Ukraine’s Construction Industry 2025: Comprehensive Analysis of Key Challenges on the Path to Reconstruction

At the Crossroads of Decline and Hope

Ukraine’s construction industry in 2025 finds itself in a state of profound paradox. On one hand, the country faces an unprecedented reconstruction challenge that potentially creates enormous demand for construction services. On the other hand, the sector shows signs of contraction and faces a series of systemic crises that limit its ability to realize this potential. Official statistics for the first half of 2025 vividly illustrate this contradictory dynamic: the volume of completed construction work decreased to 82 billion hryvnias compared to 86 billion hryvnias for the same period in 2024.

This decline occurs against the backdrop of massive infrastructure, housing stock, and industrial facility destruction that, seemingly, should have stimulated a construction boom. However, reality proved more complex. The industry’s development narrative in 2025 is defined by the conflict between enormous pent-up demand generated by reconstruction needs and rigid structural constraints. Among them are: critical shortage of workforce provoking rapid wage growth; supply chain disruptions for key materials and high import dependence; state stimulus programs that, while supporting certain market segments, have limited impact on new capital construction; and regulatory uncertainty and unique wartime challenges.

Thus, 2025 for Ukraine’s construction industry is not so much a year of massive growth as a period of deep structural adaptation. The industry’s ability to cope with the most acute human capital crisis and solve systemic problems will determine its readiness to become a true driver of the country’s post-war reconstruction. This analytical report aims to examine each of these problems in detail, assess their mutual impact, and outline strategic perspectives for one of the key sectors of the Ukrainian economy.

Macroeconomic Pressure: Foundation of Market Realities

The construction industry’s condition is inextricably linked to the general economic climate in the country, which in 2025 is characterized by restrained recovery and significant risks. Although the total volume of construction work decreased, certain indicators suggest fragile stabilization and business adaptation to new conditions. In particular, the business confidence indicator in construction in Q3 2025 improved by 2.5 percentage points, though it remained at a deeply negative level of minus 32.6%. This suggests that companies, despite everything, are finding ways to operate, with 45% of them assessing work volumes as seasonally acceptable.

Impact of Monetary Policy and Inflation

A key factor restraining investment activity is the National Bank of Ukraine’s tight monetary policy. Throughout a significant part of 2025, the key rate was maintained at 15.5%. Such a high rate is a benchmark for the cost of money in the economy: the NBU issues loans to banks at rates not lower than the key rate, which inevitably translates into high costs of commercial loans for developers and industrial enterprises. The NBU’s forecast of a possible rate reduction to 14% only in the fourth quarter of 2025 means that affordable private financing for new large projects will remain practically unattainable throughout the year, freezing private sector development.

The situation is complicated by inflationary pressure. With general inflation at 6.5%, price growth in construction was only 3.5%. This gap is an alarming signal. It indicates that construction companies cannot pass their rising costs (primarily for labor and energy) to customers. This occurs due to low demand for large capital projects and high competition for each contract. As a result, developers are forced to absorb costs, leading to sharp compression of profitability. If this trend continues, the industry may face a wave of financial instability among contractors, threatening the quality and timing of work completion.

Forecast and Economic Prospects

According to NBU forecasts, inflation should slow to 8.7% by the end of 2025, while real GDP growth will be 3.1%. These indicators suggest gradual macroeconomic stabilization. However, the positive effect on the construction sector will be delayed. The industry will only feel relief after solving specific internal problems such as personnel shortage and supply chain disruptions, as well as after monetary policy softening that will make lending more accessible.

Table 1: Key Macroeconomic and Market Indicators for the Construction Industry (2024-2025)

Labor Shortage: The Industry’s Most Acute Problem

While macroeconomic conditions create the general background, labor shortage is the most acute and directly felt problem that directly limits the production capacity of the construction industry in 2025. The mobilization of a significant portion of the male population has led to the drain of skilled personnel, provoking real “labor hunger” and, consequently, uncontrolled wage growth.

Wage Dynamics and Its Consequences

In the absence of precise statistical data on the shortage percentage, the best indicator of the crisis is wage dynamics. Over 2024, the average wage level in the industry grew by 23%. In 2025, this trend only intensified:

1. General laborer wages grew by 25% and start from 20,000 hryvnias.
2. Installer wages grew by 33% and range from 30,000 hryvnias.
3. Electrician wages grew by 25% and start at 22,500 hryvnias.
4. Construction worker (general category) wages grew by 20% to 30,000 hryvnias.

Meanwhile, the minimum salary in the construction industry was raised from 6,995 hryvnias to 12,142 hryvnias. Such rapid growth, especially in the skilled worker specialties segment, directly affects construction costs. Since labor is one of the main cost items, this further pressures project profitability, which already suffers from the inability to adequately raise prices for customers.

This creates the risk of reaching the so-called “affordability ceiling.” Construction cost increases driven by the wage fund may outpace the purchasing power of both the state and private buyers. Even state programs such as “eHome” and “eReconstruction,” working with fixed budgets and compensation limits, lose their effectiveness. A housing certificate or mortgage loan that six months ago allowed purchasing an apartment may today prove insufficient due to per-square-meter price increases. This launches a dangerous chain: cost increases reduce state program effectiveness, which decreases demand and harms the same construction companies that were forced to raise wages.

Social Transformation: Women in Construction

The response to the shortage of male workers has been an unprecedented social transformation—the active involvement of women in traditionally “male” construction professions. This process is supported at the state level and by business.

