Hungary-based Alfa Group is entering the dynamically growing private rental sector (PRS) and will deliver the second and third phases of its Ha11er residential project in District 9 of Budapest with apartments for rent. Residential-for-rent is an already well-established market segment in Western Europe that has attracted significant interest from institutional investors. This is increasingly true for certain CEE countries as well, such as Poland or the Czech Republic, but in Hungary, Alfa Group is entering the PRS market as one of its pioneers.
According to a recent report by international real estate consultancy Colliers, the existing PRS stock of Hungary is approximately 210, significantly below Poland (4,500) or the Czech Republic (57,000). However, this is expected to change in the coming years as a combination of different factors such as rising home prices or social and economic changes combined with increasing investor interest will encourage more developers to build not only for sale but also for rent. Based on the existing transactional evidence, gross initial yields in the private rental sector are between 4.5-5.5% in CEE, depending on the location, offering a lucrative, low-risk investment opportunity.
Alfa Group’s Ha11er project is located near the intersection of Haller and Mester Streets in District 9 of Budapest, one of the most sought-after and most rapidly developing residential areas of the capital. Construction is underway and the first phase of the project, with completion scheduled for 2022, will comprise 262 apartments for sale with 184 parking spaces. The second phase, with completion planned for 2023, will feature 258 apartments for rent with 192 parking spaces. The third and last phase, with a planned completion date in 2025, will include 220 apartments for rent with 205 parking spaces.
Ha11er is a mixed-use project and all phases will include a sizable retail component in addition to the residential areas.
As a real estate developer, Alfa Group operates a full-service, vertically integrated business model and is also providing facility management services in all of its properties. This will also be available to the tenants of the Ha11er project.
“Anticipating trends is the key to our ongoing success and I do believe that due to the dramatic increase in the cost of flats, we are already in a phase of adaptation where people, especially young professionals, are starting to understand that in some cases it makes more financial sense to rent an apartment than to buy one, what additionally gives high flexibility in case of change of place of living or work. Being active in both PRS and residential-for-sale, we see the supply-side of newly built apartments for rent as less crowded compared to the latter. We are and will remain active in both submarkets,” explains Ohad Epschtein, Managing Partner of Alfa Group International.
Alfa Group has been working on building an environmentally sustainable portfolio for well over a decade and green solutions are at the cornerstone of every project in every asset class, including residential. All new developments, including Ha11er, are being built in line with the highest sustainability standards and around customer expectations. The developer’s goal is to make buyers and tenants feel at home while providing them with climate-friendly features such as geothermal heating, green rooftops, charging stations for electric cars and areas for community activities.
To finance its sustainable development strategy, Alfa Group International plans to raise €27 million (approx. HUF 9.5 billion) at its inaugural green bond issue in December 2021, where MKB Bank will act as bond arranger. A German-based rating agency, Scope Ratings, has already assigned a rating to Alfa Group, contributing to greater transparency in European capital markets.
“With the issuance of Alfa Group’s first green bond, we are providing investors with the opportunity to: support our objective to mitigate climate change globally by reducing greenhouse gas emissions through our renewable and circular solutions and also to participate in our expansion into a new sector of real estate market in Hungary,” comments Ohad Epschtein, Managing Partner of Alfa Group International.
