How to invest in the reconstruction of Ukraine: where private investors can make money

After the end of the war, Ukraine will have to rebuild not individual cities or neighborhoods, but a significant part of the economy. According to estimates by international organizations, the cost of reconstruction is already measured in hundreds of billions of dollars, and the housing sector has become one of the most affected. For investors, this means the emergence of a market that will require a huge amount of capital for many years to come.

However, investing in reconstruction is not only about buying an apartment in a new building. Today, there are many more tools that allow you to participate in the development of the real estate market even with a relatively small capital.

Ukraine faced the largest housing deficit since independence

The war only exacerbated a problem that had existed for years. A significant part of the housing stock of Ukraine was built in the second half of the last century and was gradually approaching the need for large-scale reconstruction or replacement. After 2022, mass destruction of housing was added to this.

According to the World Bank, about 14% of the country's housing stock has been damaged or completely destroyed. Millions of Ukrainians have lost their homes or are in need of capital repairs. The total need for the restoration of the housing sector is already estimated at more than 84 billion dollars.

At the same time, experts estimate Ukraine's total need for new housing at approximately 600 million square meters. This figure includes both housing destroyed by the war and outdated buildings that will require gradual replacement regardless of the effects of the war.

Much less is being built than the country needs

Even before the start of the full-scale invasion, the Ukrainian construction sector could not fully meet demand. After 2022, the situation has become even more complicated.

Last year, about 9.5 million square meters of housing were commissioned. For comparison, the pre-war maximum exceeded 11 million square meters. But even these indicators did not solve the deficit problem. If we compare the current pace of construction with the total market demand, they cover only a small part of the required volume.

The reason is not only the war. Developers launch new projects more cautiously, banks finance construction much more meticulously, and buyers often postpone decisions due to uncertainty. At the same time, the completion of already started complexes became a priority for most companies over the start of new constructions.

Why apartments continue to rise in price even during the war

Many people are surprised that despite the war, real estate in most regions of Ukraine is not getting cheaper. In fact, this is explained by the market economy.

Each new residential complex today costs developers more than a few years ago. The cost of construction has increased due to higher prices of materials, more complex logistics, a shortage of workers and higher labor costs. Some products have to be imported, which makes construction even more expensive.

At the same time, the number of new apartments entering the market is decreasing. When supply is limited and demand remains, prices naturally tend to rise.

A separate role is played by the "eOsel" state program. For some developers, it already provides a significant share of sales, as it allows buyers to issue a mortgage on more affordable terms.

Where might the demand come from after the war

You can often hear the opinion that Ukrainians no longer have money to buy housing. However, statistics show otherwise.

The amount of public funds in bank accounts continues to grow. Ukrainians also invested significant sums in OVDP, and an even larger volume of savings is traditionally kept in cash currency. This means that potential domestic capital for investment exists.

While the war is going on, much of this money remains off the market. However, after the stabilization of the situation, capital owners can start investing more actively in apartments, commercial real estate and new construction projects.

Additional demand can be generated by Ukrainians returning from abroad, as well as international investors. If Ukraine continues its integration into the European Union, the difference in real estate prices between Kyiv and other European capitals may gradually decrease.

Is it necessary to buy an apartment?

For a long time, real estate investment was associated exclusively with the purchase of an apartment. Today, this approach is no longer the only one.

Real estate funds — REITs (Real Estate Investment Trusts) have been operating on world markets for a long time. They pool the funds of a large number of investors and invest them in residential complexes, shopping centers, office buildings, warehouses, hotels or other facilities.

The Ukrainian market is also gradually moving in this direction. Such funds allow an investor to get a stake in a large real estate portfolio without having to independently buy an apartment, look for tenants, or deal with facility management.

Another advantage of this approach is diversification. If the apartment owner is completely dependent on one object, then the fund usually owns dozens of different assets. This allows you to reduce risks, although, of course, they do not completely disappear.

What risks should be considered

Despite the potential of the market, investments in the reconstruction of Ukraine cannot be called risk-free.

First of all, military risks remain. In addition, profitability can be affected by inflation, currency fluctuations, changes in the cost of construction, terms of putting objects into operation, and the general economic situation in the country.

That is why investors increasingly do not concentrate all funds in one asset, but form a diversified portfolio, combining real estate, government bonds, deposits and other instruments.

Conclusion

The reconstruction of Ukraine will not be a process for several years, but probably for decades. The need for new housing, commercial real estate, and infrastructure is already far outstripping the pace of construction, and after the war ends, demand may increase even more.

For private investors, this opens up various opportunities — from buying individual apartments to participating in real estate funds. At the same time, any investment requires an assessment of risks, and decisions should be made not only on the basis of potential profitability, but also taking into account one's own financial strategy.