstructionSub-Loans C. Advancesfor MortgageSub-Loans 2: Sample ReportingForms for ParticipatingBanks 3: Sample Credit ApplicationForms A. Applicationfor ConstructionSub-Loans (Multi-Family) B. Applicationfor ConstructionSub-Loans (Single-family) C. MortgageSub-Loan Application
4: Sample Forms for ParticipatingBanks A. Letter of ConditionalApproval for ConstructionSub-Loan B. Letter of Commitmentfor ConstructionSub-Loan C. Loan Agreementfor ConstructionSub-Loan D. Contractfor Purchaseof Newly Built House or Flat E. Letter of Commitmentfor MortgageSub-Loan F. Bank Cerdfication G. Request for Advanceof ConstructionSub-Loan H. Report on ConstructionProgress I. Commitmentfor Take-OutFinancing
5: Praceduresfor Securinga CollateralInterest in Real Property
6: Guidelinesfor Sub-ProjectDesign -77- AZIIU F Page 1 of 14 HOUSING FINANCE PROJECr OF THE3 GOVURNENTOF POLANDAND WORLD BANI APPLICATION FOR CONSTRUCTION CREDIT (MULTI-FAMILY)
This form must be completed by all applicants for credits for new construction or completion of multi-family housing projects. Multi-family projects include flats, apartment buildings,'rowhouses. duplexes, semi-detached units, rooftop additions, and projects consisting of more than one single family house. To be eligible fo. astructionie credits, all projects must comply with the financial, design, technical. legal and competitive bidding requirements of the Housing Finance Project. - This application should be submitted to your local bank and the Housing Finance Project Office (HFPO). Additional information may be required by your bank or the HFPO. Final approval of your credit application is the responsibility of the local bank. If your total project costs exceed Z 28.5 billion. the HFPO must also approve your credit.application. As part of this application, you must submit the following documents: 1. Cost Analysis for Housing Projecu 2. Breakdownof Cou of Constrcdon Per Square Meter 3. Cash Flow Projection for Housing Project 4. Worksheet Calcuating Loa and Interest Payments S. Workaheec Pro-Ratidng terest Payments and Profit to Determine Finl Sales Price Per Unit 6. Worksheet Ratio Analysisfor Housing Pojects 7. Attachment Market Analyis S. Attachment Certifcation of Complaceo with Competitive Bidding Requireents
i d th bahvace afteehd tn tl;S appIleni4aes 9. A map(21O30mm or 420400mm) showng the locationof the housingproject to the cityscenter. 10. A site pln (210W0m or 420:0mm) showingthe generaldesg of the proposedproject. IL A site pla illustratingroad acess and infrsctue, Inlding water, sewage,gas, heig and electrcity. 12. AttachmensLegal Desecption of Land 13. AttachmenctEvidence of Land Ownesip or Perapetal Ground Lease
For More informatn ftmt
Housing Finance Project Office ul. Swietokrzyska 11/21 - pok. 535 00.950 Warszawa telephone: 26-82-09, lub 20-03-21 wcw. 2153; telefax: 20401-80
1 ~~~~~~ANN~EXF * . -78- -78- Pagie 2 of i4
Appllicattion for Costructinn Credits (Multi-FaLmilyc)
Project name: ._. Town/location: _ Population:
Applicant: - Address
-t-elephone (Code)
Signature Name: Position: Date:
CoGntaclt person formoreinformatinn
Name Position -relephone: P: D:-
Name: Contact person: Address ___ lelephone (Code) Have you already submitted this application to the bank? Yes No -79- ANNE F 3. Information on Land Omwnership Page 3 of 14 The lad for the project is £werIIv:
- Privately owned (fee smple) Propery of the gms -Owned by a cooperative (fee simple) - Leased by a coopentive from the gmiBa Other_ Theland for the project will:
Sold to the applicat or investor (fee simple) - Leased to the applicant or investor ; Maintained in its current status Other.
ij' the lead Is curiently ewned (not leased) by a cooperative:
When did the cooperative buy the land? t. The cooperativepurchaid the land from: Private owner -Gains - Other:
Did the cooperative purchase the land with ius own resources and at market price at the dme of purchase, or was the purchase subsidized by the government? Purchased at full market price with its own resources - -Subsidizedby the government Other.
Whatwas the purchase price per square meter? Z - What is your estimate of the curent marketvalue per square meter? ZI 1
For all projects:
Describe the curret status of the land, and provide a detailed epanation of the tertus and conditions under which the land will be made available for the consrudon of the proposedproject.
Attach tO thAi applicatioA: 1. Legal description Of the land 2. Evidence of land ownership or perpetual ground lesse ANNEXF
Information on the Applicant Page 4 of 14 The applicant is a (check one): Private company or partnership Date established: Principal business: Public enterprise Date established: Principal business: Coopera e Date established: Numberof members: Gmina Population: Other government or public institution Describe: Foreign joint venture company Date established: Principal business: % Polish interest: -Foundation and other son-profit orgaDJztion Date established: Other.
2. General Project Description This application is for: New construction - Project completion
How many units wil be constructed? How mny buildings will be constructed? On the average, how many floors will each building have?
How far from the center of the city is the project located? _km.
Describe any other importat physical or design chaacteristics of your project:
For applicatiouu for eredit to f In ish conAtruction:
When did construction start? When was construction stopped? Why was construction stopped?
What percentage of construction do you estimate has already been completed? % Describe what has already been constructed: ( -81- ANNEXPage 5F of 14 S.Schedule Give a proposed date to statt construction. and how long it will take to finish constrection. Provide a detailed description of each stage of construction. (Attach an aIddtionl page, If necessary.)
6. Information on Construction Describe what type of construction technology will be used (e.g., masonry, large panel, itd.), and identify any special problems with the construction site. (Attach an additional page, if necessary.)
7. Off-site or Primary Infrastructure Requirements Provide infomation on the project's infrastructure requiremnats. Is the project site couently seived by gas, water, sewage and electricity? What is the anticipated cost of brtiging primary infrastnscture to the project site, and who will pay these expenses? -82- ANNEXF Page 6 of 14 4. Project Management Describe how the project will be managed. Specifically, answer the following questions: *- Who will have overall responsibility for managing the project's implementation? *0 Wil a general contractor be hired? WiU a construction manager be hired? Will subcontractors be hired? a Provide information on the background and experience of the project's managers, general contractor and subcbntractors. U they are not yet identified, explain what steps wiU be taken to ensure sound management of the project. (Attach an additional page. if necessary.) Definiions of Ceal Coat atuor The Genea Cotnactor eaten into a contractwith the owner (investor) for the constroueon of the project. and takes tU responsibility for its completion. The GoneraI Contracor mWeonte into subcoawtecs with others to pedorm speefc tusl or phas of the projecL Subcontractor: A Subcontrator eaten into a conotrac with the Generva Contractor to performa specific tshor complete a specfic phoe of the projeeL Cosasrctios Manager: O larp and complex projects. the owner (investor) may hire-a Construction Managerto supervis all constuction activities includingthe neotiation of all contracts for constcion wor The Consucdon Manageract as an agentfor theowner. The Constrution Manager'sbaWc services include coordination and oversight of all construetion activities, budgeting and cost control reviewand apprval of all subeontracts. and the analysisand approval of all increases in cou and changes in the project's plan. The Constuetion Managerapproves or disapproves of all reques for payment. inspects field work. and generally expedites masers while serving as a liaison between the owner and arehitect -83- AMN= F Page 7 of 14
Atadhmta to Application fog CoastMctios Credit (Multi-Family) Market Analyis
Project name: Town/location: Applicant:
ARlp1*5UI m be abe o the l..l bak's asidem teta will S. sufleast deoint wsoi tke hoousigmana a:sat eanrmmsndsue priSce Two gaiallUs for asesngf inats demasdam I' Tbotis a piodeatflad u uatb oshe imwqualit to a mortpp 1aa. and who ~~~~~~W*WW8m, topWft_ 1-_ Xe i tMaa aafeop lonfoer Wuh she quali" *a emad sal pclc ofmbo uuu: or 2' Tat isasehsmp of housn saw lab comm* doe forailes wi housold inomes whIc quali dhrs tt ssapp loam quvea so lnm tha 70 t esdma*d sad pine of theba"uis
Is is th locl bO!easwuabUityto asag a pojes mku* bliqy. au the bek asy ege amber e or suadd ftot demhinl maha demnd
T*1*aataeshinVwtetbe.F4 1488an Jo Caeaauroeien Credie (Muti-bFamily) may besubmitted Witc a market 488ld*" is submitted dad appraved. Atsek addidaden peage, if aeeessarp. -84- ANr F Page 8 of 14 8. Financing Requirements
Tate I Ps.nieet Caate
Constructio % of total Land (cost, value or lease fees) _ % of total _ _ _rastructure % of total ______Preparauon expenses % of total
TOTAL 100 %
Incu o is tine u of thefollowing 1) the puchse price of thelad. if sheland Is not aleady ownd by aninvetor is theprojec but sms be puchset; 2) the oumesmrket valu of tke tsed. if is is arady ownedby aninvesor and doe not anedto be purhased: g 3) fsip for a pepea poud lease from ths date ghaga conmrmdot cotac is awardd thsog tse completionof conatrastlon * bfm Indse 0oy the couamtiofsutur which wiU berecovered directly through the sle of the fas or houes Otherinfrercur expens arenot elipill for finacin. Includ e pens for architecturaland technical designs, project documeau. lepl tees.itd.
3onre.Mof Piquant Pnsnen
______Eu_ it , of total Deposits/prepaymeuts of total Loas: Constructoa Credit Faciity 5Zof total Loans: local bank % of total Knvesment from ules % of total _Other sources % of total
TOTAL too %
Idsaty belowthe soue of equityia te projea
______. t4resanaof landnnhielan saradyoweedbythe levessoranddoes met needto bapurchased. Cus coatribudon by tie invetor. Dposits.Di If thedeposits wil be sd St thebeianig of theproject tor and befoe anyconstueto adits en advanced "nP preparationexpeae icumed prior to the start of costruion. - ~~~Totadequity
clud antis Ule deposikor pnpeayetswbilck ilbeInesuddudrigthe consauctionperiod.but notas equity at the beginingof coasmutlo * tamen. Cpaaepme,4toevadi.. wPsiewth Iulu onthi UsletIe amoute constrtioncdiutorwhllc you a*pp withtb oappliat I"cu on ths Han lan youexpet to recive froo othr o trc for th projecL Dscribe here the rpaymentterms
Iclde eathis lin anyaddidonal Investmesn you pan to mak In theproject from theproits ea the oae of seltsdurl tes comatrtoa perod. * p a a dsU lnceudeem hiislinoay etherfundt you expect to reeivefor thisproject. *ad describethemoberm -85- ANNEX F Page 9 of 14 20 21 Cooametioe eons (d) Total lau area (m2) 'I Usha > ' brS~~~PumaIS 2:2 cm >Ailatiomof land Peradz2 to esach l t GA , | bailtiarc >>>|- Petal: 3 21/17 Total 1 23 For a2 cost at land. r valueof load. or oadlet"e fees 24 25 Land cost Cost or value of land allocatd owvalue allocated by unit (sl) to .2 of built are (zl) > | x 14A A 22a23 * 143 3 _ _ _ * 14C c I _ _ x 14D D 2i a 148 B Total cos of x 2 aSa CM! lafirscsen (at) > a 3 *n2 GA I
n7 28 Isfrataeuucsure Ifrastruceture alloaud coau allocatud b usia (2) o ml of buil area (l) . _ 14A A | 26/ 16 x 143 3 I 14C C _ _ _ *a 14D D a 143 8r a 2-na CMI IGA I
Totalcos tomiat A 1 19A+2A+2A befor project B1 19T4253B263 prepared.O eaeses -C 1PC+.2C+.IC _) 19D+25De4sD 3t ______193.25321 ry ______IC4SC M.22UCM GAI _ _ 19OA+2SGA. 31 30 Projec protl coats Total cos of cosawteuoe. (* oatotl) I laud ad Infrastructure (1) E. write 7 as .07 DwviWap 4c 20 CM .c 20 3Z GA 'C 20, Project preparation Land c 2ix23 expeces( (21) lstrwucture 26 31x36 TOTAL . 32 34 Total project cosa (21) Total emit coat acladlg ,as o expenses (:1) A _ _ _ 229Am3t+21A B 1s V921+342M C _ 29Cz3l+29C The floal cost per wait D lo 2983n+29D will be increaed by B _ c 31+293 lsters O coas etion CM _ 29CMZ1+29=C loans. GA ______AzS129G *29 -86- ANNE F Page 10 of 14 COST ANALYSISF0R HOUSING PROJECTS Tm_: NroisesN ame: ______
1 ______2 * Numberof caits A |Co--_a_l_ GaO ps (m2) byrype a3 I (-1) Refers to units of equal C JI Cm GA_ . size: cg... WA-4U.L D _um_r I_Num ber B'"6Oms~~~~~~cte 1 n}m2 _ ____Totl I__ 4 tlbht livieg am A I A per unit (al) a Total amble am [ Includes bedrooms.di41g C per witi (d2) C room. iviag room. and D [ _ niudes aUrooms D[ kitches > I02 E in thc unit I
A ____7 Total built area _ Toal bUilt area(ml) per unit (ml) C: ______Lmi Includeswills D "IL...
CM >12 *toWl- S GA b _ Commos st* (2)W Hill. elawgtor.stairway. Ratio of comomas corridors. utility ets area to built area u
11 10 > > A EA1(GAa3) Total built nd Area attributable a |68+(S ) commas .M2) to each unit (dl) C 6C*(dCd) D W(D h9+() (u); f 1t _ _ _68+( ~~~~(I&103).a.
12 13 14 03033 A I0A*(iQ Service Ratio at sraice Total arsa . 1t3ilOUl) armw(m2) areas to built arm stwilbmtableto C * 1-C40 lIK I -- I I *eac*.(0)sf | - I100 +(IoDzIL) Storage. ecnr . 1U/11 103+(10E13) mechanicalarea
15 14 17 Total built ares Total bells area Total built ae exeluding CM leeludiagCM (.2) bdeldiag Cm c4aGA nod GA (d2)t.
(IA14A)+ 1352 0lBx14B).
15 ~~~~~~~~~~~~~~~~~~~~19For suit Coostructiomcostn per 2 (xi) _,, ou_____o am (II Usits z r >A ____
Cm Z 2 I CIA _ _ _ GA Z_,
; -87- ANN F Page 11 of 14
A B C D B P G
Workshect: Calculating Loan and Interest Payments (Thousads ot Zloty)
T o : . _ ,_ .______projei Nme:
Qusutl nteret astem loom: (Showe .15 for 15%,.20 for20l. i.td.)
F|iled Nw loasrs Dalsce ast |ln6erest Dalanceat Repajyets| N
(Quae) I(capital) beg.ssmig due aed of periodb | 1 b ace Iasw_ue_e jIers asenst Colnes C - Multiply A" Showany Sebbtet !florti oatlossIs ColmamB ColmaeC by Coulms C* reaowymets Columaa- drawdov L Colon B imeoet nte Colone D Column . _seeredn emit1ooq Add Same Some Same Same for an other mewloens Colm 0a+ perIds he"s sawloas; in ColumnB
Y"t 1:
3 4
Year 3: ___ -__ I_ I __ 1,__ tO _
TOTALS XtUUt XXXX c
ltae toadl tepMvsu (Colons P) he": Subtac Total aredis (Cole" 11): Blldace eqnals Total letevest Paid e= noW S iv mum1 5 M . ,_ _ iel rwt u_
I | f S I : 3t 7 X 4 a l 1S
OUmIs; w (I_-._ *d lemmasbrisn
Sob _ -- I ___
Sb. d -I I I I I I I I Pnpedla. ,~ee , I I Id tewnK
Sin - . _ I . _sum itbeerdnedre
d*sez - - - - -1-. - 1 -
UsemnsU _Ins.IsI_ bli _ IFI Isbow .
blud ndu" b -E - . -
tb.t E -s I I , I 1 ._1_1__1_1_I I
1a e QUO= I I I I I I I I I -m I I I I I I I_ I I. -
,,
" * o~~~~~~~~~o
_ . .*0 "I -89- ANN F s Finance;iwu Page 13P of 14 Attachment to Application for Coastru tiom Credit (Multi-Family) Certification of Compliance with Competitive Bidding Requirements
Project name: Town/location: Applicant: All applcansu for couructios caedits mauncoaply with the competitive bidding rtqulrsmnamof the Housing Fi Proeit Comptigive biddig is equirndis the followingsituaos: Thewsza or l of landwbleisomed or controllodby t public e-r or a enapda ZTheaward of a conact for housg _ooniructioosad reated iafzsuctar developm by th public sectr, a str. enrapriue,or by a cooperatvefor projea skwatd on land leae from sh Si. * Te award ofa contarcm conac by a prvate ae, invemr wba the value of the t exceedsZI 1.00 bU Ion (or th equivalen of 11.0 mMiln at the currentoffcil ahpg ra) or whe be,propoed poct com apper be uneasonbl. The award or extension at a coaserctioo con,trct for the compledon of an unfinished housing prject by the pubec scor is subject to competitive bidding requiemssam. soles it can be demaonrated hac nTheprices of the original eanactor are reas ble, and * Imposing competitve bidding requiremrengswould result in no substantial advantage to the project. to geUnel. cooperatives are ruird to comply with all competitive bidding requirements except when:
* The bousintprojectwill be siguatedon land owned by the coopetive, and notoanlandwhich is leased from the public sctor. * The land has been or willbe purchsasedby the cooperatives members with their own resouren. and act with subsidies or otber assistance fromsthe public sector. ad * The eostof on-site infrastructre will not be subsidized by the public sectr. Competitive bidding is a three-step process comprised of:
1 Te ownerof theproperty issues a Notice of Requess for Blds 2 ' Bids are submined 3 0 The owner of tde proper reviesand evaluates bids based on the riteria and procedurcs gaounced in the Request for Bids
Prior to offering lnd for sale or lese. or awarding a construcdon conact a Notice of Request for Bids muas be prepared displyed and advertised, a follows: Not les tha i weeksprior tot eldo gdate for thesubmission of bids. the Notice of Raqu esfor Bids jost be displayed in the owers offize in the city hl of the guina in which the prope is located. and in the offices of the oivodasip in which the property is located. The Notice fuWt be displayed in a locatdon to which the public ha eay aces and wbore simiLatannou.cemeata are customarilyposted * Not les than six wealtsprior to the closingdate for the submission of bids, the Ndce of Request for Bids must be publised for at leat the consecutive day in a local newaparer and at least one day in a atounai newspper.
At a minimum, the Notice of Request for Bids for the sale or lease of land meaetum the followinginformatdon:
I Tzheland record desigadon of the property, including desigatioan in the buiding and land plats * Size and eneral description of the ppaety includiag buidiap theon * Cuzrrnut m of tgheprpery '.. Desdgnatedueof thepsopegcndsieedavelopmentpidalnes(e.g..mrlti famity.singlefaaiy xed housing and commercl. etcm) Dates by which consructioa must be commenced and finished beans of le or fder (e.gt. fee simple. perpetual less etc ) Base or estimated price for property, including all buildinp and fixtures * Fees or depoits required to sbmit a bid Terms of payment for land * Factors wbich will be used to evaluate bids * Name. addres and telephone number of contact perso worequest forms and instructioas for submitting a bid * Closing date and location for submitting a bid -90- ANNEXF Pagei14 of 14 At Aminimum. theNotice of Requ"t for Sids for the awardd a eauumtioe connemt nu cotisaa the following Istormatio.:
* Size. location and penel descriation of thepeojeci esincluding buUdinp theon * Sizeand generaldescription of the project to becoanuctud * A procuamet list by peeral categotyoi good servicesad materialsu.If am * Sltedelopment pSidelbaes(e.g.. multit-famIty single family. mired housing and commercial.ete.) * DDataby wbhIcconstructona mu.x be commenred sad finished I Feesrequited ti submit a bid * Factors which will be usedt evaluate bids * StauteSmmton whether bids an limited t a speeiicdaip, or whetberaltiva desigs oillbe considerad * Name.addrss and telephoc. numberof conta perce to nquet forms tad inatuctioas tor nbulitiog abid * * Closingdate and locatioa for submittiaga bid
Theproperty owner is requiredto preparedocueataswhich provide4pecifIc isnuuctloa aedformstor submIttinga bid. The iesuutoas sould acaeclearlytha aillbidsmitue bmadei nwritinigan submittedis a eaedpakage tnoaddidiou. at a aminimumthe bid documentsshould include: * A op of ttt Notice of Requestfor Blids * Minimumquaftions f or bidden. if any * Elaboation of the site developmentguidelines * Factos to be usd in evalutinS bids.inciauding a point sste for weightingfactors * A siteplan in sufficient detail to euablette propation of prpos * A cleardecription of the levelof architeeturaldetail equird in thisbid (e.g..peeral Iayout. specific buiddingdesgns et.) * A clew descnptionand format for shepresentation of financtalinformation on tte biddarand the proposed project * Date. ieneand locationfor the public openingof bids oAnyother information acesry to ensurethat all tems andconditios of the bidding proces and projectcairus are fully undentood Factorswhich can be takeninto accountwbeo evaluating bids can inciude, but are not laited to: * The highestprice offeredfor the purchaseor leas of lad I> Lowestcost of constrution. providedthe cost estimatesare reiticd * RespcuRweanes to the site development guidelimes I Demoesaratdcapacityof the bidder to undertake constretionin timeiyfabion andfully imptement the project * Soud finaning plan. and overell autsmmnt of the projes feibiliy * Best everll architecturaldesig * Environmental impact The HFP?encouraes incluw'nog a desip componentin the evslution factwn o ecourage more inaoaeve desigs and lower cost construcios. To enure objee*ity andfairne in evaluating propols a bid review committeeshoud be established.consistn af not les tas 5 pesns and refing a tpi crossesioe of te community. Any peoe wbo hs a buaios profeional or peroal interest in anycompnywwhich hiassubmitted a bid. or-whowil beadni ia the setionot a bid. may aot seve on the bid review committee. The HousingFinance Project Office retains the right to reviewand apprve a projcts com'etitive bidding procedures 0anddocuments, eel to makea final determination that the requinrmenuthave been sautisIed.
statentent Of Cartifitestin
I hsa-e read the foregoing description of the competitive bidding requiremeats for receiving construction credits under the Housing Finance Proj et. I hereby certify that the project for which this credit application has been submitted is in full compliance with these requirements.
