Page 69 - A U4SSC deliverable - Guidelines on tools and mechanisms to finance Smart Sustainable Cities projects

Conclusion

Overall, we see that the COVID-19 pandemic did not stop construction for long, and many
projects which had already begun have continued. Future projects will have to wait before being
launched, due to market uncertainty, lack of knowledge on public aid measures, credit markets and
government legislative requests. Sales have slowed down or halted, and most forecasts suggest
that recovery could be expected before the third quarter of 2021. Prices for housing are likely to
remain similar to pre-COVID for new units, but to decrease for second-hand units if they are not
adapted to new technical codes and energy-efficiency requirements. Housing rental and sales for
units in prime locations with the latest technologies are likely to be even higher, as they have the
characteristics of the “new normal” that is lacking in older units.

Investors with ongoing projects will adopt as many layout and technology upgrades as possible,
in order to be competitive. New investments are likely to be put on hold by private investors until
new legislation, adapting to the new normal, comes into force. Governments will likely attempt to
promote investment by fast-tracking permits, reducing red tape, and opening new territories and
sectors for land development. Investors will play a crucial role in making sure all incentives agreed
at the political level reach project-finance status at investor level, and loan facility at buyer level.

The single most powerful piece of information that investors use to decide whether a real estate
project is viable is the general plan of the city. The general urban plan is the guarantee that there is
a fair and balanced distribution of burdens and benefits. For this reason, this plan allocates specific
urban parameters for the urban development of the city for all its parts or sectors. These are, in turn,
divided into smaller units, making the balance evident with a series of conditions that determine
what can be done. The determining factors are called the urban parameters, and comprise the use,
intensity, occupation, and percentage of green areas. All these parameters determine the potential
of each spatial unit or plot to be developed. This potential for development is what determines
the value of various parts of the urban environment, and therefore the potential for returns for
investors in urban development.

These plans, however, may need to be completely redesigned or, more practically, may need
to allow the complete recalculation of values of many units. This will likely lead to a complete
recalculation of values throughout cities. This may generate cities that no longer grow in height
but in width. Distancing requirements might necessitate more common spaces, reducing the space
available for private development. This, in turn, may make the real estate business limit the returns
for some investors.

The pandemic is not yet over, and its implications are still to be learned by the global community.
Its effects will not leave any part of the world untouched. Governments, civil society, businesses,
and investors will all need to adapt to the “new normal”, which is yet to be defined.

U4SSC: Guidelines on tools and mechanisms to finance Smart Sustainable Cities projects 51