BIG READ: Bombshell as proposed €50m Tipperary development now in doubt

A proposed €50 million development at Garranacanty, Dundrum Road, Tipperary Town is in grave doubt of getting off the ground due to a major obstacle that the project developer is experiencing.

Speaking exclusively to Martin Quinn for The Nationalist, Pramukh Goginei, said that if he doesn’t get the project up and running this year that he certainly will not be returning to it after that and that "Tipperary Town will lose out one more time".

Pramukh says that the costs that he has to bear are going to strangle the project and it would therefore not be viable for him to proceed with it.

"The county council require a bond from me of €8,500 per house and that equates to almost €800,000 for the proposed development of 94 houses. I am expected to carry this along with all the costs that I am already bearing and the additional costs for the connecting road from Dundrum Road to the Cashel N74 road which I am bearing solely.

"This places every responsibility on me and it is very unfair that I am being requested to provide a bond of this value for the development," he said.

Pramukh had been in contact with the Planning Department of Tipperary County Council to suggest that the bond be reduced to €4,250 per house for the first 20 houses with the idea of rolling the bond to the next 20 houses once the council were fully satisfied with compliance and quality of works, but the reply he received was not a favourable one.

"It was really devastating for me to be informed that any bond reduction from €8,500 per house is not acceptable to the council and cannot be considered further at this point in time and that this is the council’s final position on this matter. This is the final hurdle for me and it is one that I now can not possibly overcome.

"I came to this town to build A-rated houses and I would be providing the cheapest houses of this type in the country. 100 workers coming on site in Tipperary Town will carry a weekly wage bill of €100,000. These workers will shop in the town, will eat in the town and will therefore give a major boost to the local economy. Is Tipperary Town to lose out once again?" asked Pramukh.

The Cork-based developer also points to the building material costs which are increasing every week and to the fact that he is borrowing at a cost of 11% to 12% per annum.

"What is a problem for me is also a problem for other developers and I fully understand that but my situation is vastly different because of all the extra costs that I am forced to carry.

"I don’t see any other developers coming forward to undertake a project like this and that is the reason that there is a lack of quality housing development in Tipperary Town.

"I have been working on this project for two to two and a half years and the costs to date are in excess of €900,000. This project can only happen if the council meet me halfway.

"If this project succeeds the county council will benefit through the provision of additional social and affordable houses so it is a win-win all round, but it can not be all one-way traffic," added Pramukh.

The most recent figures show that county councils were holding in excess of €291 million in development bonds at the end of 2020 and Pramukh says that it makes it difficult for any builder to have any certainty as to when the bond will be released as there is no guarantee as to when the development will be taken in charge.

"The council will expect all houses to be completed before they take charge of the estate and this will make it very difficult if the bond is very excessive.

"I completed a 21 housing estate in Cork city recently and the bond that I lodged was €20,000. I know that the process differs from council to council and the deposits can be onerous and time-consuming to retrieve but it is worth also remembering that bonds tie up vital capital that is secured through finance sourced at heavy percentage costs.

"The market cannot support the open-ended nature of bonds currently in use," he said.

Pramukh also questions the policy whereby the council can sit on a bond for 10-12 years without providing any services for the residents.

"A bond is meant to protect the council if a developer goes out of business but why shouldn’t the bond be used to provide services when that occurs? I would point to a development in Boherlahan that I am very familiar with and where the council is sitting on a bond for 10-12 years without providing any services or amenities, including street lighting, for the residents. To have potential capital held in a bond disadvantages the community that could make use of the returned monies to invest in greater delivery of services," he said.

Martin posed the question to Pramukh as to where now for the project?

"I would ask the council to reconsider my suggestion of a reduced bond for the project. The council has stated that they do not intend to change their policy on the bond amount at this particular time, particularly given the uncertainty on the construction sector and supply chain.

"In response I would say that I am taking all the responsibility and all the risks in this project and that therefore there has to be an element of give and take from both sides. I am willing to work 100% with the council on all the regulatory requirements and in return I just want some leeway to help get the project started and off the ground," he added.

COUNCIL STATEMENT 

In a statement in response to the story above, Tipperary County Council said: "Security bonds are a requirement of the national planning process for residential housing developments and these bonds are necessary to ensure that in the event that a development is not completed to satisfaction by a developer that the safety and the interests of the residents are protected, such as the provision of street lights, footpaths, road surfacing and sewers.

"Local authorities are legally obliged to intervene when a developer does not complete a development to the required standards, which places a financial liability on the local authority and ultimately on public finances.

"Security bonds reduce this financial risk and as such are a necessary element of the construction costs, which developers are aware of and need to build into their costs.

"Developers have the option of providing the bond in the form of an insurance, where the developer pays an annual premium to a financial institute or security provider, in turn for the provision of the bond. Other flexible payment options available to developers in Tipperary include the payment of the bond in phases as the developer constructs houses.

"Due to the current volatile nature of the construction sector and increasing construction costs associated with land prices and construction inflation in particular the council is not in favour of reducing the current bond amount that is required. However, Tipperary County Council will certainly work with and engage with developers on applying the various bond payment flexibilities.

"The council will continue to monitor the situation in line with national guidance and policy."