Signlatuet Position: Date: rhis attach.w*^ go the dppUicarin for CaeSwuCii* Credit (Mulfti-Famwily)may be rubminiedt with eke eppltcatal. or at a facer date. As appiefca,i. f or castrwcteiO credit wifl net bef pproved with*ut a siSned Cartificascew of Cempliamce wJIs Compeftiive #iddlit Aequiresewae. -91- ANNEXG Page 1 of 8 STANDARDCONTRACT FORMS
OUTLINE FOR CONSTRUCTION FINANCING AGREEMENT
Preamble
The Preamble states who the Construction Financing Agreement (the "contract") is between, the legality of the parties to the contract, their addresses, and the date of the contract. Section I: Incorporation into the Master Contract
The first section will establish the relationship of this contract to the "Master Construction Financing Contract" (the Master Contract). This contract is an attachment to the Master Contract. All provisions in the Master Contract are binding upon the signatories to this contract. This section will also reiterate the purpose of the Fund Loan - to provide the L-tnderwith construction money for use in funding construction loans meeting the criteria of the Mortgage Fund (Fund). Section II: Definitions All definitions contained in the Guides are incorporated into this section. In addition, any amendments to the Guide definitions as well as other definitions are to be included in this part of the contract. Section III: Loan Terms and Repayment Obligation
The purpose of this contract is for the Fund to lend money to the Lender. Therefore, this section states the Lender's obligation to repay the Fund Loan and includes the specific terms of this Fund Loan such as: o How much money is being lent (the Fund Loan Amount)
o What the term of the Fund Loan is (that is, no more than X months)
o That the money reimburses the Lender after the Lender provides the ultimate borrower with its loan and has provided the Fund with evidence required by the Guide (that is Fund money is paid in arrears) o How the Fund Loan money is to be used
o What is to be repaid and when the Fund Loan is to be repaid - the principal and interest (capitalized or paid monthly, biweekly, etc). The Lender's right to repay the Fund Loan earlier and in full should also be included.
O What the interest rate is and how it is to be calculated -92- ANNEXG Page 2 of 8
o How the money is to be lent - that is the Fund Loan advance formula o What share of the borrower loan is funded by the Fund and what share of this borrower loan is funded by the Lender o The location or method for repaying the Fund Loan (that is, where'to send the money) Section IV: Fund Loan Conditions This section sets forth the Fund Loan conditions. The Fund Loan is to be used only for borrowers, properties, and construction loans that meet all Guide requirements including the origination and servicing provisions. Rather than repeating these requirements, this section states that all the Guide requirements apply with certain exceptions. Then, all exceptions to the Guide are set forth in this section of this contract. For construction loans, the Guide will likely refer to project specifics that are to be approved by the Mortgage Fund. This would include, as examples, the construction plan (plan realizacyjny), the work schedule (harmonogram),cost breakdown and estimates, the draw schedule, project description, inspection schedule, and loan management process. These are not amendments to the Guide but rather an expansion of a Guide provision that pertains to the specific Fund Loan. Section IV will include these additional items. section V: Security Interest Although the Guide will describe ways to create a security interest in the property and improvements, and for construction loans materie1s and finished units, this contract should describe specifically how the Lender has created a security interest for this specific Fund Loan on behalf of the Fund and reaffirm the Lender's right to create this security interest. This section should also state that the security interest applies to all money given by the Fund pursuant to this loan - that is all construction draws or "future advances". Section VI: Default The default provisions in the Master Contract apply to this Construction Financing Agreement. However, this contract will also provide details on what is considered to be a default under this Construction Financing Agreement. The Lender is in default if there is a failure to comply with any provision of this or the Master Contract or the Guides. There are no time limits placed on the Fund for uncovering a failure to comply with any provision and the Fund retains all rights of access to records and rights to audit for this purpose. Specif-icexamples relating to the provisions of this contract are: ANNEXG Page 3 of 8
o failure to document adequately the use of prior advances; o failure to provide supporting documentation with th.- requisition request o lack of sat4sfactory progress or timely, detailed report of satisfactory progress o non-payment of the Fund Loan either in full or part o non-payment of the Fund Loan according to any schedule or procedures for repayment o non-conformance with the agreed upon conditions of the construction plans and schedule without prior written consent o impairment of any security or collateral o ineligible use of Fund Loan, including ineligible borrower and project o incorrect or fraudulent statements or failure to provide information o bankruptcy and judgments against the Lender or the borrower o any other non-compliance with the terms of the contract Section VII: Remedies In the case of default, the following remedies can take place at the Fund's discretion: o performance of all tasks necessary to complete the project and/or sale of project o acceleration of the Fund Loan o enforcement of a work-out plan o disapproval or postponement of advances o assignment to the Fund of all the Lender's rights under the Lender contract with the ultimate borrower o costs, expenses and attorney's fees incurred by the Fund in protecting its enforcementrights under this contract
o foreclosure on any security the4or Fnd Loan o termination of this contract -94- ANNE.(G Page 4 of 8
o all remedies set forth in the Master Contract, including suspension or termination of the Lender
Section VIII: Notice
This section sets forth any notice requirements: addresses, persons, method of notice and changes of any of these items. This section also details-any notice requirements for the Fund such as material changes to the borrower, including death.
Section IX: Responsibility of Lender Signator Under this Contract
This section makes it clear that the person signing this contract on behalf of the Lender has the right to do so. Also, if there is a successor to the Lender, this successor must fulfill the conditions and requirements set forth in this contract.
Section X: Termination of the Contract
This section will incorporate the provisions on termination in the Master Contract and apply them specifically to this contract. If there are any variations to the Master Contract provisions, they should be included in this section.
Signatories
This is the signature section. All contracts must be signed by the senior and authorized representatives of the Fund and the Lender and their titles must be included. -95- ANNEXG Page 5 of 8
OUTLINE FOR NORTGAG3 FINANCING AGREEZMNT
Preamble
The Preamble states who the Mortgage Financing Agreement (the "contract") is betteen, the legality of the parties to the contract, their addresses, and the date of the contract.
Section I: IncorDoration into the Master Contract
The first section will establish the relationship of this contract to the "Master Mortgage Financing Contract (the "Master Contract"). This contract is an attachment to the Master rontract. All provisions in the Master Contract are binding upon the signatories to this contract. This section will also reiterate the purpose of the Fund Loan - to provide the Lender with money for use in funding mortgage loans meeting the criteria of the Mortgage Fund (Fund). Section IT: Definitions
All definitions contained in the Guides are incorporated into this section. In addition, any amendments to the Guide definitions as well as other definitions are to be included in this part of the contract.
Section III: Loan Terms and Renayment Obligation
The purpose of this contract is for the Fund to lend money to the Lender. Therefore, this section states the Lender's obligation to repay the Fund Loan and includes the specific terms of this Fund Loan such as:
o How much money is being lent (the Fund Loan Amount)
o What the term of the Fund Loan is. In the case of the underlying Dual Index Mortgage (DIM), the DIM is designed to repay in 20 years but the actual period may vary depending on such factors as changes in the wage index and inflation index. The term of the Fund Loan parallels the term of the DIM.
O That the money reimburses the Lender after the Lender provides the ultimate borrower with its loan and has provided the Fund with evidence required by the Guide (that is Fund money is paid in arrears)
o How the Fund Loan money is to be used
o What is to be repaid and when the Fund Loan is to be repaid - the principal and interest. The Fund Loan repayments parallel the DIM. The Lender's right to repay the Fund Loan earlier and in full should also be -96- ANNEXG Page 6 of 8
included.
O What the interest rate is and how it is to be calculated
o How the money is to be lent - that is lump sum or loan- by-loan
o For each mortgage loan, what share of the mortgage loan is funded by the Fund and what share of this mortgage loan is funded by the Lender
o The location or method for repaying the Fund Loan (that is, where to send the money;
Section IV: Fund Loan Conditions
This section sets forth the Fund Loan conditions. The Fund Loan is to be used only for borrowers, properties, and mortgage loans that meet all Guide requirements including the origination and servicing provisions. Rather than repeating these requirements, this section states that all the Guide requirements apply with certain exceptions. Then, all exceptions to the Guide are set forth in this section of this contract.
For mortgage loans, the Guide may refer to special mortgage loan requirements that are to be approved by the Mortgage Fund, such as the general location of the properties. These are not amendments to the Guide but rather an expansion of a Guide provision that pertains to the specific Fund Loan. Section IV will include these additional items.
Section V: Security Interest
Although the Guide will describe ways to create a security interest in the property and improvements, this contract should describe specifically how the Lender has created a security interest in each property for this specific Fund Loan on behalf of the Fund and reaffirm the Lender's right to create this security interest. This section should also state that the security interest applies to all money given by the Fund pursuant to this mortgage loan.
Section VI: Default
The default provisions in the Master Contract apply to this Mortgage Financing Agreement. However, this contract will also provide details on what is considered to be a default under this Mortgage Financing Agreement. The Lender is in default if there is a failure to comply with any provision of this or the Master Contract or the Guides. There are no time limits placed on the Fund for uncovering a failure to comply with any provision and the Fund retains all rights of access to records and rights to audit for this purpose. -97- ANNEXG Page 7 of 8
Specific examples relating to the provisions of this contract are: o non-payment of the Fund Loan either in full or part o non-payment of the Fund Loan according to any schedule or procedures for repayment o impairmeft of any security or collateral o ineligible use of Fund Loan, including ineligible borrower and property o incorrect or fraudulent statements or failure to provide information o bankruptcy and judgments against the Lender or the borrower o non-conformance with the agreed upon conditions of mortgage loan origination and servicing Section VII: Remedies In the case of default, the following remedies can take place at the Fund's discretion:
o acceleration of the Fund Loan repayment o enforcement of a work-out plan for any of the mortgage loans
o assignment to the Fund of all the Lender's rights under the Lender contract with the ultimate borrower o costs, expenses and attorney's fees incurred by the Fund in protecting its enforcement rights under this contract o foreclosure on any security for the Fund Loan o termination of this contract o all remedies set forth in the Master Contract, including suspension or termination of the Lender Section VIII: Notice This section sets forth any notice requirements: addresses, persons, method of notice and changes of any of these items. This section also details any notice requirements for the Fund such as material changes to the borrower, including death. Section IX: Responsibility of Lender Sianatory Under this Contract This section makes it clear that the person signing this contract -98- ANNEXG Pa~ge 8of 8 on behalf of the Lender has the right to do do. Also, if there is a successor to the Lender, this successor must fulfill the conditions and requirements set forth in this contract.
Section X: Termination of the Contract
This section will incorporate the provisions on termination in the Master Contract and apply them specifically to this contract. If there are any variations to the Master Contract provisions, they should be included in this section.
Signat2rieg
This is the signature section. All contracts must be signed by the senior and authorized representatives of the Fund and the Lender and their titles must be included. -99- ANNEXH Page f 5
POID fIRST SIht PMJECT
CASH FLOW PROJECTIONSOF THE MORTGAGEFUND
A. Economicstatistics 3. lank disbunrsemntprofito
Inftation rates- Coawtruction 50.0X 5100.000 Poland 40.0S Mortgae loans 50.0 100,000 Internationat 4.0 . Ztoty/USSdifferentlaL 36.02 Loansize, USS COOO) S200.000
Interestrates- Maturity inyeynv 17 Nortgageloan U6.02 Graweperlod In years 5 Averag dpoitor lnterest 36.02 Smnl *wivalrepayments (000) 98,333 Fundfucility 43.0X AnmwsLcomnitment fee 0.25t WortdBank toan 7.50s oDftursmnt proff1o- X Amot Exchangerate, year I Zl 13,700 ------_ YearI 10X S20,000 C. _ovenuentcontrfbutfon dishurso- Year 2 20X 40,000 sentproftle Year 3 10% 40,000 Year 4 202 40,000 Dlsb. Year5 202 40,000 Yr. period Year Deferred Year 6 10% 20.000 - ...... -..--.-. ----. Year t 0% 0 1 520,000 6 SO -- 2 40,000 7 0 100% 5200,000 3 40,000 8 0 -*a 4 40000 9 0 0. FundfaciLfty term 5 40.000 10 0 6 20,000 11 0 1. 2 of mortgagefirnaned 80.0X 7 0 12 0 2. 2 of mortggespats. ree d 80.0X -3 0 13 0 3. X dpositorInt. capit 50.0X _1. 14 0 5200.000 15 0 * -=0- 16 0 17 0
so
5. WorldBank loan cash fLlovs Tot First First First First 1. Principal (USS000) 5 years 10 years 15 years 20 years ...... Btlane begfnning of parted 0 0 0 0 0 Dosbursed S200,000 S180,000 S200,000 #200,000 5200,000 Repid 0 (83,333) (16,667) (200,000) ...... BaLanc end of period S200,000 S180,000 S116,667 933333 (SO)
2. Interest *120,000 530,750 #99,375 S117,500 S120,C00
3. Undfsbursedportfon of loan 520,000 S0 S0 S0 Malmo" um- 4. Coumilnt fee 51.475 a1S500 S1t500 S1,500
Preparedby PLO22-May-92 Of ebu'Somt: Loan$200 with govwt S200, no deferred gOv't Page1 -100- ANNEXH Page 2 of 5
POLANDFIRST NUMING PROJICT
F. fwuddisbursment prof ift (without deferred gov't contributfon)
1. fwud loan duri,wdisbursement Ffrst First Ffrst First period 5 years 10 years 15 years 20 years
NortUgs Issusd- Frm constructiontwo *1693562 s200,000 5200,000 $200.000 Oirect mortgagefinancing 1600000 200,000 200,000 200,000
Total mortgagesissued 349,562 400,000 400,000 400,000
2. Projectdisbursement summary
Mortog and construction tows: X Fundfacility- World Ban 30.0X 5200,000 S180,000 s200,000 s7nn,000 s200,05u Co-financrin O.OX 0 0 0 0 0 Gover nt 30.02 200.000 180,000 200,000 200,000 200,000 ...... 60.02 400.000 360,000 400.000 400,000 400,000 Mortgagebank 15.02 100.000 90.000 100,000 100.000 100,000 ,...... Total Loan 75.0X 500,000 450,000 300,000 300.000 500,000 Hum hold 25.02 1$6,667 130,000 166.667 166,667 166,667 ...... Total proJect 100.0X S666.o67 S6W0,000 S6*66667 S666,667 566,667
3. Cost of unitsfin nced rear 1 Year 5 Yerr 10 Year 15 Year 20 Sales per 52, In USS S400 S449 S519 S600 5694
unit X Total First first First First 32 cost* totat (JSS000) 5 years 10 years 15 years 20 yeers ...... * ...... ;...... *...... T.peA 40 S16,000 25.0X 5166,667 *150,000 714,66? S166,667 S166,667 TypeB 60 24,000 25.0X 166,667 150,000 166,667 166,667 166,667 TypeC s0 32,000 25.02 166,667 150.000 166,66? 166,667 166,667 TypeD 100 40.000 25.0% 166,667 130,000 166,667 166,667 166,667 ...-...... 62 524,935 100.OX 566,667 5600,000 S666,667 S666,667 5666,667
Ffrst First firsic first 4. Itauar of units financed 5 yers t10 years 15 yea-s 2t years Unit X Total ------...... 52 cost* total units ...... Type A 40 S16,000 39.02 10,417 8,797 9,698 9,698 9,698 Type 3 60 24,000 26.02 6,944 5,864 6,46e 6,465 6,465 TypeC s0 32,000 19.5X 5,208 4,396 4,849 4.849 4.849 Typ D 100 40,000 IS.6" 4,167 S,319 3,679 3,879 3,879 ...... e $24,935 100.02 26,736 22,376 24,891 24,891 24,891 am _ _ _ - m
* Yar I t U 400per 12
Prepsre4 by Plo22-1My-92 Disburseent:Loan S200 with pv't S200, no deferred gov't Page2 -101- ANNEX H Page 3 of 5
FPlOL FIRST OUSINGPROJECT
0. fund cash ftlos World Sank First first First PFrst project (UMS 000) 5 years 10 years 15 y*ea 20 years
Cah recipts: Proceed from bnk tloans- World Sank S180,000 $200,000 *200,000 $200,000 * Co-firnacing 0 0 0 0 , ~~~~~~~~~~~~~~~~~~~~~...... Total bank loan U 0,000 200,000 200,000 200,0C0 Govarnv nt contributaon to Fund 180,000 200,000 200,000 200,000 ...... 360,000 400,000 400,000 400,000 Subtloan Rapynts to Fund 74,04A 284,959 531,508 724,132
Total cash recefpts 434,044 654;959 931.508 1;124;132
Cash disbur ments: Loans, 100.0X of ortgage lon 360,000 400,000 400,000 400,000 Fund exFpwsns 3,315 7,547 12,947 19,840
Total disburs m ts 33,315 407,547 412,947 419,840 ...... Cash flow before debt servfce 70,729 27,412 518,561 704,292 Debt sorvice: ...... World Bank- interest 30,750 69,375 117,500 120,000 Comitment fee 1,475 1,500 1,500 1,500 Loan repaymnt 0 83,333 166,667 200,000
Total World Bank 32,225 174,208 285,67 321,500 Co-f 1 naeer- ...... Interest 0 0 0 0 cemmituent fee 0 0 0 0 0 0 0 0 ......
Total co-firanceer 0 0 0 0
Total debt service 32,225 174,208 285,667 321,500 ...... Net cash flow after debt service $38,504 $103,203 *232,695 8382,792
Accaltoted cash flow *38,504 $103,203 S232,895 8382,792
N. Fund reinvestment profile (with Govern_nt contribution tWf ront) Amount Firat First Ffrst Ffrst 1. Reinvestment disburse- X (USS 000) 5 years 10 years 15 years 20 years ment sumry ...... Nortge Fund lomns 60.01 s737,750 541,010 $135,300 3358,280 $737,750 Mortage bank 15.0X 184,438 10,253 33,825 89,570 184,436 ...... Total mortgage lons 75.0 922,18U 51,263 169,125 447,850 922,188 Housahold 25.02 307,396 17,086 56,375 149,283 307,396 ...... Total 100.0 81.229.583 68.350 *225.500 *S97.133 S1;229;%3
Preparsd by PLO 22-Msy-92 Disbursement: Loan S200 with gov't #200, no deftrred gov't PagO3 -102- ANNEXH Page 4 of 5
POLANDFIRST MOWINGPIOJgCT
H. Continuud 2. Costof unitofinaneod Year1 Year5 Yasr10 Year1S Yasr20 Salesper 12,in USS 5400 54409 619 $600 9A4
Unit X Total firat First First FIrst H2 cost* total (US5000) S ysars 10 years 1S yars 20 yeors ...... TypeA 40 $16,000 25.0X 5307,39 517,088 $56,375 $149,283 $307,396 Type 0 60 24,000 2S.OX S307,396 17,085 56,375 149,283 307,396 Type C 80 32,000 25.01 5307,396 17,086 56,375 149,283 307,396 Type 0 100 40,000 2S.0 S307,396 17,088 56,375 149,283 307,396 ,,, ...... ,...... 62 524,935 100.0 $1,229,553 568,350 5225,500 #597,13351,229,583
3. uwbrunmito financed Unit X Total K2 cost* total units
TypeA 40 *16,000 39.0X 19,212 1.068 3,523 9,330 19,212 Type a 60 24,000 26.0X 12,808 712 2,349 6,220 12,808 Type C 80 32,000 19.51 9,606 34 1,762 4,665 9,606 Type0 100 40,000 1S.6" 7,685 427 1,409 3,732 7,685 ...... 62 $24,935 100.01 49,311 2,741 9,043 23,948 49,311
Year at USS400 perN2 ,.Fund rofnvestment cash ftlows (with Goverrnunt contribution up-front) First First Ffrst Ffrst 5 years 10 yean 15 years 20 years Cashrecepts: - -. ViordSank project (see e above) 38,504 *103,203 3M2,895 s38z,7 Reinvesmtwntportfolio receipts 2,505 32,100 125386 354,954
Totalreceipts 41,009 135,303 358,280 737,747 Relnvestnt ortagge finncing 41,010 135,300 358,280 737,750
Net cash flow after reinvestment (SI) 53 so (3) Accumulatedcash flow (51) s3 so0(3)
J. Fundreinvestment cash flows with This setion Is not valid becauseno deferred deferred gov't contribution governe nt contribution wasselected in C above Cashreceipts: World Bank project (0 above) 38,504 s103,203 5232,895 S382.792 Reinvestmentportfolio receipts 0 0 0 13,442 Supplementalgov't contribution 0 0 0 0
38,504 103,203 232.895 396,234 Reinvestmentmortgage finwncing 0 0 0 0 Net cashflow aftor reinvestmnt 538,504 s103,203 S232,M5s396,234 Accumulatedcash flow
Preparedby PLO22-Nay-92 Disbursemnt:Laon 200 withgov't 5200, no deferredgov't Page4 -103- ANNEXH Fage 5 of 5
POLANDFIRST MOUSINGPOJECT
L. Consolidated20 year summary, (up-front Gowrnnnt contrib.) Invest. Reinv. Total
Nud.er of unitsfInanced 26,736 49,311 76,048
_ X of totalunits financed 33.2X 64.81 100.01 Inv * ui um Refnv Total FfnancfngPlan X X MortwageFund- -...... World Bank 30.03 $200,000 S200,000 0.0 10.5X Co-ftnncer 0.01 0 0 0.0S 0.0% Sovernant contribution 30.01 200,000 200,000 0.0 10.5X Refnvestmantof cash flow $5737.750 737.750 60.0X 38.9X
Total Fund 60.01 400,000 737,750 1,137,750 60.0X 60.0X Participatfng banks 15.0X 100,000 184,438 284,438 15.01 15.01
Total valus of wrtgage 75.0X 500,000 922,188 1,422,188 75.0X 75.01 Householdcontribution 25.0X 166,667 307,396 474.063 25.01 25.0X @ ...... Totat cost of unftsfinancd 100.03X $666667 *1,229,585*1,896,250 100.01 100.0X _~mu * _ umiua - -104- ANNEXI Page 1 of 6 PoLAwOR2.WKI DUALINDEX MORTGAGEAMORTIZATION TABLE SUMRY
45.45M2, IMF40X, GRANT0£, OP"T2SI CR0EDtPROFILE AND STATISTICS POLAND19°0
Envirormntal factors: No. ZLty ...... ;a;; .... Nominalcash flow of loan: AMW (000) Loanstarting 1nt t ate n.0- ...... Real interest rote 6.0x Interest 35.3 28,273,465 Starting annual inftitfon rate t2.84Xmonthly) 40.0x Capftal 64.7 187,500 Frequencyof adjuet_ant of monthly paymentand indexation of capitatl 2 below), fn months Total 100.0 28,462,%S (insert 3 6, or 12) 3 . aiuaa Correlatfon wagechnges/fnflation Peakcapital at month198 S1.9 9,727,439 adJustedevery 3 months 100.0S Correlation wage chengesto pamnt Increase 100.01 maturfty: Amortfzaton- (1) Capitalization Interestmnthly (2) indexation principal every 3 months I This loan aortizes in 19 years, 4 months
Zloty USS Indlcators: : ~~~~~~~~~~~...... starting exchangerate, Ztoty per US# 13,700 $1.00 IRR cash flows Canmualized) 46.0x startfng averagemonthly wgoeCAHU) 2,900,000 $211.68 .. Starting costs per N2 5,500,000 5401.46 Cost recovery: Nominal Real X
Affordabfilty calculations: (Pres ALTC to preview results) Downpue. 62,50D 62,500 100.0x _-^.-...... L. Loan 187,500 274,162 146.2X Payment1 of family income 25.0X ...... Seneficiary family incomeCIFI) (000) 5,000 250,000 336,662 134.7Z Starting monthly paysnt CO00) 1,250 Grant 0 0 0.0O Nu!ber of monthly paymentsfinanced 150 ...... Affordable loan maxium (000) 187,500 Total cost 230.000 336,662 134.7t Governmentgrant X 0.0X * inmu¢ -- - Beneficiary downpayment X i5.0% First year statistics: Maxim.uaffordable cost of housing unit(000) 250,000 ----.-.-----.---- N2 affordable 45.45 StartInginterest rate 46.0X Monthlypayment (000) 1,250.00 mult. Zloty US S Totalpaymants 1st year 17,093 Caleulation of amuntsfinanced: AMU (000) (000) Totalpayments/loan amount 9.12 ...... _..._...... ChangesIn anrualnflation rates: 0 86.21 250.000 . ..------*18248; Grant 0.0X 0.00 0 0 Startingrate (Year 1) 40.02 _. . *--- YYear 2 40.0X Costto beneficfary 86.21 250,000 18,248 Year3 ; 40.0X Downpaymeny 2S.01 21.55 62,500 4.562 Year4 40.0X _...... Year5 to maturity 40.0X Amountloaned 64.66 187,500 S13,686 Loanas a multipleof lotmonthly payment:
Startingmonthly payent 43.1% 1.250,000 $91.24 Real Real _~ mamma. S -s Int.m Mult. nt. Mult.
2.01 190 6.02 150 3.01 180 7.02 140 4-0X 170 8.01 130 5.01 160 9.01 120
Prsparad for the WarldBank by Peter L. Ooty, Financfal Consultant, on 22-May-92 -105- Ab~NNEX 6 -105- Page 2 of 6
POIANOR2.WKl DUALINDEX NRTGACE CREDITS MOITHLY AMORTIZATION- 45.45 N2, IbF 40X, IANT0O, DPNT25X
45.45N2, IMF 40X, G=ANTOK, OPMT 23S MONTHLYAMORTIZATION TABLE CAPITALIZATIONINTEREST
No Avg. Int. No. CashIn Amt. rng. Indbx. set. X pit. wage rate AMW (out) Int. (pes) prino. prfnc AMW ...... ,...... 0 2,900 0 (64.635) (187,300) 0 0 187,500 1 2,900 3.20K 0.4310 1,250.00 6,007.30 4,737.30 192,257 43.1K 2 2,900 3.20K 0.4310 1,250.00 6,159.71 4,909.71 197,167 43.1K 3 2,900 3.20K 0.4310 1,250.00 6,317.02 5,067.02 202,234 43.1K 4 3,154 3.20m 0.4310 1,339.70 6,479.36 5,119.66 207,354 43.1K s 3,154 3.20 0.4310 1,3S9.70 6,643.39 5,283.69 0 212,637 43.1X 6 3,154 3.20m 0.4310 1,359.70 6,812.67 5,452.97 218,090 43.1K 7 3,431 3.20K 0.4310 1,479.02 6,987.38 3,308.36 223,599 43.1K S 3,431 3.20K 0.4310 1,479.02 7,163.86 5,684.84 0 229,284 43.1K 9 3,431 3.20K 0.4310 1,479.02 7,345.99 5,866.97 235,151 43.1K 10 3,732 3.20K 0.4310 1,608.81 7,533.97 5,925.15 241,076 43.1K 11 3,732 3.20K 0.4310 1,608.81 7,723.80 6,114.99 0 247,191 43.1K 12 3,732 3.20K 0.4310 1,608.81 7,919.72 6,310.90 253,502 43.1K 13 - 4,060 3.20 0.4310 1,730.00 8,121.91 6,371.91 259,873 43.1K 14 4,060 3.20K 0.4310 1,750.00 8,326.06 6,576.06 0 266,450 43.1% 1i 4,060 3.20K 0.4310 1,750.00 8,536.75 6,786.75 273,236 43.1K 16 4,416 3.20K 0.4310 1,903.58 8,754.19 6,850.62 280,087 43.1K 17 4,416 3.20K 0.4310 1,903.58 8,973.68 7,070.10 0 287,157 43.1K 18 4,416 3.20K 0.4310 1,903.58 9,200.20 7,296.62 294,454 43.1K 19 4,804 3.20K 0.4310 2,070.63 9,433.97 7,363.35 301,817 43.1K 20 4,804 3.20K 0.4310 2,070.63 9,669.89 7,599.26 0 309,416 43.1K 21 4,804 3.20K 0.4310 2,070.63 9,913.36 7,842.73 317,259 43.1K 22 5,225 3.20K 0.4310 2,252.34 10,164.63 7,912.29 325,171 43.1K 23 5,225 3.20K 0.4310 2,252.34 10,418.13 8,165.79 0 333,337 43.1K 24 5,225 3.20K 0.4310 2,252.34 10,679.76 8,427.42 341,764 43.1K 23 S,684 3.20K 0.4310 2,450.00 10,949.76 8,499.76 350,264 43.1K 26 5,684 3.20K 0.4310 2,450.00 11,222.08 8,772.08 0 359,036 43.1K 27 5,684 3.20K 0.4310 2,450.00 11,503.13 9,053.13 368,089 43.1K 28 6,183 3.20K 0.4310 2,665.01 11,793.18 9,128.18 377,218 43.1K 29 6,183 3.20K 0.4310 2,665.01 12,085.64 9,420.64 0 386,638 43.1K 30 6,183 3.20X 0.4310 2,665.01 12,387.47 9,722.46 396,361 43.1K 31 6,,s 3.20m 0.4310 2,898.88 12,698.97 9,800.09 406,161 43.1K 32 6,725 3.202 0.4310 2,898.88 13,012.95 10,114.07 0 416,275 43.1K 33 6,72S 3.20K 0.4310 2,898.88 13,336.99 10,438.11 426,713 43.1K 34 7,316 3.20K 0.4310 3,153.28 13,671.42 10,318.14 437,231 43.1K 35 7,316 3.20K 0.4310 3,153.28 14,008.41 10,855.13 0 448,086 43.1K 36 7,316 3.20K 0.4310 3,153.28 14,356.20 11,202.92 459,289 43.1K 37 7,958 3.20K 0.4310 3,430.00 14,713.12 11,285.12 470,574 43.1K 38 7,958 3.20K 0.4310 3,430.00 15,076.69 11,646.69 0 482,221 43.1X 39 7,958 3.20K 0.4310 3,430.00 15,449.84 12,019.84 494,241 43.1K 40 8,656 3.20K 0.4310 3,731.01 15,834.94 12,103.93 506,345 43.1K 41 8.656 3.20m 0.4310 3,731.01 16,222.73 12,491.73 0 518,836 43.1K 42 8,656 3.20K 0.4310 3,731.01 16,622.96 12,491.9 531,728 43.1K 43 9,416 3.20K 0.4310 4,058.43 17,036.00 12,977.57 5"4,706 43.1K 44 9,416 3.202 0.4310 4,058.43 17,451.79 13,393.36 0 558,099 43.1X 45 9,416 3.20K 0.4310 4,038.43 17,880.90 13,822.46 571,922 43.1K 46 10,242 3.20K 0.4310 4,414.59 18,323.75 13,909.16 585,831 43.1Z 47 10,242 3.20K 0.4310 4,414.59 18,769.39 14,354.80 0 600,186 43.1K 48 10,242 3.20K 0.4310 4,414.59 19,229.30 14,814.71 615,001 43.1K 49 11,141 3.20K 0.4310 4,802.00 19,703.95 14,901.95 629,902 43.1K s0 11,141 3.20K 0.4310 4,802.00 20,181.39 15,379.39 0 645,282 43.12 51 11,141 3.20X 0.4310 4,802.00 20,674.13 15,872.13 661,154 43.1K 52 12.118 3.20K 0.4310 3,223.41 21,182.63 15,959.24 677,113 43.1K 33 12,118 3.20K 0.4310 5,223.41 21,693.97 16,470.56 0 693,384 43.1K 54 12,118 3.20X 0.4310 5,223.41 22,221.67 16,998.26 710,582 43.1K
Preparedfor the World Bonk by PeterL. Dotyon 22-May-92 Page1 -106- ANNEXI Page 3 of 6 P0LAOR2.W1 DUALINOEX MORTGAGE CRDItTS MONTHLY AMORTIZATION- 45.45 N2, IMF 40, GRAT 01, OPT 251
45.45 N2, IMF 40X, GRAT 0O, OPHT 25z MTHLY AMRTIZATIONTABLE CAPITALIZATIONINTEREST
No Avg. 1rt. No. Cash fn At. ng. Index. mla. X put. wage rate AMW (out) Int. CPU.) prlnc. prine ANW , .. ~~~~~~~~~~~~~~~~~...... SS 13,182 3.201 0.4310 5,681.60 22,766.27 17,084.4? 27,666 u.1x 56 13,182 3.201 0.4310 5,681.80 23,313.64 17,631.64 0 745,298 43.1x ST 13,182 3.20x 0.4310 5,681.80 23,878.55 18,196.74 763,495 43.1X 58 14,339 3.201 0.4310 6,180.42 24,461.55 18,281.13 781,776 43.1% 59 14,339 3.201 0.4310 6,180.42 25,047.26 18,866.83 0 800,643 43.11 60 14,339 3.201 0.4310 6,180.42 25,6s1.73 19,471.31 820,114 43.11 61 1S,597 3.20X 0.4310 6,722.80 26,275.57 19,552.77 839,67 43.1X 62 15,597 3.20 0.4310 6,722.80 26,902.02 20,179.22 0 859,846 43.1X 63 15,597 3.20X 0.4310 6,722.80 27,548.54 20,825.74 880,672 43.11 64 16.966 3.201 0.4310 7,312.77 28,215.77 20,903.00 901,571 43.1X 65 16.966 3.20 0.4310 7,312.77 28,885.48 21,572.71 0 923,148 43.1X 66 16,966 3.201 0.4310 7,312.77 29,576.65 22,263.87 945,412 43.11 67 18.454 3.20x 0.4310 7,954.52 30,289.96 22,335.43 967,747 43.11 68- 18,454 3.201 0.4310 7,9S4.52 31,005.56 23,051.04 0 990,798 43.11 69 18,454 3.201 0.4310 7,954.52 31,744.09 23,789.57 1,014,588 43.11 70 20,074 3.201 0.4310 8,652.59 32,506.28 23,853.69 1,038,441 43.11 71 20,074 3.201 0.4310 8,652.59 33,270.53 24,617.94 0 1,063,059 43.11 72 20,074 3.201 0.4310 8,652.59 34,059.26 25,406.67 1,088,466 43.11 73 21,836 3.201 0.4310 9,411.92 34,873.26 25,461.34 1,113,927 43.11 74 21,836 3.201 0.4310 9,411.92 35,689.02 26,277.10 0 1,140,204 43.1X 71 21,836 3.201 0.4310 9,411.92 36,530.91 27,118.99 1,167,323 43.1X 76 23,752 3.20X 0.4310 10,237.88 37,399.77 27,161.89 1,194,485 43.11 TY 23,752 3.201 0.4310 10,237.88 38,270.01 28,032.12 0 1,222,517 43.11 78 23,752 3.20X 0.4310 10,237.88 39,168.13 28,930.24 1,251,448 43.11 79 25,836 3.201 0.4310 11,136.33 40,095.02 28,958.69 1,280,406 43.1X so 25,836 3.201 0.4310 11,136.33 41,022.82 29,886.49 0 1,310,293 43.11 81 25,836 3.201 0.4310 11,136.33 41,980.35 30,844.02 1,341,137 43.11 82 28,104 3.201 0.4310 12,113.63 42,968.56 30,854.93 1,371,992 43.11 83 28,104 3.201 0.4310 12,113.63 43,957.12 31,843.49 0 1,403,835 43.11 84 28,104 3.20X 0.4310 12,113.63 44,977.35 32,863.72 1,436,699 43.11 85 30,570 3.201 0.4310 13,176.69 46,030.27 32,853.58 1,469,553 43.11 86 30,570 3.20X 0.4310 13,176.69 47,o2.86 33,906.18 0 1,503,459 43.1X 87 30,570 3.201 0.4310 13,176.69 48,169.18 34,992.49 1,538,451 43.11 88 33,253 3.201 U.4310 14,333.04 49,290.30 34,957.26 1,573,409 43.11 89 33,253 3.201 0.4310 14,333.04 50,410.29 36,077.26 0 1,609,486 43.11 90 33,253 3.201 0.4310 14,333.04 51,566.17 37,233.13 1,646,719 43.11 91 36,171 3.201 0.4310 15,590.87 52,759.08 37,168.21 1,683,887 43.11 92 36,171 3.20 0.4310 15,590.87 53,949.91 38,359.04 0 1,722,246 43.11 93 36,171 3.201 0.4310 15,590.87 55,178.89 39,588.02 1,761,834 43.11 94 39,345 3.201 0.4310 16,959.08 56,447.25 39,488.17 1,801,322 43.11 95 39,345 3.201 0.4310 16,959.08 57,712.40 40,753.32 0 1,842,076 43.11 96 39,345 3.201 0.4310 16,959.08 59,018.10 42,059.02 1,884,135 43.11 97 42,798 3.20X 0.4310 18,447.36 60,365.62 41,918.26 1,926,053 43.11 98 42,798 .L20% 0.4310 18,447.36 61,708.64 43,261.27 0 1,969,314 43.1x 99 42,798 3.201 0.4310 18,447.36 63,094.68 44,647.32 2,013,962 43.11 100 46,554 3.20 0.4310 20,066.25 64,525.13 44,458.88 2,058,420 43.11 101 46,554 3.201 0.4310 20,066.25 65,949.55 45,883.29 0 2,104,304 43.11 102 46,554 3.201 0.4310 20,066.25 67,419.60 47,353.34 2,151,657 43.11 103 50,639 3.201 0.4310 21,827.21 68,936.75 47,109.53 2,198,767 43.11 104 50,639 3.20X 0.4310 21,827.21 70,446.08 48,618.87 0 2,247,385 43.11 105 50,639 3.20X 0.4310 21,827.21 72,003.78 50,176.57 2,297,562 43.11 106 55,083 3.20 0.4310 23,742.71 73,611.38 49,868.s7 2,347,431 43.1X 107 55,083 3.201 0.4310 23,742.71 75,209.12 51,466.41 0 2,398,897 43.11 108 55,083 3.20x 0.4310 23,742.71 76,858.0S 53,115.34 2,452,012 43.1x 109 59,917 3.201 0.4310 25,826.31 78,559.81 52,733.50 2,504,746 43.11
Prepared for the World Bank by Peter L. Doty on 22-May-92 Page 2 -107- Page 4 of 6
POIANOQ2.WKI DUALINWFX NORTGAGE CREDItS MIOTHLY ANORTIzATION- 45.45 M2, IMF 40X, GIANTOX, OPHT252
45.45 M2, IMf 402, GRANT02, OPNT25x MONTHLYAVOTIZATION TASLE CAPITALIZATIONINTEREST
No r Avo. Int. No. CashIn Apt. neg. Index. Be. 2 Pt. mage rat A1W (out) Int. (poU) prtnc. prfne AMW ._...... l11 59,917 3.20% 0.4310 25,826.31 80,249.33 54,423.02 0 2,559,169 43.1% I1I s9,917 3.202 0.4310 25,826.31 81,992.96 56,166.67 2,615,336 43.12 112 65.173 3.20X 0.4310 28,092.76 83,792.50 55,699.75 2,671,035 43.12 113 65,175 3.202 0.4310 28,092.76 85,577.06 57,464.31 0 2.728,520 43.12 114 65,175 3.202 0.4310 28,092.76 87,418.80 59,326.04 .2,787,846 43.1% 115 70,8s9 3.20S 0.4310 30,558.10 89,319.54 58,761.44 2,846,607 43.12 116 70.8s9 3.202 0.4310 30,558.10 91,202.19 60,644.09 0 2,907,251 43.1X 117 70,895 3.20X 0.4310 30,558.10 93,145.16 62,587.06 2,969,838 43.1X 118 77,116 3.202 0.4310 33,239.80 95,150.38 61,910.59 3,031,749 43.1X 119 77,116 3.202 0.4310 33,239.80 97,133.93 63,894.13 o 3,095,643 43.1X 120 77,116 3.202 0.4310 33,239.80 99,181.03 65,941.23 3,161,584 43.12 121 83,884 3.202 0.4310 36,156.83 101,293.71 65,136.88 3,226,721 43.1X 122 83,884 3.202 0.4310 36,156.83 103,380.63 67,223.80 0 3,293,945 43.12 123- 83,884 3.20X 0.4310 36,156.83 105,534.40 69,377.57 3,363,323 43.12 124 91,245 3.20X 0.4310 39,329.86 107,757.19 68,427.33 3,431,750 43.12 125 91,245 3.202 0.4310 39,329.86 109,949.52 70,619.67 0 3,502,370 43.12 126 91,24S 3.202 0.4310 39,329.86 112,212.10 72,882.24 3,575,252 43.1X 127 99,253 3.202 0.4310 42,781.34 114,547.17 71,765.83 3,647,018 43.1X 128 99,253 3.20X 0.4310 42,781.34 116,846.47 74,065.13 0 3,721,083 43.12 129 99,253 3.202 0.4310 42,781.34 119,219.43 76,438.09 3,797,521 43.12 130 107,963 3.202 0.4310 46,S35.72121,668.43 73,132.71 3,872,654 43.1X 131 107,963 3.202 0.4310 46,53s.72124,075.60 77,s39.88 0 3,950,193 43.12 132 107,963 3.202 0.4310 46,535.72126,559.89 80,024.17 4,030,218 43.1X 133 117,437 3.202 0.4310 50,619.56 129,123.78 78,504.21 4,108,722 43.12 134 117,437 3.20X 0.4310 50,619.56 131,638.97 81,019.40 0 4,189,741 43.12 135 117,437 3.202 0.4310 50,619.56 134,234.74 83,615.18 4,273,356 43.12 136 127,743 3.202 0.4310 55,061.80 136,913.68 81,851.88 4,355,208 43.12 137 127,743 3.202 0.4310 55,061.80 139,536.12 84,474.32 0 4,439,683 43.12 138 127,743 3.202 0.4310 55,061.80 142,242.59 87,180.79 4,526,863 43.12 139 138,954 3.202 0.4310 59,893.88 145,035.77 85,141.89 4,612,005 43.12 140 138,954 3.202 0.4310 59,893.88 147,763.62 87,869.74 0 4,699,8s7 43.1X 141 138,9S4 3.202 0.4310 59,893.88 130,578.87 90,684.99 4,790,560 43.12 142 151,148 3.202 0.4310 65,150.00 153,484.32 88,334.32 4,87a,894 43.12 143 151,148 3.202 0.4310 65,150.00 156,314.45 91,164.45 0 4,970,059 43.12 44 151,148 3.202 0.4310 65,150.00 159,235.26 94,085.26 5,064,144 43.12 145 164,412 3.202 0.4310 70,867.39 162,249.65 91,382.26 5,155,526 43.12 146 164,412 3.202 0.4310 70,867.39 165,177.44 94,310.05 0 5,249,836 43.12 147 164,412 3.202 0.4310 70,867.39 168,19.03 97,331.64 5,347,168 43.12 148 178,841 3.20% 0.4310 77,086.52 171,317.43 94,230.91 5,441,39 43.1X 149 178,841 3.202 0.4310 77,086.52 174,336.49 97,249.97 0 5,538,649 43.1X 150 178,841 3.20X 0.4310 77,086.52 177,452.27 100,365.75 5,639,015 43.12 151 194,535 3.202 0.4310 83,81.43 1ao,667.88 96,816.45 5,735,831 43.1X 152 194,535 3.20z 0.4310 83,851.43183,769.77 9,918.3S 0 5,835,749 43.1X 153 194,s35 3.202 0.4310 83,851.43 186,971.05103,119.62 5,938,869 43.12 154 211,607 3.20X 0.4310 91,210.00 190,274.89 9,064.89 6,037,934 43.12 1ss 211,607 3.202 0.4310 91,210.00193,48.82 102,238.82 0 6,140,173 43.12 156 211,607 3.20% 0.4310 91,210.00 16,724.44 105,514."4 6,245,687 43.12 157 230,177 3.202 0.4310 99,214.35 200,105.01 100,890.66 6,346,578 43.12 158 230,177 3.20X 0.4310 99,214.35203,337.43 104,123.09 0 6,450,701 43.1X 159 230,177 3.202 0.4310 9,214.35206,673.42 107,459.08 6,558,160 43.12 160 250,377 3.202 0.4310 107,921.13 210,116.30 102,195.17 6,660,355 43.12 161 250,377 3.202 0.4310 107,921.13 213,390.52 105,469.39 0 6,765,825 43.1X 162 250,377 3.20X 0.4310 107,921.13 216,769.64 108,848.1 6,874,673 43.12 163 272,349 3.202 0.4310 117,392.00220,257.03 102,865.03 6,977,538 43.1X 164 272,349 3.202 0.4310 117,392.00223,552.71 106,160.72 0 7,083,699 43.12
Preparedfor the UorLd Bank by PeterL. DOtyon 22-May-92 Page3 -108- I -108- ~~~~~~ANNEXPage 5 of 6
POLAMOR2.WKI DtUALINDEX NORTGAGE CREDITS MONTHLY AMORTIZATION- 45.45 142, IMP40X, GRAT 0m, OPFT2s%
45.45 M2, IMF 40X, GRAT 0%, DPNT25z NONTHLYAORTIZATION TABLE CAPITALIZATIONINTEREST ,,,,...... ----...... *e--j- Aort ...... No Avg. tnt. No. Cashin Amt. ng. Index. ht. X Pat. wage rate AtW (out) Int. (poJ) prfno. prtno ANW ... ~~~~~~~~~~~~~~~~~~~~~~~ ...... ---...... 165 272,349 3. 0.4310 117,392.00 226,953.99 109,561.99 7,193,261 u.1x 166 296,250 3.20% 0.4310 127,694.00 230,464.23 102,770.23 7,296,031 43.1% 167 296,250 3.20 0.4310 127,694.00 233,756.88 106,062.88 0 7,402,094 43.1% 168 296,250 3.20% 0.4310 127,694.00 237,155.02 109,461.01 7,511,555 43.1% 169 322,248 3.20% 0.4310 138,900.09 240,662.03 101,761.94 7,613,317 43.1% 170 322,248 3.20% 0.4310 138,900.09 243,922.37 105,022.29 0 7,718,339 43.1% 171 322,248 3.20% 0.4310 138,900.09 247,287.17 108,387.09 7,826,n6 43.1% 172 350,528 3.20% 0.4310 151,089.58 250,759.77 99,670.19 7,926,396 43.1% 173 350,528 3.20X 0.4310 151,089.58 253,953.10 102,863.52 0 8,029,260 43.1% 174 350,528 3.20X 0.4310 151,089.58 257,248.73 106,159.15 8,135,419 43.1% 175 381,289 3.20% 0.4310 164,348.80 260,649.96 96,301.16 8,231,720 43.1% 176 381,289 3.20% 0.4310 164,348.80 263,735.34 99,386.54 0 8,331,107 43.1% 177 381,289 3.20% 0.4310 164,348.80 266,919.58 102,570.78 8,433,678 43.1% 178 - 414,750 3.20% 0.4310 178,771.61 270,205.83 91,434.23 8,525,112 43.1% 179 414,750 3.20% 0.4310 178,771.61 273,135.29 94,363.68 0 .8,619,475 43.1% 180 414,750 3.20% 0.4310 178,771.61 276,158.60 97,386.99 8,716,862 43.1% 181 -.51,147 3.20% 0.4310 194,460.12 279,278.77 84,818.65 8,801,681 43.1% 182 451,147 3.20% 0.4310 194,460.12 281,996.27 87,536.15 0 8,889,217 43.1% 183 451,147 3.20% 0.4310 194,460.12 284,800.83 90,340.71 8,979,558 43.1% 184 490,739 3.20% 0.4310 211,525.'.2 287,695.25 76,169.83 9,05,728 43.1% 185 490,739 3.20% 0.4310 211,525.42 290,135.65 78,610.23 0 9,134,338 43.1% 186 490,739 3.20% 0.4310 211,525.42 292,654.23 81,128.82 9,215,467 43.1% 187 533,805 3.20% 0.4310 230,088.32 295,253.51 65,165.19 9,280,632 43.1% 188 533,805 3.20% 0.4310 230,088.32 297,341.33 67,253.02 0 9,347,885 43.1% 189 533,805 3.20% 0.4310 230,088.32 299,496.05 69,407.73 9,417,293 43.1% 190 580,650 3.20% 0.4310 250,280.25 301,719.79 51,439.55 9,468,732 43.1% 191 580,650 3.20% 0.4310 250,280.25 303,367.86 53,087.61 0 9,521,820 43.1% 192 580,650 3.20X 0.4310 250,280.25 305,068.73 54,788.48 9,576,608 43.1% 193 631,606 3.20% 0.4310 272,244.17 306,824.09 34,579.93 9,611,188 43.1% 194 631,606 3.20 0.4310 272,244.17 307,932.00 35,687.83 0 9,646,876 43.1% 195 631,606 3.20% 0.4310 272,244.17 309,075.40 36,831.23 9,683,707 43.1% 196 687,035 3.20% 0.4310 296,135.58 310,255.43 14,119.85 9,697,827 43.1x 197 687,035 3.20% 0.4310 296,135.58 310,707.81 14,572.3 0 9,712,399 43.1% 198 687,035 3.20% 0.4310 296,135.58 311,174.69 15,039.11 9,727,439 43.1% 199 747,327 3.20% 0.4310 322,123.64 311,656.53 (10,467.12) 9,716,971 43.1% 200 747,327 3.20% 0.4310 322,123.64 311,321.17 (10,802.47) 0 9,706,169 43.1% 201 747,327 3.20X 0.4310 322,123.64 310,975.07 (11,148.57) 9,695,020 43.1% 202 812,910 3.0 0.4310 350,392.35 310,617.88 (39,774.46) 9,655,246 43.1% 203 812,910 3.20% 0.4310 350,392.35 309,343.55 (41,048.79) 0 9,614,197 43.1% 204 812,910 3.20 0.4310 350,392.35 308,028.40 (42,363.95) 9,571,833 43.1% 205 884,249 3.20z 0.4310 381,141.83 306,671.10 (74,470.73) 9,497,362 43.1% 206 884,249 3.20% 0.4310 381,141.83 304,285.14 (76,856.69) 0 9,420,506 43.1% 207 84,7249 3.20% 0.4310 381,141.83 301,822.74 (79,319.10) 9,341,187 43.1% 208 961,848 3.20X 0.4310 414,589.82 2"9,281.44 (115,308.38) 9,225,878 43.1% 209 961,848 3.20% 0.4310 414,589.8s 295,587.08 (119,002.73) 0 9,106,876 43.1% 210 961,841 3.20% 0.4310 414,589.82 291,774.37 (122,815.45) . 8,984,060 43.1% 211 1,046,258 3.20% 0.4310 450,973.10 287,839.49 (163,133.61) 8,820,927 43.1% 212 1,046,258 3.20% 0.4310 450,973.10 282,612.87 (168,360.53) 0 8,652,566 43.1 213 1,046,258 3.20% 0.4310 450,973.10 277,218.79 (173,734.31) 8,478,812 43.1% 214 1,138,074 3.20% 0.4310 490,549.28 271,651.89 (218,897.39) 8,259,915 43.1% 215 1,138,074 3.20X 0.4310 490,549.28 264,638.66 (225,910.63) 0 8,034,004 43.1% 216 1,138,074 3.20X 0.4310 490,549.28 257,400.73 (233,148.56) 7,800,855 43.1% 217 1,237,949 3.20% 0.4310 533,598.57 249,930.90 (283,667.66) 7,517,188 43.1% 218 1,237,949 3.202 0.4310 533,598.57 240,842.50 (292,756.07) 0 7,224,432 43.1% 219 1,237,949 3.Z0% 0.4310 533,598.57 231,462.92 (302,135.65) 6,922,296 43.1%
Preparedfor the WortdBank by Peter L. Doty an 22-May-92 Page4 ANNEX I -109- Page 6 of 6
POLAHOR2.WKI DUALINDEX MORTGAGE CREOITS MOTHLY AMORTIZATION- 45.45 N2, IMF 401, GRANT0X, OPHT2sx
45.45 M2. INF 401, GRANT0X, OPNT251 MTHLY AMORTIZATIONTABLE CAPITALIZATIONINTEREST
No Avg. Int. No. Cash In Ant. nes. Index. Bet. X put. # 9 rate AMW (out) Int. (pon) prlnr. prlnr AMY ...... 220 1,346,58 3.20x 0.4310 580,425.74 221,72.82 (358,642.92) 6,s53,653 43.1X 221 1,346,588 3.20 0.4310 580,425.74 210,292.29 (370,133.45) 0 6,193,520 43.11 222 1,346,588 3.20 0.4310 580,425.74 196,433.62 (381,992.12) 5,811,528 43.11 223 1,464,761 3.201 0.4310 631,362.34 186,195.ol S445,167.33) 5,366,360 43.11 224 1,464,761 3.201 0.4310 631,362.34 171,932.33 (459,430.01) 0 4,506,930 43.11 22s 1,464,761 3.201 0.4310 631,362.34 157,212.69 (474,149.65) 4,432,781 43.11 226 1,593,304 3.20z 0.4310 686,769.00 142,021.46 (544,747.54) 3,888,033 43.1X 227 1,593,304 3.201 0.4310 686,769.00 124,568.34 (562,200."6) 0 3,325,832 43.1X 228 1,593,304 3.201 0.4310 686,769.00 106,556.04 (580,212.95) 2,745,619 43.11 229 1,733,128 3.20x 0.4310 747,038.00 87,966.6s (659,071.34) 2,086,548 43.11 230 1.733,128 3.20x 0.4310 747,038.00 66,850.72 (680,187.27) 0 1,406,361 43.1X 231 1,733.128 3.20x 0.4310 747,038.00 45,038.27 (701,979.73) 704,381 43.11 232 1,885,223 3.20% 0.3856 726,948.65 22,567.60 (704.381.05) 0 38.61 233- 1,885,223 3.201 0.0000 0.00 0.00 0.00 0 0 0.01
Preparedfor the World Bankby Peter L. Doty on 22-May-92 Page5 -110- ANNEX J Page 1 of 9
PROJEC PROFES
The followingdescriptions provide information on ten projectswhich have been submitted to the HousingFinance Project Office(HEPO). As of the end of November, 1991,the HFPO has received over 50 complete loan applications,with total project costs of approximatelyS 270 millionfor the constructionof morethan 9000 units. Another 10 partial loan applicationshave been submitted.Project applicatons have been submittedduring quite a long period starting in 1990.That is why detailedfinaneial information(i.e. total project cost, cost per square meter and so on) should be treated cautiously.But statisticaland physicaldata are still useful.Projects have beenevaluated and listedaccording to ratioof the estimatedfinal price per one squaremeter to the averagemarket price per one squaremeter of an apartmentin the similararea . Folowing are'descriptions of some exemplary projects.
Siedlce- M1ynarskaHousing Complex Siedlce,a town of approximately75,000 personsin easternPoland, is preparinga project whichwill dramaticallyalter currentland use and increasepopulation densities. Like many Polish towns, Siedlce's urban landscapeis characterizedby huge high-riseblock buildings sitting on large land parcels, with the wide servicedsetbacks between the buildingsand streetsleft completelyvacant. In Siedlce, the municipalityproposes to build new in-fill low-rise 4-story buildingswith commercialareas on the groundfloor, using fully servicedland on the northem border of an existing high-rise housingdevelopment "Mlynarska". The initial design calls for the constructionof 108 units on a 1.6-hectareproject site, with totalproject costs estimatedat US$ 1.783million. Architecturally,the design will revitalizethe old Starowiejskastreet and form a new street facadewith commercialspaces. The constructionof the first buildingwas startedin the fall of 1991 and the secondfloor level has been built beforethe winter, costing approximately US$ 80,000in municipalresources. The cost of constructionat Zl 2.6 millionzl per m2 of usable area seems to be moderate. The first buildingshould be completedby November 1992 whenthe mortgagecredit will be expected. The SiedlceMunicipality is in closecontact with the HFPOand wiWingto cooperateon an as needed-basisto complete success- fully the Mlynarska Project and continue the cooperationby next projects. Total number of units: 108 Total numberof hectares: 1.6 Total project costs: $1.783 million Averge per unitcost: $16,510
1 - 1 1 1 - ANNEX J Gdynia Page 2 of 9
Gdynia, a principal port town on the northern Balticcoast withjust over 252,000 inhabitants, has proposed three projects for review which are described separately below.
Gdynia #1 - Redlowo Zielona: The municipalityowns a 5.6-hectarebuilding lot in the center of town which is already servicedby primaryinfrastructure. A major thoroughfareabuts the site, and the site itself is divided by an existingroad into 2-hectareand 3.7-hectare segments, but both parts will be developed simultaneously. Through competitivebidding, the city has chosen a private architectural firm to act as developers, and they are currently negotiating the terms for selling or leasing the land to the project. The design calls for the construction of 4- and 5-story residential buildings, with road frontage buildings having ground floor commercial areas. Many of the residential buildings will have inner courtyards. Approximately500 new units will be constructed. The units will be sold at market prices which will include cost recovery of infrastructure and land. The total project cost is currently estimated at $19.1 million.
Total number of units: 496 Total number of hectares: 5.6 Total project costs: $19.1 million Average per unit cost: $27,746
dyz"a #2 - Cechowa (Posejdon Cooperative): In 1989, one of Gdynia's smaller cooperatives, Posejdon, purchased 6.2 hectaresat marketprices and commencedconstruction on the first 24 rowhouses of a planned 127 units. The property is served by primary infrastructure, but its topography prevents full use of the property for residential purposes.The cooperative is requesting financingto build 99 rowhouses. The site plan and architectural drawinigshave been prepared, first 24 units shouldhave walls and roofs finished till the end of March 1992.
Total number of units: 9 Total number of hectares: 0.08 Total project costs: $0.6 million Average per unit cost: $42,201
Gdynia #3 - Orlowo: The local developer, Novum/CIC, proposed a project of a small housing complex, for 17 units in rowhouses(10 units), small multi-familybuilding (6 units) and one single family building. The design as well as the constructionprocess is supposed to be conducted by a Danish Group, "Green Way", and should result in a attractive, high quality, low energy consumption, long lasting and easily maintained.
The project site is well chosen as far as ecologicalconditions are concerned, surrounded by existing single family houses and with old trees on the lot. Of course, the final cost of the unit will be much higher than the Polish standard one; according to the latest information providedby the developer it should not exceed US$ 750 ANNEX J -112- Page 3 of 9 per m2 of usable area (US$ 500 per m2 of usable --ea for construction, infrastructure and design).
Total number of units: 17 Total number of hectares: 0.55 Total project costs: $1.3 million Average per unit cost: $76,000
Czastochowa- John Paul II
Czestochowa is a light industrial city in south central Poland with a population of under 300,000. Czestochowa is also Poland's religious center since it serves as the home for the famous Black Madonna. The city intends to act as the developer in this project, while the contractor will be selected through competitive bidding. The city proposes to construct four 4- and 5-story apartment buildings which will take up a full square block in the city's center. A total of 141 units will be constructed. Provision has been made for commercial space, as well as above- and below-grade parldng. The land is owned by the city, but small garden plots have been established on the property, and the city may be required to pay compensationto the users before construction can begin. As with many projects in Poland, real estate ownership records also need to be updated.
Total number of units: 141 Total number of hectares: 1.24 Total project costs: $2.6 million Average per unit cost: $14,160
Nowy Sacz - Zawada I and II
Nowy Sacz is a town in southern Poland with a populationof 75,000 at the foothills of the Carpathian Mountains. There is some light industry in the town, primarily ceramics and food processing. However, due to its picturesque location and proximity to health resorts, development in Nowy S4cz will continue along the lines of tourism.
Two housingprojects have been submitted by a private company, Homol, which is the owner of the adjacent properties on which the projects will be constructed. Architectural drawings have been prepared for both projects. Work on Zawada II will be started first, and will result in 203 units in a mixture of multi-story flats and rowhouses. The project is being built in conjunction with the Smreld Cooperative. Zawada I is more of a commercial development, and currently Homol is preparing a marketingbrochure. Zawada I consists of 92 rowhouses. Total project costs for both costs are estimated at just over US$ 10 million. In the fall, 1991, the construction of the first building in Zawada I has been started using company resources. The company will need short-term credit in March-April 1992 to complete the first building by the fall, 1992.
3 -113- ANNEXJ ZawadaI Page 4 of 9 Total numberof units: 92 Total numberof hectares: 3.81 Total projectcosts: $3.9 million Averageper unit cost: $30,427 ZawadaII Total numberof units: 203 Total numberof hectares: 4.60 Total projectcosts: $6.2 million Averageper unitcost: $22,318
Katowice - Stary Dwdr
Katowice,the old center of miningand steel industry,is the greatestpart of the large urban area inhabitedby more than 2 millionpeople. As the result of the Local HousingStrategy, the city proposesconstructing the "Stary Dw6r" (Old ManorHouse) project: a large (20.07 hectares)housing development in the best possibleecological location in Katowicenamed Bryn6w. A privatedeveloper, Polcon Ltd, will organizethe wholeinvestment process.
In the proposedhousing complex 446 units have been designed:410 apartmentsin multi- storey buildingsand 36 units in one-familyhouses. Commercialareas have been designed in the multi-storeybuildings. Buildingshave very good DEF (DesignEfficiency Factor), with relatively limited circulationand service areas. Constructionwill use traditional buildingtechnologies. Pursuant to HFPOguidelines, the developmenthas been divided into stages as far as constructionprocess and infrastructuresupply is concerned. Total numberof units: 446 Total numberof hectares: 20.07 Total projectcosts: $10.000million Averageper unitcost: $20,850
Krakow - ZSM Cooperative (Projects ABC & G) Krak6w, the country's cultural center in the south with over 700,000 inhabitants, has proposeda project which representsa transitionwithin the cooperativesector to a market- oriented system. One of the city's larger cooperativesis irnthe processof assembling9.25 hectares for new housingconstruction. This land is privately-ownedand close to nearby infrastructure,and the cooperativeis purchasingit at marketprice. The land itself is being divided into sevensmaller areas, for sevensub-groups on the cooperative'swaiting list, and these areas will be designedand constructedthrough competitive bidding. A total of 514 units are planned. The units will be sold at market prices with first priority given to cooperativemembers, but if there is insufficientdemand for themby cooperativemembers, then they will be offered to the communityat large. The final sellingprice of the units will
4 -114- ANNEX J Page 5 of 9 include land, construction, project development and infrastructure costs. The project will receive no municipal subsidies.
ZSM Cooperative has applied to the HFPO for financingthe first phase of this development. In this phase, 217 units will be built with total project costs estimated at $4.3 million.
Total number of units: 217 Total number of hectares: 1.54 Total project costs: $4.3 million Average cost per unit: $17,589
Krakdw - Inwestprojekt, gwiqtokrzyska Street
Cooperative for Investments and Designs "Inwestprojekt"in Krak6w, acting as an investment manager on behalf of "Piast" Housing Cooperative, proposes a design for an in-fill building, located in the quarter Krowodrza some 5 Idlometers from the city center on a building lot of .2 hectares. In this 5-storey building there will be 16 apartments with net usable area of 882.2 m2 and 334.5 m2 of commercial area on the ground floor. There is full existing infrastructure accessibility, as well as social services. According to latest information, working drawings have been finished, some contractors have submitted their offers (ZL 3.0- 3.5 million per rn2 of NUA), and initial negotiationswith PKO State Bank have been started. The project is ready for the spring 1992 construction season.
Total number of units: 16 Total number of hectares: 0.2 Total project costs: $390,000 Average per unit cost: $16,213
Opole - Habitat
Opole is a voivodship town in southwest Poland with 130,000 inhabitants. On the eastern outskirts of the city, near the road to Czestochowa and close to a hospital under construction, the local medical personnel have organized the Medyk Housing Cooperative and obtained a building site for housing development. The project's investment manager is a private firm, "Habitat". The proposed design is very interesting both from architectural and financial point of view. It is a classical low-rise high-densitycomplex, with rowhouses and duplexes. Advanced technology of construction (in-situ RC bearing wails, sandwich type light exterior walls) results in low-cost and relatively fast construction. Before the final approval of the project, off-site infrastructure supply must be checkedvery thoroughly, as some municipality participation in financing of it is concerned.
Total number of units: 221 Total number of hectares: 0.9 Total project costs: $6.087 million Average cost per unit: $27,150
5 -115- ANNEX J Wolin - Wineta Cooperative Page 6 of 9
Wolin, a town of approximately 5,000 inhabitants, is located on the Wolin Island. A local housing cooperative has a very attractive location, the site of 0,87 hectares in the center of the city which is near an international road, 26 kIlometers from ferryboats to Sweden and Denmark and 40 Idlometers from the airport Goleni6w. For this site, the Wineta Cooperative has submitted the proposal to build 69 apartments in 3-storey buildings, with additional flats on the roof and a large commercial space in the ground floor. The first project has been made for RC panel technologyand has been heavily criticized by HFPO architects both of economical and aesthetic reasons. The new project is now under preparation, using RC frame and light sandwich walls. Some preparation works were started in the fall, 1991; namely, water and electricity installationshave been finished. The cooperative is in contact with HFPO, and a new applicationis expected-to be submitted.
Total number of units: 69 Total number of hectares: 0,87 Total project costs: $1,445 million Average per unit cost: $17.951
Warszawa - Fabryczna
One of largest Warsaw Cooperatives, Sr6dmiejska Sp6ldzielniaMieszkaniowa ("City Center Cooperative"), owns many multi-storey buildings constructed in the central area of Warsaw in 1960s and 1970s. In some cases there are possibilitiesfor new infills or semi-infills (new free-standing buildings in the existing neighborhoods). That is the case of the Fabryczna Project which is located on a rather quiet corner lot where SSM proposed a new building with 55 flats. The project's total net usable area will be 3,900 m2 with an underground garage for 34 cars and ground floor and second floor commercial areas. The design and construction wUI be conducted by HBB Joint Venture Ltd., offering advanced housing technology: in-situ concrete frame in the garage. The costs are reasonable; infrastructure already exists on the site; and the land belongs to the cooperadve. Apartments'are large, but SSM has a huge stock of small apartments with relatively wealthy members waiting for bigger ones. The average unit size is 71 m2 of usable area. Some suggestions concerning particular solutions in the design have been made already by the HFPO's Architect.
Total number of units: 55 Total number of hectares: 0,29 Total project costs: $3.36 million Average per unit cost: $25.782
6 Project Pipeline at 31 Dec 91 17*Nar-92 - 116- XN: ANNEXJ Page 7 of 9 Poltnd Housing Finance Project Project Profiles - Gencrel Dat
Prolect ame City Total Number Average Estimated Estfmated Nurwr of Area Oensity project of usable cost per cost per inhabitants(heetares)per hectare cost units area unit /1 unit /1 tS) Cw2) (ZO (S)
I Arka Lindleya Lodz S1,594,615 76 57.2 179,992,138 S18,947 266 0.65 409.2 2 TKP Lindley. Lodz S1166,149 60 57.2 161,375,586 S16,987 210 0.61 344.3 3 TKP Lisclista Lodz S4,291,727 210 49.7 167,551,066 S17,637 790 1.22 647.5 4 Polesfe1 Lodz 53,091,008 152 51.7 173,289,636 $18,241 546 1.34 407.5 S Potesi 2 Lolz S994,664 50 50.3 169,520,586 $17,844 177 0.44 402.3 6 Zelelnic Torun S9,359,987 456 53.3 152,879,788 $16,093 1,394 5.32 262.0 7 Pod Sorem Skierniewice S10,035,726 453 81.5 174,683,663 S18,388 1,805 15.50 116.5 8 Cachowa Gdynia 54,203,112 99 126.9 229,494,161 S24,157 490 4.96 98.8 9 Mlynarska Siedlce S2,201,958 108 92.8 139,069,959 S14,639 .?M1.. 1.60 275.6 10 Warazawska11 Siedtce S2,491,609 87 100.5 211,944,281 S22,310 110 1.04 490.4 11 Folwarczna Gdynlea $694,do9 17 101.3 262,270,325 $27,607 55 , 0.55 100.0 12 orlawo Gdynfa $588,853 9 97.8 400,910,751 542,201 39 0.08 462.1 13 ProjectABC Krakow 54,312,681 217 75.0 167,091,546 $17,589 885 1.54 573.6 14 ProjectG Krakow 5807,321 38 77.4 179,225,262 S18,866 170 0.50 341.4 15 John Paul 11 Czestochowa 52,565,994 141 91.3 134,522,701 S14,160 564 1.24 455.0 16 Zoliborz Warszawa S2,475,069 58 69.0 301,211,630 S31,706 216 0.46 469.6 17 Stary Fordon I Bydgoszcz 518,506,582 360 125.0 482,507,708 S50,790 1,440 5.76 250.0 18 Stary Fordon2 Bydgosacz S1,296,529 50 63.5 197,294,106 120,768. 180 0.40 450.0 19 Stary Fordon3 Bydgoszcz 57,006,982 300 63.3 172,584,292 518,167 1,080 2.50 432.0 20 Piaski Bydgoszcz S16,565,441 500 80.4 244,870,3S6 525,776 1,800 l.00 180.0 21 FordonN Bydgoszcz S24,639,230 1000 62.8 182,295,807 S19,189 3,500 15.00 233.3 22 ProjectI Wroclaw 53,773,158 119 59.8 301,218,487 531,707 514 6.20 82.9 23 Projset2 Wractaw 512,016,737 385 53.3 273,739,901 528,815 1,418 13.14 107.9 24 Project3 Wroclaw S22,454,401 491 55.3 414,967,823 543,681 1,898 22.40 84.7 2S RedlowoZielanoa Gdynia 519,060,960 496 100.0 263,586,945 527,746 2,276 5.61 405.7 26 Zawada I Nowy Sacz 53,870,7n4 92 94.7 289,058,968 S30,427 394 3.81 103.4 27 Zawada 11 Nowy Sacz 56,164,109 203 72.1 212,024,103 522,318 732 4.60 159.1 28 MSM Lebork 5850,605 29 59.7 185,857,250 $19,564 101 0.11 899.4 29 Stary Dwor Katowice 511,742,096 4,.6 66.0 219,848,365 523,142 1,374 3.46 397.1 30 Queen Jadwiga Gizycko 53,776,679 178 45.0 1SS,204,527 516,337 629 2.38 264.3 31 Srod. Twortych Lodz S491,931 30 50.7 131,118,539 513,802 105 0.28 374.5 32 Swietokrzyska Krakow 5390,032 16 55.1 154,025,032 516,213 56 0.23 248.6 33 BlezanowI Krakow 51,120,502 52 60.3 152,486,302 516,051 200 0.95 211.2 34 Baezanow2 Krakow 51,165,731 60 60.9 161,114,703 516,959 235 1.10 212.8 35 Bfozanow 3 Krakow S1,102,959 51 62.2 176,956,787 518,627 206 0.96 214.6 36 Biezanow4 Krakow 5678,669 32 65.4 176,012,928 518,528 139 0.63 219.9 37 Sawickiej KlucWbork S2,288,9"3 111 63.6 147,516,295 515,528 423 1.27 333.1 38 Sojary I Bialystok 51,018,525 60 48.6 134,721,937 $14,181 180 0.29 629.4 39 Sojary 2 Bialystok 54,109,883 182 42.8 162,182,314 517,072 736 1.42 517.0 40 WlasnyDom Sialystok 51,338,632 32 136.5 358,063,031 $37,691 131 1.00 131.0 41 Habitat OpoLo 57,364,000 221 139.8 275,400,271 $28,9°0 1,060 5.30 200.1 42 Semafor W-wa Ulochy 54,994,316 67 138 621,046,922 565,373 409 3 136.3 43 SGN W-wa Urwynow 51,831,158 76 80.9 170,164,000 517,912 323 0.90 358.9 44 Animator Krzepice S830,7M3 42 58.2 148,454,881 S15,627 160 0.77 207.8 45 Limanowskfogo Ostrow 54,438,947 197 58.9 183,664,264 519,333 732 2.33 314.2 46 PrzybyszewskiefoLodz 51,114,186 36 81.1 202,580,737 S21,324 180 0.44 409.1 47 UstronnmCPert)Lodz 52,783,827 120 73.8 184,683,705 S19,440 470 1.02 460.8 48 Wineta Woin S1,673,800 69 62.5 170,533,571 517,951 261 0.87 300.0 49 Rozyck1ego Lodz 5484,942 26 57.6 156,990,783 S16,525 41 0.21 195.2 50 SN Kopernik KotLowo S9,530,523 161 93.9 383,529,575 S40,372 746 8.91 83.7 51 Lumel Zielona Gore $2,339,572 115 58.2 170,463,220 $17,943 395 1.02 387.3 52 Sikorskiego Glowno S2,434,603 140 53.6 142,241,690 514,973 450 1.32 340.9 53 Almebud Lodz-Andrespo S2,365,053 50 133.0 305,564,800 S32,165 340 3.00 113.3 54 Ptnoe S.A. Lodz-Liseiast S5,925,242 130 116.2 318,686,868 533,546 530 1.22 434.4 55 FabrycznaHBe Wdrrszaa 53,358,579 55 70.9 371,275,636 S39,082 176 0.29 606.9 56 S.M. Lipiany S861,053 44 64.3 159,881,818 S16,830 162 0.88 184.1 57 Praconicza S Jablonn $S1,325,323 66 67.0 176,267,951 518,555 274 0.44 622.7
Total nunber of projects: 57 Total projectcosts (S): S269,960,750 Total inha 35,014 Total nuiimr of units: 9,121 Total hect 172 Averageunit coot (Z): 281,178,284 Averagede 203 Averageunit cost (S): 29,598 Project Pipeline at 31 Dec 91 17-Nar-92 -117-
Poland Housing Finance Project ANNEX J Project Profiles FinancialSuary Page 8 of 9
Project Name City Totat Cost components: estimated Sourcemof financing: project Construction Land Infra- Prepar- Equfty Deposits HFP Other Cash Other bosat structure ation Credit loans floiw sources (Z bi nsa) Fund
Arks Lindleya Lodz 15.149 68.9X 19.3% 3.51 8.31 26.31 0.0X 42.2X 0.01 0.0% 31.51 TKP Lindleya Lodz 11.078 52.2% 24.81 9.3X 13.71 TKP 24.81 20.01 55.21 0.01 0.01 0.01 Lisc1asta Lodz 40.771 50.2% 13.5X 23.3X 13.0X 13.51 0.01 Polesie I Lodz 53.21 0.0% 0.01 33.31 29.365 69.31 20.51 6.91 3.31 20.61 10.01 69.41 0.0% Polesfe 2 Lodz 0.0X 0.0X 9.449 69.11 20.81 6.91 3.2% 20.7X 10.01 69.31 0.01 0.01 0.0X Zielenfec Torun 88.920 60.81 6.01 22.51 10.7X 27.91 Pod Sorm_ 0.01 65.31 0.01 0.01 6.81 Skferniewice 95.339 73.3X 4.9X 19.91 1.91 24.4X 6.31 cechowa Gdynia 56.01 0.01 13.41 0.0X 39.930 63.01 12.4% 17.21 7.41 20.01 0.0% 80.01 0.01 0.01 0.0o Nlynarsks Sledlca 20.919 74.01 11.01 10.01 5.01 Warizawska 100.0X 1I Siedlce 23.670 78.11 6.31 7.81 7.81 6.31 O.`X% Fotwarozna Gdynia 73.7X 0.01 0.01 20.01 6.596 59.81 16.71 8.11 15.41 2.01 0.0% 64.81 Orlowo Gdynia 0.01 33.21 0.01 5.594 80.0X 4.3X 9.21 6.51 11.81 0.01 67.81 12.51 0.01 7.9X Project ABC Krakow 40.970 85.31 7.51 2.31 4.91 30.01 0.01 65.01 Project G Krakow 0.01 5.01 0.01 7.670 79.31 13.0X 2.91 4.81 30.01 0.01 56.21 0.01 13.81 0.01 John Paul II Czestochowa 24.377 82.81 5.51 7.11 4.61 ZoLiborz 34.31 0.01 51.11 0.01 14.61 0.01 Warszawa 23.513 78.81 6.81 5.31 9.11 8.81 0.01 Stary Fordon 1 Bydgoszcz 91.21 0.0X 0.01 0.01 175.813 85.81 4.9X 4.51 4.81 20.01 6.21 73.8% Stary Fordon 2 Bydgoszcz 0.01 0.01 0.01 12.317 75.31 4.9X 15.1X 4.8X 24.51 0.01 75.51 0.01 0.0% 0.01 Stary Fordon 3 Bydgoszcz 66.566 85.91 5.61 3.71 4.81 Piaski 20.0% 6.01 74.01 0.01 0.01 0.01 Bydgoszcz 157.372 72.41 9.51 11.51 6.61 20.0% 6.91 73.11 FordonN Bydgoszcz 0 0X 0.01 0.0% 234.073 80.91 9.61 2.91 6.6X 19.71 7.2% 73.11 0.01 0.01 0.01 ProjectI Wroclaw 35.845 56.51 10.31 29.21 4.01 49.2% 13.21 Project 12.41 0.01 25.21 0.01 2 Uroclaw 114.159 53.31 11.51 31.2% 4.01 50.6a 12.31 12.61 Project3 Wroclaw 0.01 24.51 0.01 213.317 49.01 14.01 33.01 4.01 52.0% 10.5X 13.21 0.01 24.31 0.01 RedlowoZiolon&Gdynia t81.0T 85.01 6.21 3.61 5.21 12.51 Zawada 65.0% 0.5X 0.01 0.01 22.01 I Nowy Sacz 36.772 77.91 6.2X 13.21 2.71 26.41 0.01 64.51 0.01 Zawads It Nowy Sacz 0.01 9.11 58.559 80.11 4.71 5.9% 6.31 21.81 0.01 69.11 0.01 0.01 9.21 MSM Lebork 8.081 81.01 3.51 10.11 5.41 32.11 0.01 StaryOwor 67.91 0.0X 0.01 0.01 Katowice 111.550 68.61 4.71 19.71 7.01 7.01 25.11 48.5X Queen Jadwfga Gizycko 0.01 0.01 19.41 35.878 78.0% 10.01 10.0X 2.01 NA NA NA NA NA MA Srod.Twortych Loaz 4.673 63.61 0.61 20.31 15.61 0.61 SwietokrzYska 19.5X 79.91 0.01 0.01 0.01 Krakow 3.705 79.41 9.11 6.81 4.CX 30.01 0.0, 48.6X BiezanowI Krakow 0.01 21.41 0.01 10.645 71.01 7.11 8.8X 13.1% 36.11 0.01 63.91 0.01 0.0X 0.01 Biezanow2 Krakow 11.074 70.51 8.01 8.51 13.01 36.8% 8iezanot 0.0X 63.2% 0.01 0.0% 0.01 3 Krakow 10.478 70.51 7.31 9.21 13.01 35.11 0.01 64.91 0.01 Biezanow4 Krakow 0.01 0.01 6.447 68.51 7.81 10.61 13.11 38.0% 0.0X 62.01 0.01 0.01 0.01 SawlckieJ Kluczbork 21.745 64.01 15.81 19.61 0.61 NA sojary NA NA NA NA NA I Bialystok 9.676 81.81 3.01 9.11 6.11 NA NA NA Sojary NA NA NA 2 Bialystok 39.044 82.61 5.51 5.81 6.11 NA NA NA Utasny Dom Bialystok NA NA NA 12.717 85.01 8.01 4.01 3.01 K. NA , NA Nabitat Opole NA NA MA 69.958 74.0X 3.01 19.01 4.0X NA NA NA NA NA NA Semafor W-wa Wlochy 47.446 74.11 12.81 9.81 3.3X SGH U-wa Ursynow 17.396 Animator Krzepice 7.893 86.4X 1.51 9.11 3.01 25.01 0.01 37.01 35.01 0.01. 3.01 LimanowskifgoOstrow 42.170 75.41 8.31 10.41 5.91 8.31 PrzybyszewskiegLodz 0.01 76.11 0.01 0.01 15.61 10.585 76.51 2.21 11.11 10.2X 0.01 0.01 70.01 0.01 0.01 UstronnaCPeri)Lodz 30.01 26.446 87.51 3.81 2.81 5.9X 3.81 0.01 40.71 0.01 55.51 Wineta Wolin 15.901 91.01 0.21 3.01 5.81 5.51 0.01 Rozyckiego 64.11 0.11 22.91 7.41 Lodz 4.607 72.81 2.51 12.01 12.71 0.01 0.01 70.01 0.01 SR Kopernik Kotlowo 0.01 30.01 90.540 80.01 1.11 12.31 6.61 NA NA NA NA Li.uel Zietona Cors 22.226 81.41 4.61 12.61 1.41 1.41 0.01 Sikorskiego 98.61 0.01 0.01 0.01 GIowno 23.129 89.41 0.61 7.7X 2.31 0.61 0.01 69.41 0.01 Atmabud Lodz-Andrespo 0.01 22.468 86.51 8.71 4.51 0.41 30.01 o.01 70.01 0.01 0.01 Polnoc S.A. Lodz-Lisfeist 56.290 94.51 1.61 0.01 3.81 S;.6 20.71 71.01 0.01 FabrycznaHBO Warszawa 31.907 2.71 S.M. Lipiany 8.180 88.4X 1.2X 7.3X 3.11 Pracownicza 20.01 O.OZ 80.0X 0.01 0.0 0.0 S Jablonna 12.591 90.4X 4.1X 4.8X 0.6a 47.0X 0.0 47.11 0.0 0.01 5.9X
Total project costs (Z billions): 2,564.6 AveragepercentaConstruction 72.71 Land 7.51 Infrastructure 10.31 Project preparation 6.11 ProJect pptine at 31 DOc91 17-Mar-92 -118- ANNEX J ;oland Hoaing FinanceProject Page 9 of 9 Project Profiles - TechnicatSumary
Project Nam City Per Q2 Total buflt Of which, percentagefor: Ratio of construction aroa lIed to coast (it) /1 2) Units CommonService Cormercle Garages built area area area pce
Arks Lindleya Lodi 1,626,000 6.o49 76.4X 13.9X 2.3X 0.01 7.4X 1.01 TKP Lindleya Lodz 1,000.000 S 779 69.2X 18.2X 12.72 0.02 0.02 1.06 TKP Lifzlasta Lodz 1,000.000 20,448 79.22 7.12 13.6X 0.02 0.01 0.60 Polesie 1 Lodz 1,786,000 11,397 78.62 11.12 10.32 0.01 0.0 1.18 Polesie 2 Lodz 1.7860000 3,654 78.62 11.12 10.3X 0.02 0.0 1.20 Zieleniec Torun 1,500,000 35.304 70.9X 7.51 19.62 2.12 O.O1 1.51 Pod Boram Skiernlewice 1,400,000 50,806 83.01 0.01 0.02 4.62 12.41 3.05 Cechowa Gdynia 980,000 25,635 52.22 4.72 16.52 21.82 4.8X 1.93 Mtynarska Siedlca 996,000 15,632 64.02 7.82 18.02 9.81 0.01 1.02 Warszawska 11 Siedlce 1,536,254 12,227 71.52 6.42 18.12 4.02 lO. 0.85 folwarczna Gdynia 1,500,000 2,630 66.5 1.1 24.02 0.02 8.41 2.09 Orloto Gdynia 2,000,000 1,642 57.22 7.31 4.82 20.31 10.41 . 0.51 Project ABC Krakow 1,507,620 22,346 72.31 16.22 6.22 5.31 0.01 0.69 Project G Krakow 1,507,620 4,034 3.02 15.8 11.21 O.OX 0.01 1.23 John Paul It Czestochowa 1,160,200 18,848 68.31 9.62 2.32 2.21 16.92 O.66 Zolibor: Warsz:. 3,000,000 6,371 62.82 11.51 9.12 11.91 4.7X 0.72 Stary Fordon 1 Bydgoszcz 1.800,000 83,800 98.8 0.01 0.0 1.22 0.01 0.69 Stary Fordan 2 Bydgoszcz 1,800,000 5,150 70.91 9.22 20.02 0.01 0.01 0.78 Stary Fordon 3 Bydgoszcz 1,800,000 31,770 68.72 9.11 22.22 0.02 0.01 0.79 Piaskf Bydgoszcz 1,800,000 65.179 70.11 7.7% 13.41 1.62 7.32 1.53 FordonN Bydgoszcz 1,800,000 105,050 68.7X 9.2X 19.42 2.72 0.01 1.43 Project1 Wrocla 1,650,000 12,280 100.02 0.01 0.02 0.02 O.OX 5.05 Project2 Uroclaw 1500,000 40,617 90.31 2.01 7.72 0.02 0.02 3.24 Project 3 Wroclaw 1,500,000 52,172 94.41 1.22 4.52 0.01 O.O2 4.29 Redltwo ZielonaGdynfa . 1.589,580 96,793 61.72 10.52 4.92 8.81 14.11 0.58 Zawada I Now Sacz 1,522,582 18,823 72.31 0.01 17.62 1.22 7.52 2.02 Zawada 11 Now Sacz 1,643,622 29,607 67.12 6.41 8.52 3.52 5.12 1.55 iSH Lebork 1,587,430 3,524 59.02 7.72 16.31 17.02 0.02 0.32 Stary Owar Katowico 1,930.000 42,506 82.12 .5.81 4.62 4.51 2.91 0.81 ?ueen Jadwiga Gizycko 1,700,000 16,474 68.01 9.01 20.02 3.OX 0.0 1.44 Srod. TworzychLodz 1,100,000 2.701 81.42 2.82 15.81 0.02 0.01 1.04 SwietokrzyskaKrakow 1,500,000 1,961 58.22 8.42 16.42 17.11 0.02 T.15 Biezanow1 Krakow 1,300,000 5,814 63.61 10.92 25.51 0.02 0.01 1.63 Bfezanow2 Krakow 1,300,000 6,005 71.82 15.52 12.72 0.02 0.02 1.84 Biezarow 3 Krakow 1,300,000 5,679 65.92 20.2X 12.52 1.41 0.02 1.69 Blezauw 4 Krakow 1,300,000 3,399 72.72 14.71 12.61 0.02 O.O1 1.86 Sawickiej Kluczbork 1,860,000 12,780 55.31 20.01 17.12 4.02 3.61 O.99 Bojary 1 810lystok 1,700,000 4,658 74.7X 8.8 16.52 0.0 0.02 0.61 Bojary 2 Bialystok 1,700,000 19,550 64.22 11.42 12.92 7.21 OOX 0.73 Wlasny Dom Bialystok 1,900,000 5,669 90.12 0.02 0.02 0.02 9.92 1.76 Habitat Opole 1,090,7Z0 47,446 77.02 10.01 13.0X 0.01 0.01 1.12 Semfor -wa UtLachy 2,400,000 15,579 87.72 0.01 0.01 5.82 6.52 1.93 SCH W-wa Ursynow 2,600,000 9,226 MA MA 0.01 MA 0.01 0.98 Animator Krzoepice 1,504,000 4,850 68.01 ll.O 14.01 0.01 7.0 1.59 LlmanowskiegoOstrow 1,600.594 19,412 75.72 10.12 10.52 3.7X 0.0 1.20 PrzybyszewskiegLodz 1,400,000 5,867 56.32 12.62 21.41 0.02 9.81 0.75 'istromoa(Peri)Lodz 1,752,856 11,577 77.02 6.82 9.62 6.81 0.01 0.88 Uineta Wolin 1,985,000 6,520 71.02 3.01 7.02 20.02 0.02 1.33 Rozyckiego Lodz 1,400,000 2,396 74.92 13.7X 11.41 0.02 0.01 0.88 SI Kopernik Kotlowo 2,760,000 28,669 64.0 4.22 10.52 18.02 3.31 3.11 LuMOL ZielonaGora 1,709,000 10,591 77.62 10.62 12.72 0.02 0.01 0.96 Slkorsklego Gltomo 1,540,000 12,180 73.41 12.72 13.91 0.02 0.01 1.08 Atmsbud Lodz-Andrespo 1,682,000 11,791 68.02 0.01 24.0X ALM 8.01 2.54 Polnoc S.A. Lodz-Lfsciast 2,000,000 26,890 67.1 6.SX 13.21 4.52 8.72 0.45 FabrycznaHUB Warszwi 2,700,000 7,038 64.01 20.02 15.02 0.41 S.M. Lipiany 2,030,000 4,032 75.01 11.02 14.02 0.01 O.OX 2.18 PracowniczaSM Jablonn 1,490,000 7,692 81.01 11.41 4.52 3.02 0.01 0.57
Average 2 cost of construction cZ): 1,658,116 Total built area(2) 1,146 918 Averagebuilt area folowing units 71.1X Cron area 8.11 Service are 11.6 Co mercealspace 4.22 Garage. 3.0X Averageratio of tand to built area: 1.39 -1 19- ANNEX K Page 1 of 8
ANALYSISOF PROJECT COSTS
Def initionz
1. Built-Up Area (BUA): the groos floor area of the unit, including that of external and partition walls plum a prorated share of the common areas (external corridors, hallways, staircases, main entrances, common storage areas, water storage and mechanical areas etc.). The area of garage. and comuercial spaces La excluded from the total becauso this area should be sold separately.
Usable Floor Area (UFA). The usable floor area of a dwelling: kitchen, bathroom, bodroom(o), living room, dining room, entry hall, corridor and balconies.
Desian Efficiency Factor (DEFIs the ratio between the gross built-up floor area and the net usable area of the unit (acceptablerange 1.30-1.50).
Foreion Exchanae Component (FEC): the percentageof constructioncosts which involveo direct or indirect expendituresof foreign exchange (para 8 below).
Direct and Indirect ConstructionCosts
2. Discussionswith Polish engineers, architects,and developers as well as the analysis of the cost estimate prepared for a specific building by an Lndependentengineering firm (Kluczbork-Building A) led to the following breakdown of construction costs:
Labor Materials Equipment 19% 78% 3%
These cost components are affected by general and indirect costs (koQztv ocolne). The value of labor and equipment should be increased by 100% (in Polish practice these general costs vary from 80 to 120%) and the value of materials by 17%. After the addition of indirect costs the new breakdown of constructioncosto would be:
Labor and Equipment Materials 31.5% 68.5%
3. The indirect costs that affect labor and equipment include the administrativeand technical costs of the enterprise, depreciationof equipment, small tools for workers and in some cases transportationand breakfast for the workers. The indirect costs on materials ares transportation, storage and losses. -120- ANNEX K Page 2 of 8
Zstimating Cost per m2 of total and usable area
4. The following sources were conuidered to evaluate the cost per m2:
a) The averave cost of 45 sample projects presented to the HFPO (see table 2). It should be observed that the average DEF of the sample (1.50) is on the high side. The HFPO has already contacted the interested institutionsand developers to request revisions in designs in order to improve the DEF.
b) A selection of the above projects consideringonly these more efficiently designed (projectswith a DEF lower than 1.5) and eliminating projects with clearly distorted constructionprices (Table 3). The average DEF (1.36) is quite acceptable.
c) A table of constructioncost estimates table published by Bistyp office in March 1991. The costs were updated to May 1991, the indirect costs reduced to 100% and the basic price increasedby 16% because electricity %nd plumbing costs had not been considered in the table.
d) The cost estimate drawn by an independentengineering firm for a similar building.2
e) The cost of the same building as presented by the Kluczbork Coop.
f) Conversationsheld with private developers in Poland.
Table2 a based on Table 1 and updats to May 31, 1991the costs of constructIon,land, lnfastructure and design, expressedin USS. It was assumedthat the costs of tho projectpresented In Table 1 were based on the constructionprices of the quarterending before of the date of presentation. Whenthe last quarter ends In the month Immediatelybefore the month of the project presention the correction factoris referredto the quarterbefore the last one. The resulting correctionfactors are as follows:
Prolect PentdQffaxtr Ending factor
May 91 March 91 1,0144 April 91 DOecember 90 1,0365 March 91 December 90 1,0365 Januay 91 September 90 1,0518 December 90 September 90 1,0518 November 90 September 90 10518 October 90 June 90 1,0675 July 90 March 90 1,0833 June 90 March 90 1,0833 May 90 March 90 1,0833 March 0 Docember 89 10994
TheKJuczbor* building was chosen because It /a similar to the Bistyp building. Both are ffve floors buildings, the difference of their usable area is 11%and the relation between the useful area and the volume of the building Is 1.25In Kuczborikand 1.20In Bistyp. -121- ANNEXK Page 3 of 8
Findinaa
S. The constructioncouts estimates are presented as follows (hereinafter all costs in US$)t
Bistyp Kluczbork Kluczbork Table 2 Table 3 eng. firm coop
201.28 211.66 202.94 184.89 193.80
The average estimate of all costs is $198.91 and the average of Bistyp and Kluczbork costs is $205.29. For the purpose of the Housing Project, the average construction cost per m2 of total built-up area has been assumed to be equivalent to US$205 including a 1S percent contractor's profit.
6. Contractor's Prices: Assuming a construction period 3 of 15 months and financing cost of 13 percent per annum the costs of residential construction would be:
On May 31. 1991: x m2 of Gross Built Up Area x m2 of Net Usable Area including OH and profit $190.88 x 1.0825 = $206.62 $206.62 x 1.45 = $299.60
On January 1st. 1992 (assumingseven months of price inflation)
OH and profit $206.62 x 1.0515 - $217.26 $217.26 x 1.35 $S315.03
The contractor'scost of a two bedroom unit (m260 of usable area)4 would be:
$315 x m260 - $18,900 Contractor'sprice
7. Develpoer's Prices: To achieve a comprehensiveestimate of project costs the percentages of construction,land, infrastructure,design and supervision have been establishedconsidering the tables 2 and 3.
Table 2 Table 3 Adooted %
Construction 72.86 72.44 72.50 Land 9.72 11.17 11.00 Infrastructure 11.87 12.23 12.00 Design S.SS 4.16 4.50
As a result, the cost of land, infrastructureand design is 27.5% of the total cost. The cost of land varies with by the particular city and cooperative.
A constroctionperiod of 15 months was assumedfor 50%of the building costs, 12 months for 25%and 21 monts for 25%. Theflnancial cost factor mplqed (1,0825)Is an averagefactor for the assumption made.
Polish M3 category. The intemalarea distributionwas figured out as follows: kitchen m29.20;bathroom m24,80;bedroom m 212,00;bedroom m211, lvign-dining m'18,00; and corridor mr2,20. -122- ANNEX K Page 4 of 8
In the future, with a land market in place, this cost is expected to be higher. The design percentage (5.3% of constructionand infrastructurecosts) is in line with standard professionalpractice. If constructioncosts represent 72.5 percent of investment costs, and if we add about 3 percent for project administrationand marketing the total investment costs can be calculated by factoring the constructioncosts (the Contractor'sPrices above) by 1.32 (i.e. 100/75.5). The results are as followss
x m2 of Gross Built Up Area x m2 of Net Usable Area
On May 31. 1991 $190.88 x 1.32 - $251.96 $299-60 x 1.32 - 395.47
On January 1. 1991 $206.62 x 1.32 - $272.74 $315.00 x 1.32 - 415.84
The Developer's cost of the same 60 m2 unit would be on January 1, 1991:
$415.84 x m260 - $24,950 Developer Price
Foreian Exchanae Comoonent by constructioncomponent
8. The FEC % of a typical 5 floor building would be 38.50%. This result was based on the cost evaluation of the Kluczbork A building (Table 4).
TABLE 4 ESTIMATE OF THE FOREIGN EXCHANGE COMPONENT
Components Z1 % Foreign FEC %
Excavation 46184510.00 2 2.00 0.03 Foundations 163737247.00 6 40.00 2.28 Walls 786142882.00 27 30.00 8.22 R. Concrete 442620620.00 15 60.00 9.26 Roof/Ins 206928313.00 7 40.00 2.88 Floors 314460888.00 11 30.00 3.29 Carpentry 183030462.00 6 40.00 2.55 Hardware 95923365.00 3 50.00 1.67 Plaster 162010050.00 6 30.00 1.69 Painting 21116425.00 1 50.00 0.37 Facades 51332910.00 2 40.00 0.72 Elect/Plumb 395758027.00 14 40.00 5.52
Total 2869245699.52 100 38.48 TAULEI
Cly Nam d Tolan. Aea Cal Date Costs p o m2 US$1.00I9.500.00oa TOla 1006000 pjbo of eunms uubl. DEF pm2 TA Cends. % ol T. Land % oT. hblaa. %olT. Dolg. %dT. Tot an Or Rener' U1 alEon
Wacdaw 1 119 30-90 1.25 165000012190 173.7 50.6 32.0 10.4 90.0 29.3 11.$ 33 307.5 12290.0 0 1220 3.72 Wioclew 2 385 47-124 1.27 16800001290 173.7 66.0 33.7 I00 92.9 29.6 11.9 3.6 12.2 40017.0 0 40617 12J2 Waclaw 3 491 47-104 1.22 105000012190 173.7 60.6 47.0 13.7 110.0 32.0 132 36 343.9 60360.0 0 50230 17.32 Lodz Palbal 152 47-01 1.46 17380005*0 133.0 69.2 560 20.0 1U.9 7.0 .7 3.2 271.6 11332* 0 11332 S3O Lodz PoUstel2 60 47-61 1.46 17360006190 13.0 69.2 66.0 20.6 11.9 7.0 3.7 3.2 271.6 364.0 0 3654 0.9 Lodz AtlcaUad 70 52-62 t.38 1626000129o 171.2 6e.9 47.3 19.0 20.6 6.3 .9.4 3.8 248.4 U974.0 476 0449 1.6 Lodz TKPUni 6d 52-62 133 .191700011U1 201.3 67.6 60.0 10.7 . 36.7 11. 11.6 . 3a 299.0 s77. 0 6779 .73 Lodz TKPUso 210 38-74 1.63 i993960 119l 209.9 67.9 60.0 16.2 37.0 12.0 12.0 3.0 308.9 20443.0 0 20448 3.32 8h1dke Mlpya,a 108 58-0 1.40 16202004191 191.6 30.6 16.9 6.7 21.0 8.8 9.2 3.9 237.7 14092.4 0 14002.4 3.35 Gdph Oulwo 9 U4-110 1.30 2000000190 210.5 74.0 16.4 6.6 3.7 13.1 18.4 6.5 231.0 111o.o 467 115.0 3.25 Odpna Cechwmt 70 145-140 1.45 16200004191 170.6 62.5 60.7 13.6 3682 13.1 156. 6.7 272.6 113i.6 170 13C5.6 0.3 Gdpnl Cecow2 24 116-101 1.64 1620000 170.6 02.5 50.7 13.6 36J. 13.2 10.0 6.9 273.0 3311.0 0 2311 J0. Gdpda Red.21#1 490 1.63 1t8953802120 167.3 83.3 12.2 0.1 10.9 6.4 10.6 6.2 200.0 7482t.0 1331 3M54 17.73 Slamne PodEoY 463 63-92 1.25 140000012190 147.4 71.6 9. 4.7 44.7 21.7 4.0 1.9 205.7 42172 6232 43454 0O97 Caz.tech Jan P.1U 141 64-124 1.6 116020012180 122.1 83.7 7.45 6.1 9.6 6.0 6.68 4.0 145.0 15607 31t 16233 2.67 BaIpo B*op 00 34-3 1.6 17000001290 17m.9 31.3 6.46 3.0 19.9 0.1 13.35 0.1 218.7 4657.0 0 4667.0 1.02 BaYso ojasi 132 34-4 1.62 1700000122D 178.0 *2.0 11.6 6.3 12.29 5.7 1t.1U 6.1 215.9 13134 1415 10649 422 0alao Wlsnyd 121-157 1.3 190000012190 200.0 64.9 19.30 3.2 9.20 3.9 6.66 2.09 236.6 66 0 56 1.33 Teoun asZeI 456 40-73 1.41 1500000I1IWO 167.9 66.9 15.3 6.7 59.6 25.2 2.6 1.2 236.0 3409 0 3469 6.17 N.Sacz Zavadat 92 60-132 2.5 162263211W0 100.3 77.1 12.76 6.1 29.3 14.1 6.64 2.7 207* 17177 1416 1693 3.11 N.Sacz Zawad2a 42 33.5-47 1.45 184362111I00 173.0 *2.8 9.J 4.7 12.6 6.2 13.2 6.S 201.0 0 1563 11022 2.0 N.Sao Zawd.2b 76 602.2 1.2 1043621II10 173.0 32. 9. 4.7 t12A0 6.2 13.2 8.3 206.0 04to 0 0486 l.98 N.S8 z Zawad.2e O5 6o-22 1.65 1643621 173.0 82.6 90. 4.7 12.86 6.2 13.2 6.S 201.0 14740 0 14748 3.016 takow ABC 217 37-i4 1.64 161100012210 190.6 66.0 74.48 20.6 4.6 1.6 10.6t 3.3 20.2 21lU6 0 211f" 936 w K,akow a 36 5675 1.02 190000012D9 200.0 82.1 26.11 10.7 6.74 2.4 11.32 4.0 243.7 4034 0 4034 0.98 W-wa Zdlbo U 65384 1.66 3000000120 315.6 76.0 26.63 o6 21.67 6.4 30.4 6.2 400.4 6317 206. 681662 2.26 Kcatowe St.Dwot 446 46-110 1.3 116550002190 195.3 60.7 12.66 4.6 60.14 10.Q 19.f6 7.0 214.2 3a37 1240 40S67 11.63 olack K.Uadw. 170 47-110 1.2 17000003190 176.9 30.0 13.71 62 24.21 10.9 4.34 2* 221.2 16817 672 I7360 3.65 e.odz Sp.aedA 30 60-02 2.7 19o00o07U0 200.0 70.7 10.0 4.2 36.8O 14.1 12.92 5.0 200.7 270l 0 2701 0.7o IC*w kU_wr 16 36-70 1.76 16000001101 2S7.9 7n.4 1J.14 0.1 23.42 6.7 9.47 4.8 19.0 IO16 a 120 0.32 Kackow SIsanAl 52 34-73 IS 1300000110 130D. 70.7 13.72 7.1 17.65 9.1 26.23 13.0 193.4 5314 0 6ut4 1.12 Kiakow WBzan.A2 60 34-3 1.64 130000 136.3 70.6 15.46 6.0 16.46 J.5 26.32 13A 194.1 a06 a oo05 1.17 Krakow WeazmnA3 51 34-s 1.77 1300000119 136.8 70.4 14.21 7.3 17.S5 0.2 25.35 13. 2U4.3 6001 0 601 1.09 Krakow SIez.nA4 32 50-63 1.62 1300000119 130.3 09.2 13.42 0A 21.7 11.0 26.79 13. 197A s330 0 3s3 0.,7 KIakow WbeaAS 30 34-73 1.6 13000001191 138.0 69.2 13.42 0.3 21.7 22.0 26.79 13.0 197.3 330 0 a30 0.77 Krcabor 109 4746 1.32 SSO6OOO3192 195.6 70.3 32.97 II.& 10.7 24.6 6.0 3.2 M2.4 6 0 0 Opcb Hdi 221 100-I90 1.6 10902303W9 114.0 73.9 4.90 3.2 20.62 20.1 a 3.0 165.4 47446 0 47446 7.37 Wichy Semnalr 07 133 1.69 2400000319 252.6 77.2 31.69 0.6 33.68 20.3 0.6 2.0 327.4 l767 1020 1477 4.04 Lodz oe.Utron 120 34 42 1.4 17528601o0o 184.5 37.2 8.52 4. 6.04 2.0 12.64 6.9 211J 0o09 0 10098 2.24 Jablonna 60-114 1.6 1490000 166.6 84.3 7.06 3.8 3.38 4.6 13,73 7.4 26t.1 7460.0 0 7460.6 1.36 Lebotk STAROM 29 60-0 1.69 165874301191 167.1 70.2 8.39 4.0 24.46 2t.6 11.4 8.4 221.3 2920.6 0 2s2026. 0.62 Kaplo kAnImal 42 41-77 1.7 160400 6592 158.3 66.4 2.2 2.4 6.0 9.2 6.33 2.9 133.2 462S.27 0 4626.27 0.33 035w 197 35-77 1.61 0oo0604 t68.6 76.2 1.95 8.4 23.74 10.6 13.3 6.9 224.8 2I667.9 0 16687.9 4.19 * Ladz e.Puab 30 6140 1.82 1400000 147.4 76.7 4.46 2.3 23.6 12.1 19.3 9.9 194.7 0 0 0.60 * Cedmas Posedon 24 2I1-I16 2.68 16200004191 170.5 01.4 60.7 18.3 35.8 12.9 20.60 7.4 277.8 569s 0 09 1.42 o
Tol 45 PRjtc(s 642452 SIM 874160 21Q.32 0 Aveisge 1.51 175.42 72.84 23.39 0.71 .26.62 2.8 13.309J 4 6.68 240.82 * ; , * ;~~~~~~~4' mars,ci 10680 Mois CoCU Dama 512101 .511910 CoaoaSpot vad uM; SO I 111000.00SI Told oso E!g GOlalEtiab slaM.O d Fac1 LA Caes. MAL IaLwlg-L b.niie L%d om M wea 8m Iho.m us
8964cIaw I SW woo6 8.25 860000 1219 007.0 1.0610 322.0 102.4 KG* 33.0 10.4 04.0 23.3 12.3 3., 12260. 0 8220 0.01 vAccIaw 2 365 41-124 1.21 1660000 12190 312.2 1.0516 2204 102.0 650 25. t0.6 31.0 23.0 12.1 310 40617.0 6 40011 12.50 V*o8aw 3 405 41-104 1.22 10501000t213 343.0 1.0586 361.1 1402 00. 40.6 S3. ItS.? 22A 1:33. a0 50300* 0 s0aw tS.22 Lade Paleole 162 41-Ot 1.4 110600 680 278.0 1.0623 204.2 20L46 00.2 60.6 20.6 20.0 1.0 0.4 3.2 18362. a 81302 0.26 Lads P06.8.2 Go 41-68 1.46 176600 600 215.0 SA0M3 204.2 203.0 60. 60* 20.0 26*: 1.0 0.4 0.2 UK64. 0 3664 8.06 Loa" AIOOL864 16 62-62 1.36 1626000012130 245.4 "S0IG 261.3 100.0 614.10 40.6 10. 20.7 0.3 6Le 3* 01594.0 416 g44" 8.0 Ladi TICftMd 411 52-02 836 sallo00 11911 29.0 1.056 854.6 252.6 61.6 526 86. 37* IIO 82.0 0.6 613. 0 5?11 S.02 to"e TKPUmc 210 26-14 1.63 196000 1*31 30.0 8.0686 324* 220.6 61.0 62.6 0. 30. I2. 121 as 20440. 0 2044 SAG4 Media6 U Mlyuka too 60-00 1.40 802020014*0 231.1 1.036 240. 160.0 60.0 16.6 6.1 21.7 0.0 0.0 0.0 H4INDU 0 140112.4 0.4 GIada Ogle,.a S 4-ItS 0.30 2000000 11*0 208.0 1.067 3001.01 224.1 14.0 16.6 5L6 30.3 108 I3.s 6.6 88106 461 18100. 0.41 GdroIa c.10weat 10 146-140 8.46 123010104101 212. 1.036 212.6 170.6 62. 52.0 10.0 21.01 1.1 16.4 Le6 1138. fie 1300.5 ex1 Odysia Codaaw&2 24 18I-1465 1.64 1620000 213.0 1.030 200.0 14160 62.5 02.0 11.41 31.1 10.1 ISA 6. 3011.* 0 23381 0.04 Odvala Retzdle 496 SA3 1606060 12100 200.0 1.0618 211.8 110 02.3 12. 6.041 1* 6.4 51.2 5* 14462. 131 06214 IsiS 0&kumaI PadIOm 463 06-02 1.55 14000001210 205.1 1.0510 2104L 165.1 15.1 10.2 4.1 46. 21.1 4.1 8.9 42112 am6 4645 W10.4 Clem"a Jo8 P.11 841 64-829 1.5 116020 12100 145.01 1.0610 163.4 125.4 0W. 1.6 Li 10.0 6.40 1.1 40 11601 3165 1123 2.00 Olaygl 0ajoa0 00 34413 IA 1110000 1289 216.1 1.0616 230. 168.2 05.61 6.0 3 20.01 6.1 14.6 6.1 40116.0 0 461*1 SW0 Olalpata S4aap 102 34-04 5.62 170000 12100 286.0 1.016 221.1 1008.3 52. 012* 5.2 t2.0 Li 10.0 6t1 1534 H4IS am64 4.44 "rshi WaisYd 212-161 1.3 100000 1210 235.5 1.0610 241.1 210.3 34.0 20.3 0.2 0.1 0.041 1.4 3 0006a 0 1.40, Tome. as2Bob 456 40-73 1.41 I0000 SOWS0 226. 8.0115 215.0 140.6 40.01 %4160 1 60.5u 20.2 0.0 1.2 3460 0 3460 5.12 11111act Zawajal 02 110-132 2.5 15226612 JIM2 201*9 1.001 221.0 171.1 11.1 10.5 6.1 31.* 14.1 6.01 2.1 00Il H41s II05 4.83 Wilsac Zaovd2a, 42 386.-41 8.45 1643621 830 2009 1.011116 225.0 104.6 02.0 80.6 4.? 8. 6.2 84.0 Li3 0406 116 l1022 2.4 11.0003 Zo.vsd.2b 76 60-02.G 1*4 l6436s 11800 2061.01 1.0 223.0 164.6 02. 10.6 4.1 1.06 6.2 54. U. 040 0 0e0" 2.8 ".Saaa z..w.1.2 116 101-122 8.55 l64362 200.0 8.0675 220.0 104.6 62.6 80.61 4.1 10. 4.2 "A. 6.3 14145 6 14146 0.20 Krakow ABC 281 31-64 1.54 8tallo0 12120 260.2 1.0615 204.1 200A 00 10. 26.0 4. 1.0 Il.2 0. 28000 0 ali606 62.4 Krakow a 36 55-75 1.62 800000 12120 243.1 1.0610 250.2 280.4 62.1 21.4 to.? 5.0 2.3 82.6 4*9 403 6 4034 8*03J. W--,& Zalab Bil 63-04 S."6 3000000 12810 400.4 8.0680 421.8 332.1 10 U6.S 1 2t 6 .1, S 6311 2010.01 168.0, 2.3 Ka8lmwk SLOane 440 40-180 8.3 8051000 881201 264.2 1.067 3004 900A 60.1 80. 4* 00.1 1.6 21.2 1 3awf 1200 40611 12.31 Olapala K.aw.U 810 471-88 8.2 870000 312 221.2 SAM00 240.2 106.1 60.0 ILI 0.2 26*0 10.04 4*4 8.00 tail 612 1136 4.26 Ladz 11p.81ad.1 30 50-62 8.1 1300000 180 260.1 1.003 262A4 280*9 16ll 18.0 4.2 36*0 84.8 14.1 6 2710 0 2101 0.10 Ktiakaw k%eo13 la 36410. 8.15 8500000 ties 010.0 8.0686 200.2 106.8 10.4 1O.0 0.5 84.0 0.1 I". 4* U162 6 862 5.34 .3 K~~~~~iakawNaul~At 62 34-13 8.65 8200000 8121 103.4 8.0186 2006 844.0 10.6 84.4 1.8 141.6 6.8 20.4 83 6084 0 5084 8.86 AKoala, W*az.A2 60 34-03 1.64 1300V' 804.8 1.0556 204.2 840.0 70A 86.3 a 11.4 0.6 21.* 83 606 6 6006 8.23 Krakow Nlexan.A3 61 34-03 8.11 1360000 1121 804.3 1.0580 JIMA 143.0 104 54.0 7.3 85.6 0.2 2.4 S0.1 6008 a 6005 8.14 Kiakaw 08.zan.A4 32 60-03 1.62 136000001128 801*0 8.0686 200.0 840. 00.2 84.8 . 22*0 II 27.0 82 2330 0 309 0.18 Koakaw ObonaM 36 34-13 8*0 8300000 81281 1117.61 8.0580 200.0 840.0 00.2 14.1 6.0 22.0 II1 21.0 13 36601 0 340 0*51 KIseba 109 41-OS 1.32 806000 312 210.4 1.0AW 260.5 200.8 10.4 34.0 it1.6 42.8 14* 0.2 2.2 0 0 0.00 Opal. 11.13. 221 100-lW0 8.1 100012303128 865.4 1.0306 815.8 880.0 10.0 5.2 0.2 30* 10.5 to 3.01 41440 0 4144 1.04 Wooby baShowo 07 486 1.66 2400000 312I 227.4 SAWS6 330.4 32.6 11.2 32.6 0* 35.0 10.2 OA 2.0 13167 1020 841011 6.62 Lodz mU.1avoo 820 34-08 8.4 575200 8082 2568. 8.0616 226*0 101.0 01.2 0.0 4 0*0 2.0 80. .3 80000 6 80060 2.20 Jablamas 00 50-814 8.10 840000 1004.8 1.0366 192.0 861* 6.3 1.3 0.0 6.1 4.6 84.31 14 1400.0 6 1400* 8.44 Lbobak SFAROM 20 60-40 8.6 08661430 81281 288.2 I.0650 22.2 815. 70.1 0.0 . 4 26.0 11.6 11.6 6.3 2026.6, 0 3266 0*3f IuWpO& Ankna 42 48-11 8.1 860400 5128 800.2 1.0144 165.0 860.1 106 2.6 1IA 81.1 0.2 6A 2.0 4525.81 0 4525.81 0*4 Ott,. 807 35-11 1.08 860054 224.6 1.0065 232.71 84.7 16.1 80.6 IIA 24.1 80*1.4 W. 6. 1000.0 0 16061.0 4.36 Lads 00'Iyab 36 61-00 1*1 8400000 804. 18.0366 201.6 862.6 15.1 4* 2.2 24.4 I2.I 20.0 0.6 0 0 0.00 It 880-868Jj~~ 862000 4128 IlLS IO36 n7L 116.6 !L4 fj& 16. 31 I 283 Li 600SW00
Told 04245 aim 074860 230.84 0) *461090 1.01 2~~~ ~ ~~~~~~~~~~~~~~40*N6U. 10.6 12.06 24.61 0.7 123082 1.61 84.6 6.61 !iI
0 TABLES
9j Namol Told.. A.s Cost 613319 .61391 Cost Pe$ m2 Us$ 3.0053.000.00al To1 1toocos cive! eluat I REP pm2 TA TOW facL TA co A-AL M %tT. itank- `T. oT. . s
Lodz Pdashi 352 47n41 3.4s 17900 61 27m.6 3.053 2942 2016 69.2 60.6 20.6 29.6 1. A.4 32 3132. e 11332 1.36 Lodz Pdot&2 S0 47-1- 1.46 17660006sN 271.6 3.033 204.2 203.0 69.2 60.6 20.6 20.6 7.0 9.4 2 3654.0 0 3654 3.0 Lads Aik&Lkd 14 62-62 3.36 M6D00 12N1 245.4 3.0536 261.3 I60.0 69.9 49.6 39.0 21.7 9.3 9.9 .6 6974.0 475 6449 3.61 Lode TKPLkad 66 62-62 .36 191700 l9s 209.0 3.0536 314.6 212.6 61.6 62.6 36. 37.4 11.9 12.0 3.I 679.9 9 610 1.92 shdlc "uwka 386 66-90 3.40 36220 4591 237.7 1.0365 246.4 196.6 69.6 36. 6.1 2W.1 5.6 9. a9 142.4 6 392.4 34 Odyabt Odao 9 64-339 0.30 2900000 390 231.0 3.0616 300.0 224.7 74.9 30.6 6.6 .3 3. 3.6 6.6 IIIttO1 41?7 15.8 3,47 Gdpoa Cochowal 10 415-149 3.46 16200004591 2fl.6 3.03s 262.6 376.6 416 62.6 36.6 37.9 33.3 16.4 6.6 3336.6 170 1300A 9.37 Skb#eAI Pod Owe 453 66-92 1.36 1400000 12190 206.7 3.0516 236.4 156.1 73.1 30.2 4.1 46.9 23.7 4.1 3.9 42312 6292 4464 39.48 shalyhso Wlnaaod 123-167 3.30 390000032190 2366 3.0610 241.7 230.3 64.0 20.3 8.2 9.1 3.5 7.4 3 180 0 166 3.40 oltar as 23.. 46 0-73 .43 310000033 IW 236.0 3.976 2S3. 66.6 ".9 IS0 S.1 63.5 25.2 3. 3.2 3469 3460 8.172 ft.s c 0Z.d.2. 42 36.6-41 3.45 1943621 3iN9 206.9 3.0676 223.0 134A. 2.6 10.6 4.1 33.6 6.2 34.6 6.3 946 3536 322 2.46 £atow 51.0Da 446 46-130 3.39 1865000 3339 294.2 1.0676 303.4 296.4 6.L 33.1 4.5 0.3 39.6 23.2 7 337 3240 43511 32.33 OtUcko K.Jadw.I 170 41-136 3.20 370000033 223.2 1.0994 2432 196.7 69.0 6.L 6.2 20.6 10.84 4.3 L.9 136917 672 17368 421 Uczba. e9947-96 1.32 36610000393 27.4 3.0365 266.6 203. 70.4 34.0 33.6 42.1 14.6 9.2 3.2 e 0 eeo. L3dz os.Utsha r20efl 1.4 376266 0i1w 23. 3.0I15 363* 3910 61.2 0.a ii !! I i J1
Tldo 21333 OM2 222069 6.312 Awes. 3.36 260.0 2662 194.0 122 29.24 30.90 31.17 1.I13 316 4.n
03~1 Mh .; . . 5
r' .; C~~~~~OD Table 5: CONSTRUCTION COSTS ANALYSIS (Based on May 1991 Prices)
Cost Comnonents ZL x X US S x M2 Notes
Labor 487,000 15.0 44.00 27.01 of Base Cost Equipment 81,000 2.5 7.50 4.51 of Base Cost Materials 1.236.000 38,3 112.50 68.5S Of Base Cost BASE COST 1,804,000 55.8 164.00 100.0 BASE COST Contractor's OH & Profit 451.000 139 41.00 25.01 of Base Costs
Total ConstructionCosts 2,255,000 69.7 205.00 1.25 x Base Cost Add: Interest LuringConstruction 185,000 6.1 17.00 0,0825 x Cost (131 pa.) 0' CONTRACTOR'SPRICES (ConstructionLoans) a) per M2 of Built-Up Area 2,440,000 75.8 222.00 (Base Cost) + (OH+P) + (IDC) b) per N2 of Net Usable Area 3,300,000 102.0 300.00 1.35 x Gross - Net Area Cost Add: - Land 275,000 8.5 25.00 15.01 of Base Constr. Costs - Infrastructure 300,000 9.2 27.00 17.01 of Base Constr. Costs - Design and Supervision Costs 110,000 3.4 10.00 5.31 of Const. & Infr. Cost - Marketing and Administration 100.000 3L1 9.00 4.01 of Construction+ Land + + Design & Sprvn. Costs
Subtotal 785,000 24.2 71.00
DEVELOPER'S PRICES (MortgageLoans) (May 91) (Jan. 92) a) per M2 of Built Up Area 3,225,000 100.0 293.00 x 1.0515 - US$ 308.09 b) per M2 of Net Usable Area 4,350,000 135.0 395.50 x 1.0515 - US$ 415.80 COST OF A 60 ua FLAT Zl 261,030,000 - 11,000 x 23,730 x 1.0515 - US$ 25,000 |0
00 a.t -127- ANNEX L Page 1 of 10
TECHNICAL ASSISTANCEPROGRAM
The programfor technical assistanceand the logistical organizationpresented in this report has been designedto implement the objectives of housing developmentand housing finance set forth by the Governmentof PolandIn cooperation with the World Bank, EuropeanBank for Reconstructionand Development,and the U.S. Agency for Intemational Development. These internationaldonors have been brought together under the auspices of the Housing ProjectOffice ("HPO)and the MortgageFund (FUND") in order to facilitate a unified program. The HPO will function as the primary coordinator of training, technical, and logistical assistance (see Figure 1).
The HPO will be supervised by the Project Managerwho is appointed by the Ministry of Spatial Economyand Construcion I"MOSEC"). The HPOand the FUNDwill be rundedthrough multilateraland bilateralgrants. Advisors will be contracted in accordance with the practices of the sponsoring agencies.
As recommendedby FNMA, a team approachfor technical assistanceis desired. This team would combine long, medium, and short term on-site advisors, along the lines of a "buddv system".
Specifically, technical assistanceand training will be targeted to the following three groups:
' The Mortgage Fund ('FUND') * Eligible Retail Banks * The ultimate Borrower
As representedin Figure 1, there will be two operatingoffices for the Project,the HPOand the FUND. Theseunits will have an informal chain of command to the MOSECand the internationaldonors. The HPO will be the central office for training and technical support for the FUNDand Retail Banks. The staffing requirementsfor the HPOwill be primarily short and medium term and the FUNDwill be medium and long-term. The FUNDwill be the source of refinancing for the Retail Banks as well as the control mechanismfor loan and bank compliance.
The Retail Bank is the conduit between the FUNDHPO, and the ultimate Borrower. By filtering the information through the Retail Bank, there will be no misunderstandingabout the origin of the monies from the borrowers' perspective. If there is communication which falls out of the chain of commands, it could lead to personnel problems (staff will feel that managementdoesn't think they are doing quality work) and transfer of information problems. The borrower will be told from the onset to contact its retail bank and the bank will provide all relevant information and training. This flow is necessarysince the retail bank takes on the first dollar risk in most cases. The customershould feel as if the retail bank is the best informed source for information. If there is no confidence in the retail banks, there will not be many quality projects coming to the banks. Consumerconfidences are built in this manner. In the case of construction/developertraining, the Retail Banks, in cooperation with the municipalities, will be the sponsors of the HPOseminars. (see attached training scheduleoutlines).
Figure 2 presentsthe specific staffing requirementsof the HPO. The specialistposition, held by PolishNationals are designed to operate as long term advisors on macro issues involving reform and change in their relevant businesssectors. In the initial stages of the project they will be part of the HPOstaff, however over a two year period the specialistswill be absorbedby the relevantministry or the FUND.
The Advisor staff, housed in the HPO, will consist of long term technical assistance(up to 2 years). Their primary responsibilitiesare to keep informed on the macro issuesand providethe ultimate borrowers and short term trainers with up-to-date information and technology. They will also ibe responsible for assisting the FUND on design/constructionmatters.
The Trainer staff will consist of short-term (2-6 month)and medium-term (6mo-1yr) foreign assistance. They will provide technology transfer to the FUND staff and intense training courses to the Retail Banks, construction companies,developers and other potential borrowers. Post training course, they will provide ad-hoc assistance wherever a demand or request is placed. Over a two year period, the technology and information transfer from the HPO will be complete and at that point any remainingjob responsibilitieswill be shifted to Nationals and the remainingpermanent staff will be placed in the FUND. -128- ANNEXL Page 2 of 10
Figure3 is an organizationalchart o the Bud Bank and the breakdown of the departmentaldivision of the FUND as detailed in the Bud-BankBylaws.
The Vice Presidentof the Managing Boardof the Bud Bank will also operate In the functional position of the FUND Director/CEO,and is nominatedby the Presidentof the ManagingBoard of the Bud Bank. The CEOselects the four managerialpositions of Vice Director/Chief FinancialOfficer (VD/CFO),ChiefOperating Officer (COO),Quality Control Officer (QCO),and the GeneralCounsel with the consent of the Bank Council. This team of four comprise the FUNDCredit Committee.
As recommendedby FNMA and USAID,there will be five functional department in the FUNDwhich reportto each of the Credit Committee Management. FNMA and USAID recommendlong term advisors be placed in the Credit ManagementDepartment, Control ManagementDepartment, and the Housing FinanceManagement Department. These advisors will be policy and guidelines specialists who will develop the organizational structure and departmental requirements for their respective area. Medium-term assistance is recommended for the MIS Management Department and the Construction Finance Management Department. The form of short term assistance recommended would be to. support the Housing Finance Management Department, the Credit ManagementDepartment and the Construction FinanceManagement Department.
To supplement the aforementioned recommendations,additional short and medium-termtechnical assistanceto all existing departments is recommendedas follows:
Medium-TermAssistance to the MIS Support Staff, ConstructionLending Staff, Mortgage LendingStaff and the Funding Staff;
Short-TermAssistance to the Monitoring/Evaluationstaff, LoanAdministration staff,OFUND"Compliance staff and the Reportingstaff.
Figure 4 represents a typical organization structure participating Retail Banks should have. This structure is requiredfor monitoring and review of the financing requestfrom the ultimate Borrowerand reporting to the FUND.
In summary, the technical assistance and organizational structure presented will serve as the transitional environmentrequired to make the housingfinance mechanismin Polandself-sufficient and operative. MACRO SCHEMATIC OF THE PROJECT - Figure 1
USAID PROJECT E8RD WORLD BANK PROJECT
MOSEC
: :
* : * *
HOUSING PRO3JCT OFFICF TH BUD BANK AND TME FUND
(see Figure 2) (see Figure 3)
Retail Banks (see Figure 4)
IGMINA | Dvlpr construct-l o Mortgage | |Singlo (Munici- lon Operatives Applicants Family pality) Companies Investors
e1 00 0 HOUSINGPROJECT OFFICE - Figure2
|Fnance Speclalist| |Banking |st rjctapcait Mr||Legal Specialt ||rcrmnt Spec.|
Housing Planning/Constr. Architectural & Technical Assistance Advisor and Counterpart Office Advisor Advisor Design Advisort* Manager
Construction Municipal Architect/Design Trainers o AdvLsors Trainers Senior Construction Mortgage HI8 DIM (Trainers) Credit Credit Credit Trainer Expert Trainer Trainer Trainer Trainer
This group will provide training to construction companies, This group will provide training and support to the retail home builders, municlpalities, co-operatives and developers. banks and the FUND.
0n 4u-t 0~0D| -131- ANNEXL Page 5 of 10
HOUSINGPROJECT OFFICE
Summary of Responsibilities:
* Fund Raisingto support technical assistanceprogram/personnel; * Design, Management,Implementation of TechnicalAssistance * Headhuntingfor technical assistancepeople Marketngof Project * FUND MIS Development * Reportingand Monitoring Training DIM training and assistance * Construction and Land Use Planning v Technical Assistance for Housing Sector - (Construction Co; Home Builders; Developers;Municipalities)
Housing Project Office: NOTE: Section 1.3.3 of the Policy and Operations Manual states the following:
(1) Assist the Mortgage Fund in its Review and Analysisof ConstructionProjects; (2) Assist the FUND and MOSECin complying with reporting and monitoring requirements; (3) Manageand implementtechnical assistanceand training for banks, municipalitiesand developers; (4) Source of Advisory Assistance to GOP, WB and Finance Institutions on Policy and operational issues relating to reform in Housing Sector.
Responsibditiesof the staff and advisors will be transferredto nationalsover a two year period.
ProposedJob Descriptions:
ProjectManager: (long term; 2 years) * Liaison to the Govemment of Polandand IntemationalDonors * Manages, coordinates, and staffs the functional divisions i Supervisesat all levels coordinatingimplementation of the project.
FinanceSpecialist: (long term; 2 years) Advise MOSECon reforms in finance systems * Assessneed if subsidy programshvoucherschemes * ExamineMacro implications of legislative/regulatorychanges * Undertakespecial studies for MOSECand government
BankingSpecialist: (long term; 2 years) * Advises on banking issues which affect HFP 0 Monitors reforms in banking sector * Undertakesspecial studies
LegalSpecialist: (long term; 2 years) ProvidesAdvice to HPO * Drafts contracts and legal documents Advises MOSECon sector reform * Trains counterpart
ProcurementSpecialist: (long term; 2 years) * Supervisescompliance with competitive bidding requirement * Reviews procurementcontracts and procedures
Translator/ Admin Asst: Updatesdocuments. Prepares public relations materials. Provides translation services. Helps to coordinate translation services for the technical assistance programs. Assists the secretary in office support tasks when necsssary. -132- ANNEXL Page 6 of 10
Asst. Project Mgr: Managesthe Team; Team Leader. Liaisonsto InternationalDonors and Project Manager. Initiates fund raising for technical assistance.(Long Term Assistance; 2 years).
Housing Advisor: Reform Rental Housing Policies. Developmanagement guidelines for Co-Opsetc. General Guidelinesfor municipalities. Assistancein Preparingfimplementingplans of public sector housing. Production SystemsReforms. (Long Term Assistance; 2 years).
Planning/Constr Advisor: Land use planning. Acquisition Management. Changesin Building Codes/Construction Regulations. (Long Term; 2 years).
Design/Architect Advisor: Specialist in Architectural Designs. (Long Term; 2 years).
Tech Assist Advisor/ Counterpart: Logistics people. Organizeall training programs. Coordinatestechnical assistance. Trains the counterpart for job. (MediumTerm; 1 year)
Officer Manager; Responsiblefor the maintenanceand upkeep of the facilities (Medium Term; 1 year).
Architect Trainer: Advises developersand architects on technical design. Trains borrowers on how to borrow Construction from the fund; how to participate in the bidding process; how to preparea businessplan to the lending institution; how to obtain presalesand cash flow preparations;and how to managea project. Rental, maintenanceand divestiture policies for the municipal housing stock. Cost recovery and pricingof housingrelated municipal services. Economic,financial and technical analyses of proposedinfrastructure and housing projects. (Long Term; 2 years).
Municipal Advisors: Provide technical assistanceand training to local govemments, construction companies, developers,and other potential borrowers with regard to municipal financial management including valuation of land and fixed assets and other housing-relatedissues. (Medium Term; up to 1 year).
Senior Credit Trainer: Analyze Loan Requests. Providestechnical Assistance to the FUNDcoordinating lgistics and managementpolicies. FUNDcriterion trainer for relevant documentation. Reporting to the FUND training. Audit Requirementstraining. Legal Requirementstraining etc. (Medium Term; up to 1 year).
Construction Credit Trainer: TechnicalAssistance to the retail banks- How to analyzeconstruction companies;staffing; monitoring the loan; credit file maintenance;etc. Assist the FUND in Loan Review. (Medium Term; up to 1 year).
Mortgage Credit Trainer: With the DIM expert, trains retail banks on how to use the Dual Index Mortgage program (DIM Expert) and what the information generatedby the programmeans. Identifying eligible borrowers. Assist the FUND in implementationof the project. Teach the local banks on mortgage servicing and escrow accounts, defaults. (Medium Term; up to 1 year).
MIS Trainer: Train banks on how to usethe newly developedMIS system. (MediumTerm; up to 1 year). TU BUD BAUM AID THE MORTGAGEFUND STRUCTURE - Figure 3
Shareholders
|External |ankCudcitoUNprvso|
t ~~~~~~~~MANAGINGBOARD Preeident
# ~~~Member I iePresident Member I Member Nie
---- THE FUtlD------, ------THIS FUND ------6 ----- TEFN ----- FUND birector/cs I~~~~~~FI=
-|chiefoffiCerOp. | | Quality CnrlOfcr |VD/Chief Fin. Officer | | Gneral Counsel]-
I~~~~~~~~~~~~~~~~~~~I HISMgmt Dept/ ConetructlonI~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Fin Credlt Ngmt Dept/ Control Mgmt Dept HouaLng Fin. Team Leader I~~~~~S Ngmt Dept/Team Lead. Team Leae Team Leadert Sll Tsa Deader | D| I~~~~~~~~~~~~~~~~~~~~~~ . . ~~~~~~~~...... e~~ngin"erCnut...Lan
Prog _ rStaff I Const.AnlyaLs |HotaeAnalys.| Compliance | |~~~~~LendingStaff | Lndg Staff Staff
HonitoriLng/ ...... |Retail Bank Evaluation Stf |F. UND * W S I ~~~~~~~~~~LoanParticipation/Purchasing/ Compliance I and Fundlng Staff S taff |I FacllitLes I ! | ~~~~~ ~ ~ ~ ~~~~~~~~Staff|1 -134- ANNEXL Page 8 of 10
The FUNDand the BUDBank The MortgageOFUNDO: (1) Will act as a departmentof the BudBank etblished by the Boardof Directorsof BudBank; (2) Provideapplied technical assistanceto Lenderson lending practicesand implementationof private construction/mortgagesystems; (3) Establishquality credit standardsaid creditoversight policies and operationalpractices and controls. The BUDBank Shall: (1) Organizetraining in qualifiedcommercial banks; (2) Participatein the creaton of systemsenabling the Implementationof financingschemes; (3) Cooperatein the implementationof financingschemes; (4) Use the informationacquired in the courseof permanentmonitoring to enhancethe effectivenessof financingprograms ProposedJob Descriptions: ChiefOperating Officer: The facilitiesadministrator in chargeof Backoffice operationsand systems development QualityControl Officer: In charge of Lenderadministration, Lender approval, and compliancewith banking regulations. VicePresident/Chief Fin.Officer: In charge of internal audits, reconciliations,reporting functions, disbursements, applications,and reporting requirements.
GeneralCounsel: In chargeof legal review, regulatoryreview, reportingactivities, and cooperationwith legislatorsand government persons on housingfinance related issues. TeamLeader, MIS: Managesdepartment. Creates departmental guidelines and policies for the FUND.(Medium Term;up to 1 year). MISSupport/ Programmer: Evaluateexisting reporting and control systems. Reviewcontemporary systems. Design reporing and controlsystem. Designmodeling, scheduling, forecasting programs for constuodonand default management. Design loan origination system. Designseicing system. Choose delivery system. DevelopLoan AccountingSystem and Funds Managementsystems for the rtil banksand the FUND.Oversees implementation of the MIS system.(Long Tern; 2 years). Monitoring/ Evaluation Officer: Reportwriting for the FUNDand Database maintenance for the project.(Medium Term; up to 1 year). Construction Fin Mgmt Dept Developappropriate maricet analysis format; models for development/financeof residential TeamLeader: constructionand completionof prbjects. EstablishProcedures for effective construction monitoring,control and funds disbursal.Creation of projectreview, approval evaluation method and materials. Developstandards for efficient cost-effectiveconstruction. (MediumTerm; up to 1 year). Construction Eng.Consult: Works with the ComplianceDepartment providing reports ceacemingcompliance and compltion of projectfor the eligibleloans. Monitorsongoing projects and provides reports. (LongTerm; 2 years). -135- ANNEX L Page 9 of 10
Credit Mgmt Loan origination. Establishrisk managementphilosophy. Develop credit policy, Department underwriting guidelines;appraisal; valuation, etc. Establishstandard loan Team Loadw: originatdon/setement processes. Establishquality control and audit procedures. Does project feasibility analysis. First level review team. Uaison with local bank if there are questions conceming funding requests. Similar role of Marketing and Relationship managementposition. Filtersout projectswhich are not complete or qualified. (LongTerm; 2 years). Construction Analysis Staff: Analysis of construction funding requestsand make recommendationbased on information provided. Provideswritten defensefor acceptanceor rejection of project funding request. (Medium Term; up to 1 year).
Mortgage Analysis Staff: Analysis of mortgagefunding requests and make recommendationbased on information provided. Provideswritten defensefor acceptanceor rejection for funding. (MediumTerm; up to 1 year).
Loan Purchase Participation Staff: Primary responsibility is to provide funding and receive payments for loans that have qualified for the funds. Must maintain a databaseof information in coordination with the MIS department. Keepstrack of interest dues and payables. Sendsout billing notices for interest paymentsand providestimely reports to the retail banks on status of outstanding loans. Also, providesreports concerning portfolio exposureand projecttypes etc. (Medium Term; up to 1 Vear).
Loan Admin Staff Loan Servicing; Primary responsibility is to backup the loan purchasing department with record keeping and monitoring of loans, maturities, interest due. They maintain the hard copiesof all loan documentation. They make sure loan agreementsare placedand tracked in the vault - dated and stamped. They keep all the files in order for the extemal and intemal auditors. (MediumTerm; up to 1 yearl.
Control Mgmt Control, managementand accounting of construction and end loans. Developmentof Departm systematc standardizedloan administrationpolicies, process procedures. Developdefault Team Leader. management(delinquency reporting and foreclosure).Development of mortgageaccounting and reconciliationmethods and proof system. (LongTerm; 2 years).
Loan Fund ComplianceStaff: Default Management.Verifies all information and compliancerequirements. For example, reviews bidding requirementsand Incomeverification needs. (MediumTerm; up to 1 year).
Retail Bank ComplianceStaff: Pre-ualifses banks. Monitors the legal operating status of the participating retail banks. Uaison with retail banks concemingcompliance issues. (Medium Term; up to 1 year).
FUNDReporting Staff: Receivesand analyzesthe reports submitted by the retail banks as required by the FUND. (Medium Term; up to 1 year).
Housing Finance ManagementDept Identify/developincentives for Polishlenders to enter housing market. Analysis of Team Leader: atemative asse managementstrategies. Analvze Systematic changes impacting housing such as regulatory, legal, tax, and instiutional designs.
Facilities Staff: Responsiblefor facilities maintenanceand office management. -136- ANNEXL Page 10 of 10
SHORTTERM ADVISOR NEEDS (recommended by B. MarcusFNMA) (for up to 6 months) to the ConstructionFinance Management department: * RealEstat ConstructionNaluation * Environmental& UrbanPlanning * MarketAnalysis * Archiecture. Engineer& LandDevelopment to the CreditManagement department: * Borrowerapplication/education materials * Loanorigination process * Underwritingmanual development * Appraisalvaluation & comparability * Mortgage Tite Insurance * ComplianceiGualitycontrol * Consumer Lending/Marketing to the HousingFinance Managemont department: * BankingRegulation/Gov't Finance * SecuritesUnderwriting * InvestmentBanking * SecondaryMarket Development -137- ANNEXM Page 1 of 14
REPORTNG AND MONITORING SYSTEM PROJECT IMPLEMENTATIONPHASE
Oerview
The Housing Finance Project Office (HFPO) has designed a reporting and monitoring system to be used in analyzing and evaluating the implementation of the Housing Finance Project (HFP). The system is based on quantifiable information that can be gleaned easily from construction and mortgage loan applications. Local banks prepare quarterly reports that are subinitted to the Mortgage Fund, and in turn the Mortgage Fund prepares quarterly - and eventually, annual - consolidated reports. The reporting formats can be readily computerized, once a software program is developed. A corresponding monitoring and reporting system will be designed for the Mortgage Fund itself following the elaboration of its procedures and responsibilities.
The reporting system generates information on aUlloan applications whether or not approved, and on all approved loans. This system enables some analysis of general or total demand and a more detailed assessment of the HFP's actual portfolio. In addition, the system can be used to analyze trends in the housing sector (e.g., changes in construction costs, sources of investment and household incomes, etc.). This reporting system will need to be complemented by in-country examination of selected multi-family projects to monitor aspects of the HFP which are less suitable for quantifiable analysis, such as environmental impact or availability of community services. Information on these factors is contained in the applications for multi-family construction loans, and complete copies of these applications for all approved projects will be on file at the Mortgage Fund. Joint World Bank and Government of Poland monitoring and evaluation teams will be able to review these documents and make on-site inspections.
Steps in the Reporting System
1. Upon receipt by a local bank, all applications for multi-family construction, single-family construction and mortgage loans are entered on an applications roster. Separate rosters are maintained for each type of loan, and basic information about the application is noted. -138- ANNEXM Page z of 14
2. For multi-family and single-family construction applications, the bank completes Project Summary forms. These forms are used to assist the bank in its review of the application, and most of the information required by the reporting system can be taken from the Project Summary forms. A Project Summary form is not required for mortgage loan applications.
3. For all approved loans, the bank completes additional forms that provide more detailed information on such factors as construction costs, basic design data, land tenure, etc. A separate series of forms is maintained for multi-family projects, single-familyprojects and mortgage loans.
4. On a quarterly basis, copies of the forms referenced in Steps 1-3 are submitted to the Mortgage Fund and the HFPO. The bank starts a new quarter using blank forms to minimize the possibility of double- counting by the Mortgage Fund when it prepares consolidated statements. The banks will be instructed to submit these forms within 10 days from the end of the quarter.
5. In addition to the above-referenced forms, on a quarterly basis the bank submits to the Mortgage Fund a 'Consolidated Quarterly Report on Loans in Disbursement". This form requests basic information on the bank's lending activity for the quarter for all types of loans. Again, this form will be due within 10 days from the end of the quarter.
6. Following the receipt of quarterly reports from the banks, the Mortgage Fund prepares a series of consolidated statements for approved multi-family projects, single-family projects and mortgage loans. In addition, the Mortgage Fund prepares a quarterly "Activity Report on Local Bank Disbursements". These reports should be submitted to the World Bank and GOP within 30 days from the end of the quarter.
Tist of Forms
The following is a list of all the forms referenced above. Copies of these forms are attached in the order by which they are listed. Examples of these forms will be annexed t o the Operations Manual, and the Mortgage Fund will provide copies of all forms to banks that are pre-qualified to participate in the HFP.
2 -139- ANNEXM Page 3 of 14
Local bank reports
Multi-family construction projects:
1. ROSTER OF ALL LOCAL APPLICATIONS FOR MULTI- FAMILY CONSTRUCTION PROJECTS 2. SUMMARY - MULTI-FAMILY CONSTRUCTION PROJECT 3. CONSTRUCTION DATA ON APPROVED MULTI-FAMILY PROJECTS 4. CONSTRUCTION COST INFORMATION ON APPROVED MULTI-FAMILY PROJECTS S. CREDIT INFORMATION ON APPROVED MULTI-FAMILY PROJECTS
Single family construction projects:
6. ROSTER OF ALL LOAN APPLICATIONS FOR SINGLE- FAMILY CONSTRUCTION PROJECTS 7. SUMMARY - SINGLE-FAMILY CONSTRUCTION PROJECT 8. CONSTRUCTION AND COST DATA ON APPROVED SINGLE- FAMILY PROJECTS 9. CREDIT INFORMATION ON APPROVED SINGLE-FAMILY PROJECTS
Mortgage loans:
10. ROSTER OF ALL APPLICATIONS FOR MORTGAGE CREDIT 11. INFORMATION ON APPROVED MORTGAGE LOANS
Other report: 12. CONSOLIDATED QUARTERLY REPORT ON LOANS IN DISBURSEMENT
MErtgaae Fund repor=t
13. MORTGAGE FUND: ACTIVITY REPORT ON LOCAL BANK DISBURSEMENTS 14. MORTGAGE FUND: ACTIVITY REPORT ON ALL LOCAL APPLICATIONS RECEIVED BY LOCAL BANKS 15. MORTGAGE FUND: ACTIVITY REPORT ONALL APPROVED MULTI-FAMILY PROJECTS 16. MORTGAGE FUND: ACTIVITY REPORT ONALLA.PPROVED SINGLE-FAMILY PROJECTS 17. MORTGAGE FUND: ACTIVITY REPORT ONALLAPPROVED MORTGAGE LOANS
3 -140- ANNEXM Page 4 of 14 SUMMARY - SINGLE-FAMILY CONSTRUCTION PROJECT
Appliceat: _ Address: Town:
Typeof project (checkooe): Now constuetion (NC) Project completion(PC) Substantialrenovation (RiN)
PROJECTDATA
Total built area > . ) m2. 3 3 Not living area _m2 * of total :1 :o Notcirelatio area o2 of total > > Net ervice area .2 * of total a Net embleoarea .2 * of total > , Net garagearea _o2 S_ or tota
Total load aea: Ratio of load areato total build area:
Number of bo-sehold members:
FINANCIAL DATA
Total monthly housebold Income:
Coastreatioacosts: Cost of concttetioo per d2: Costof laud per m2:
Total project costs(Zlotys):
Construction or_ototal Land _* of total lfrastructure * oftotal Documentatioo %_ of total TOTAL 100 S Total In U.S. Dollar: s
Proposedsources of finoacing Zlotys):
Equity from borrower _ * of total Construction loa * of total Other sourees % of total TOTAL 100 6 Total inU.S. Dollars: S
Bank lxf orrmalion
Name of bank ______Address _ Vovoidship Telephone number Contact person Status of appticatiox Datereceived: Approved Date: Disapproved _ Reason: -141- ANNE M Page 5 of 14 SUMMARY - MUALTI-FAMILY CONSTRUCTION PROJECT
Tows: Typeof project (ceick one): Project ame: Newconstrucuon (NC) Appliaen Prjet compltion (PC) Substantialrenovation (REN) CONSTRUCTIONDATA Laudimprovement (LI)
Total built area, > > > . 2 <444'S021." >t,~, Units M2 __ _ ooftotal r >. Cinelotioo mrea d2 444 1 ______of total $_i_e>>er_ Om __ _ 4 44 _ ofttotl 3. C.merC aasrl mm"2 4all 3$ ______S of totl > >n agees _l 444 _ 91 of toul
U"ble ae for all unlts _ ___2 4 4- V. Totl nsubr of utn __ _ _ 44 Nurmber inshaded Averageemlt sim .2 < 0 Arearefer to entriesoan the Deg. Effeiency atio ______4 ;4(DHP) foramCost Analysisfor Housiazi riecu' Total badarea Ratio of laad or" to total built aem_ -
Number of becficairiec (Ceture reideeut):
CONSTRUCTIONCOSTS (Zlotys)
Cocauctlom emuo for ol: Averagecost per unit of: Resdetia uni* _i_ , Residential units Cormercial area __ 3 Commercialareas -_____ argbes _____ " Garage Total _
Per d2 couructlon cos ttor niuts :_ _ Dateof co.struclioa coatestimate: U3636
TOTAL PROJECTCOSTS (Zloqs)
Constrectio of tout Laud % of total Infrastructure __of total Docuentatioon __ % of toMtl TOTAL _ _ _ -100 9 Total Is U.S. Dollars: S
PROPOSEDSOURCES OF FINANCING (Zlotp)
lIvestor's equity - of total Depoelut/prepaymeuts _ of total Construetioner dits * of total laeatmeatfrom "ale _ of total Other souress TOTAL 100o_ Tota is U.S. Dollars: S lBanlshIeriagiot Name of bank ______Addr_ Vovoidahip _ Telephonenumber Conta peson
Date eeived: Approved Date: Diapproved _ Reason:_____ tr eig: _ COISUCTIONCOSm INFORUAm ON APPROV NULII-PAU1LY PREC
______tow eidublt: ______-___. _ _ _ _ coads Breakdoumol eal Coa.coA Date Trcadovuol costruciojm Borrower Town ProjectRome I otal tetnex p Pokelrm2 ol coad I tabor Mbteriab Eqp. hket PTOIC hilawd o InfreAuoc-~Conalac-Documen- tor bossing eœtimte cd lion lure lation omit
-- 4 3 4
9
13 16_ 171. 13
II
21 24 21 22-
i0.O ROSEROF ALL LOAN ALATIONS FOR SNCLE-FAIILY CONSTRUCTION PROMJ
las: ______-w. _ .dh _ Addrewovo"iduip: . _
Applirct lonm Date Twoo l Total Total tdt ousehl _ aolic opplcatioa project prone coltruction credil incomeelaid pie y MoMtaken. and die tie lecied /1/ aits ceods mcudt haualoast ldate ai r1olor _di mumrd ml
I 3 4 5
9 e I 1.
16 n 21 . 13 I! 2, 515 3'
Xl /1/ lor newconatnctlon. vC forproecl compleion or l1 or ubstoutialrepaina~~~-- CONSOUDATEDQUARELY REPORT ONLOANS INDISBURSEMIENT (ztotp)
Dau: Quartereudng:. Addrew
Total Total Disbursements Amount Reimbursements Total Total Total total anmonulof amount as of reimbursed from Fundas accrued disboremento repaymems outstaidlug approved disbursed approved from x of inlerest and balce credits to date credits Morgage total to date accrued (prlacipl& /1/ _ uhnd disburements laterat interest)
Sulil-Famil, Costruietlon Projects/2/111 -
Projeets I ,
lMortgageLoans I I I I _ I I bTOTS _ ., I I I I I _I II
/I/ ADinfonmntion should be providedon a cumulativebab as of the endof the quarter. /2/ IncludeInformation on land Improvement projects.
co | K 0 . NORTCACEFUND: ACiT REPORTONA LOLANAPPUCAMONS (hlota)
Qurtereodiot_
Total Total Aene Total ContrcUo Tot*l verage Total Atne Tola number projectcost project constructioa cotdsas a credit credit awber amber of memberd of loom for an cost cos percentageof reqestd request *1 uois er beneficiaries applitions applications for all tota proet for al units project *sulb tions costs onlintion Nulti-Pamil Construction ProjectsIIII
Total Total Avege Total Construction total Average Averae Average number projectcost projetp condruction Cots a a credit credit bousehold redit reqeed o loan for all cod cost percentage repeds requed income asa multiple applicon.s applications for all of.toal for a* of aveg e *appications prolet costs atlictions heom I
Slagle-PamlIp Condstuion Projects I I I I I I
Tol Total Aver Tobl pvege verage Averg Averge number iles price "ien credt crdit creditrequest houeold tredi reques l loan for ill pfice requet request as a pereatge ncome ana muliple appiatins anits for ao of average of verwe Ionplations saIn rice iseome
mortgagels I I I I I I
'a"1 INORMAIONONAPPROVED MORCACE LOANS Quter e rdbg:
Borrowet towa llor. Ospropel Ia toormlon tes: _ _1Ibhld Total Numkr TOtl Aout Tm Net bad hie Amount Amount I ncoew ereditau a of Iale of of unit iiiint uus 1inn to of opproved from from werWiledby multipleol bUd. priee dog- in / nmlareai2) /2/ amDiwedrenues bank fimd book bd. e. embers amt rke
3 4 5
7 9
9 10
13 '4 lS
17 lel 19 20 21 22 23 24 25 /1/ 'H' for hOUseand F lfor olat /2/ I' for eesimple ond VPCL fr prtual groundlease 0 MORTCACEFUND:ACTIVI REPORT ONWCAL BANK DISBURSEfM (MIS) tsverad la ______
ToWl Tolal osbumemal Amoual Relurmatls TOW Tolai Toaal Tol auuILof _solm ua of reluhm i from had as aued dlsbrumnts repsyels ouldad credits disne appoed from off blerest aid Isa aprwd by to dote mills Mortew to to date ine. C la haus bt haus hPid ds*b uo mi
M-liameily Projcts I I I * I I I I I
CousIutios Proes I I I I I I
Vortgae LmosoI I I I I I I I
TOTALS I I I I I I I I
10 IX.J MORrACEFUND. ACTIVITY REPORT ONAL APPROVEDMULT-FAMILY PROET
QuatereadrW
BAIC UiNUTo1 or COMSTRUCIlI _ ITotl Of lotaL numberof prilects by lt. Tobl rla member New Project Removaioe la"d nmbe avm*er d of approved Icontructioo completion impoement ol ben- umits proiects IkI
INFORNiONON PROJECT DESIIN
unit size KDr built built area Unats c. area Service Commercial Caraes bnd bad are ntio of |D2) area (Pc) per (Pr) are (PC) areas area per lad to .orojt proiect buil o
IIORUAIIONON CONSTRUCTNON COSM
Total Avege Averagebrakdown of costs Average Avenge breakdowno1 constructliom costs ;project' P; ltotalcods by perc m eoarction by t costs pe Construc- Land Infrestrucw Doimen- cost per labor Naterial Eqpl Indiret ; i lreiect lion ture bin ; 11 I I !I.1 1 I I I INROINATIONON APPROVED CONSRUCTION CREDIm
Inlormationon all approvedcondructlion loLs Total Informationom oa soures of rliaucg. Total amount Totalamount 2 of credits Xof credis projed by *verate pereentaie o *ai odcredit frm local from fibaing Invetrs Deposits Credits Investment Olher loan approved banis ovn 9r4tag (cods) equity fromsales sowamt reQuesLs resources Fund e I I I I I, I I I I I I |
o I: 1 I SINGLE- 3 (zlotys) quarter ending:
BASICINFORNATION ONSINGLE-FAMILY CONSTRUCTION
Total O total, numberof o ctsby typeTotal number New Project Substantial numberof of approved construction completion renovation bousebold projects m [mbem II I I INFORMATIONONSINCLE-FAMLY PROJECT DESICN
Totalbuilt Aerage Total Average areafor built area net usble metunuable all projects per project area area
I I I . I I INFORMATIONONSINCLE-FAMILY CONSTRUCTION COSTS
Total Average Averagebreakdown of costs Average Average costs or cost b prcentares coastruetlbo cod per 2 all per Construc- Land lofrastruc- Documen- coatper for proecits project lion tore tation m2 had I _l ~ ~I I I I I I IMROUATIONONAPPROVED SINCLE-FrAILT CONSTRUCTION CREDItS
Inlormationon al aprovedconstruction loans Total Totl b laveet Average Average A eelou Total_amount Totalamount Zofa ts X ofcredlt proect Invested n*a X a household ba as anll of credit fromlocal from financing by of tol ount oe mnk d loan approved banksown Mortgage (costs) borrowen eosbs sveisle requests rsources hund hee I I I I I I I I I-I a
0 MORYCACEFUND: ACTIVITY REPORT ON AUL APPROVED NOMCACE LOANS (ZhIp)
INUI MATIONON UNIMS PURC IAS ll ORACILAN Toall IOtotl, lumberof units by O1pe lote!. aumber of suite Total Average number bywland teeure. nssiberol Iwutbol of re'Ied Flas i Feedimple Purpetualground ouebold e km~ ~ fat oa less mimbera I I I
I TIIONON MORTGACE WANS
blformmtoUon an poprovedeonsectlion loamt towl Tobl bInedt Averie Aee Averaelm TOWamoiint Totalamounlt of edits S of aedits Uut prki inedted a a teag homho em ma d an of credil from local from for all by of total must inuere mltipe d i *apprd banks own Mortpge malLs borstsa eat ge requets resources Fund uene l
10X U- -151- ANNEX N
EST[MATE SCHEDULE OF DISBURSEMENT
Bank Fiscal Disbursements Cumulative Percent Year and Each Quarter Disbursement of Ouarter Endina 1USS million) US millon) Total_
Fm June 30, 1992 13* 13* 6.5
FY 93 September 30, 1992 3 16 8.0 December 31, 1992 4 20 10.0 March 31, 1993 4 24 12.0 June 30, 1993 5 29 14.5
September 30, 1993 8 37 18.5 December 31, 1993 8 45 22.5 March 30, 1994 8 53 26.5 June 30, 1994 8 61 30.5
FY 95 September 30, 1994 9 70 35.0 December 31, 1994 9 79 39.5 March 30, 1995 9 88 44.0 June 30, 1995 9 97 48.5
FY 96 September 30, 1995 9 106 53.0 December 31, 1995 9 115 57.5 March 31, 1996 9 124 62.0 June 30, 1996 9 133 66.5
IlY97 September 30, 1996 9 142 71.0 December 31, 1996 10 152 76.0 March 31, 1997 10 162 81.0 June 30, 1997 10 172 86.0
Ty 98 September 30, 1997 10 182 91.0 December 31, 1997 8 190 95.0 March 31, 1998 6 196 98.0 June 30, 1998 4 200 100.0
*Includ 411$ million advance disbursement to establish SpecLal Account. -152- ANNEX 0 Page I of 3
Selected Documentsand Data Availablein the Project File
A. POLISH S0URCF8
-Brseski, Wladislaw Jan, selected Housina Issues in Poland, paper given at the WB/CDC Housing Seminar in Prague, May 1991.
-Chiechocinuka Maya, The Social Imaae of Urban Housino: Dreams and Realitiest the Came of Poland.
-Hajduk Henryk, Restructurina the House-Buildina Industry D-velopnmnt in poland.
-Herbst Irena, The Oraanizational Structure f Housino in Poland, 1950- 29, Institute of Organisation, Management and Bconomics of the Building Industry, ORGBUD, Warsaw, June 1990.
-Herbst Irena, Housing Construction Financina: System Aesumotions, Ministry of Spatial Economy and Construction Team, Warsaw, February 1991.
-Hopfer, A., Posnlak K., Zwirowicz, K., Selected Asg2cts of Economiee of Cadestre as an Examinle of Land Information Svotem, Olsxtyn University, June 1988.
-Jajesczyk, Ryszard, Information about Housina. Manaaement of Housina and Resource Problems and Solutions, Report of the Chairman of the Task Force of the Ministry of Spatial Economy and Construction, Warsaw, March 1990.
-Laszek, Jacek, Proportions of Housina Financina, Institute of Land Use and Municipal Economy, Warsaw, February 1990.
-Ministry of Administration and Spatial Economy: Nonoaraoh on R2nt Policy in Poland, Warsaw, June 1984.
-Muziol-Weclawowicz, Alina, Philosoohies of Mortaaae Lendino - A Case of Poland, Institute of Geography and Spatial Organization, Proceedings of a Conference held in Budapest, June 14-16, 1990.
-Niemczyk, M., and Jedrzejewski, H., The Problems of Land Use Plannina, a paper to the Polish-American Conference on "Restructuring Housing Construction in Poland - A Market Solution" Warsaw, February 18-21, 1991.
-Sulmicki, Jan, &ev Hounina Issues in Poland, report to the President of the National Bank of Poland, Warsaw, June 9, 1990.
-Zawadzki, Fugenius, Forecast of Buildina Industry Develoument in Poland till the Year 2000, Institute of Building industry, Management and Economy, ORGBUD, Warsaw, December 1989. -153- ANNEX 0 Page 2 of 3
- Zelenev, S. Housina in the Centrally Planned Economies of Eastern Europe and in the USSR, Second Draft.
- Zuziak, Zbigniew K., Environmental Conflict Resolution in Land Use Control: The Lessons of the US Experience for Poland, The Johns Hopkins University, Baltimore, December 1990.
B. WORLD BANK PAPERS
- Poland: Reform. Adlustment and Growth, Annex VI, Housina Report No. 6736-POL, World Bank, August 1987.
- Poland: Aide Memoire of the World Bank Housing Sector Pre- Identification Mission, January 8-19, 1990.
- Poland: A Strateov for the Housing Sector, Report of the Joint Bank- Polish Task Force on Housing, World Bank, October 1990.
- Housing and Labor Market Distortions in Poland: Linkaaes and Policy Implications, by Stephen Mayo and James Stein, June 1988.
- Housing Reform in Socialist Economies, by Bertraud Renaud, a World Bank Discussion Paper, June 1990.
- The Legal Framework for Private Sector Development in Poland by Cheryl W. Gray, unpublished mimeographed paper, September 1991.
- Poverty in Eastern Europe in the Years of Crisis: Poland. Hungarv and Yugoslavia, by Branko Milanovic.
- Structure and Performance of the Housino Sector of the Centrally Planned Economies, by Hanna Matras, Discussion Paper and Comparative Data Base, INU Reports No. 53 and 9, World Bank, October, December 1989.
- Alternative Mortaaae Instruments in Distorted Housing Systems: How Useful is the "DRAM"? by Loic Chiquier and Bertrand Renaud, Draft Report, EMTIN Regional Studies, January 15, 1992.
- Poland: Decentralization and Reform of the State, by James Hicks, Green Cover Report No. 10446-POL, Infrastructure Operations, Central Europe Department, April 27, 1992.
C. USAID. OFFICE OF HOUSING AND URBAN PROGR&MS
- Analysis of On-Lendina Structure Usina the DIM Mortaaae by Elaine Weiss, Consultant, May 1991.
- The Structure of the Polish Financial System, a report by Elaine Weiss, Consultant, May 1991.
- Housing Finance Development in Poland, recommendations for USAID, by Jenne K. Britell and H. Beth Marcus, Jur.e 1991. -154- ANNEX 0 Page 3 of 3
- Transformation of the Housina Sector in Poland and Hungary, The Urban Institute, Washington, D.C. March 1990.
- World Bank Housina Finance Proiect/Poland - June-July 1991 Training Program TEAM 1 (ABT ASS.INC.), Final Report, Cambridge, Mass. July 1991.
- Poland Housing Finance Proiect: June 1991 Trainina Proarom, TEAM 2 (PADCO) Summary Report, July 1991.
- Report for Services Performed in Poland for PADCO INTL INC. by Thomas Potocki, Consultant, Warsaw, May 5, 1991.
- The Price of Land in Poland: A Real Estate Valuation Method for a New Market Economy, by D.V. Calano, J.D. Lippincott, D.M. Michorski, Washington, D.C. October 1990.
- POLAND HG-001 - Housina Finance and Shelter Production Prooram. Program Description Paper, Office of Housing and Urban Programs, March, £992.
- Polish HG Technical SupDort and Municioal Advisory Program, Draft Work Statement; Office of Housing and Urban Programs, May 12, 1992.
D. OTHER SOURCES
- United States Department of Labor, Restructurina Housina in Poland, Final Conference Report, Warsaw, February 18-21, 1991.
- Cooperative Housing Foundation, Cooperative Housing in Poland: Issues and Potential, by Judith Hermanson, November 1990.
- National Association of Realtors: Policy Environment for the Facilitation of Private Housina Construction, by Norman D. Flynn, Warsaw, February 1991.
- WOCCU, Credit Union Prosoects in Poland, report of the WOCCU mission at the invitation of the National Executive Commission of Solidarity, November 1989.
- UN Economic Commission for Europe - WorkshoD on Housina Financina and Subsidies in the Context of Socio-Economic Transition, Bratislava, April 9-12, 1991.
- Le Loaement en Polocne, by JFG, Caisse des Depots et Consignations, Paris, June 1990.
- Poland. Housina Finance Proiect: report of Legal Advisor by Charles Haar, January 17, 1991.
- Economic and Housing Sector Transformation in Eastern Eurooe with Case Studies of Poland and Hunaary, The Urban Institute, Washington, D.C. March 1990.