The most striking example is the “Iron Women” program launched by the Ministry of Economy. It provides free retraining for women as construction equipment operators—excavators and front loaders. Training, which includes online theory and practice on modern Volvo equipment, allows obtaining qualifications as “excavator operator 5th grade” and “loader driver 4th grade.” Although the pilot group includes only 12 participants, this initiative has enormous symbolic significance.

“Iron Women” is part of a broader trend. Projects already exist for training women to drive trucks, and statistics record that women increasingly master specialties such as crane operator (104 women), repair locksmith (56 women), and woodworking machine operator (274 women).

Despite the importance of these initiatives, they are not yet capable of solving the problem on a national scale. Industry needs are measured in tens of thousands of specialists, while training programs graduate dozens or hundreds. This underscores the need to create a comprehensive state program for mass professional training and retraining of personnel for the construction industry.

Table 2: Average Wage Dynamics in the Construction Industry (2024-2025)

Material Base: From Import Dependence to Localization

Providing construction projects with materials is the second most significant challenge after labor shortage. In 2025, the construction materials market is characterized by gradual recovery of domestic demand, but also high dependence on imports, creating strategic risks for reconstruction.

Steel and Metal Products Market

The metal products market demonstrates positive dynamics, which is an important indicator of construction activity revival. In the first 8 months of 2025, domestic steel consumption grew by 22.6%, reaching 2.81 million tons. The main demand drivers are construction of defensive structures, infrastructure restoration, and residential construction. The highest demand growth is observed for hot-rolled sheet metal (+60%) and reinforcement (+45%).

However, the key vulnerability remains the high share of imports, which accounts for about 37% of total consumption. This means that more than a third of Ukrainian construction’s metal needs are covered by external suppliers, making the industry sensitive to world price fluctuations, logistics problems, and currency risks.

Bottleneck: Glass and Window Systems

The most critical situation is with float glass (sheet glass) supply, which is the basis for modern window production. Ukraine is almost completely dependent on imports of this material, creating a strategic threat to the entire reconstruction program. Any supply disruption, for example, due to logistics obstacles or geopolitical changes, could lead to finishing work stoppages at thousands of facilities across the country—from residential buildings to schools and hospitals. Import analysis shows dominance of Turkish manufacturers, creating the risk of dependence on one region.

Strategic Response: Production Localization

Recognizing this risk, both the state and business have begun implementing a production localization strategy. In 2025, several ambitious float glass production plant construction projects were announced:

1. “NovaSklo” Project (EFI Group): Plans to build a plant in Kyiv or Zhytomyr region with investments of about 230-240 million euros in one production line. Construction start is planned for spring 2025 or March 2026, with completion by 2028.
2. “City One Development” Projects: The company plans two plants—one in Berezan (Kyiv region) with implementation deadline by 2027, and another in the western region (by 2028).

These projects are not just commercial initiatives but elements of national economic security. Their implementation will not only close domestic needs and save up to 200 million euros in foreign exchange earnings annually but also eliminate a critical vulnerability in the reconstruction process. The state supports such initiatives within the “Made in Ukraine” policy, offering investors through UkraineInvest compensation of up to 30% of capital investments and other benefits.

However, implementing these energy-intensive projects faces the risk of high electricity prices. In 2025, tariffs for industry increased significantly, and the final cost of 1 kWh can reach 9.5-10.4 hryvnias. This will significantly impact the cost of future production and require implementation of the most modern energy-efficient technologies.

State Initiatives: Demand Driver or Targeted Impact?

State programs are a key factor supporting the construction industry under conditions of limited private investment. In 2025, the main market impact comes from “eReconstruction,” “eHome” programs and the DREAM digital ecosystem, each with its own specifics and target audience.

“eReconstruction” Program: Stimulating the Repair Market

The “eReconstruction” program has become a powerful driver for the repair and restoration work segment. As of August 2025, its results are impressive:

• Compensation for damaged housing: Over 97,000 Ukrainians received assistance totaling 9.7 billion hryvnias.
• Housing certificates for destroyed housing: Over 21,000 families received certificates worth 31.1 billion hryvnias for purchasing new housing.

The program demonstrates rapid dynamics: in just two months, from June to August, the number of compensation recipients for damaged housing grew by 7,000, and the payment amount by 700 million hryvnias. “eReconstruction” effectively solves urgent citizen problems and provides work for small and medium construction crews throughout the country.

“eHome” Program: Mortgage Support with Nuances

The affordable mortgage lending program “eHome” is designed to stimulate housing demand, particularly in the primary market. Overall, since the program’s start, over 19,400 loans totaling over 32.5 billion hryvnias have been issued. In 2025, the program continues to work actively: over 4,600 families received loans for 8.4 billion hryvnias.

However, analysis of issued loan structure reveals a systemic problem. Despite the declared goal of increasing the primary market share to 40% in 2025, the program mainly works in the secondary market. For example, during one week in September, 163 loans were issued for primary housing while 102 for secondary, which, though a positive ratio, doesn’t reflect the overall trend for the entire period. Additionally, the program has clear regional concentration: most loans are issued in relatively safe regions such as Kyiv and Kyiv region, Lviv and Ivano-Frankivsk regions, limiting its stimulating effect in frontline zones.

DREAM Ecosystem: Reconstruction Transparency and Funding Deficit

The Digital Restoration Ecosystem for Accountable Management (DREAM) is a “single window” for managing restoration projects, ensuring transparency from application submission to implementation monitoring. Priority areas are restoration of critical social infrastructure: education (4,648 projects), healthcare (1,870 projects), and water supply (1,594 projects). An example is the allocation of 960 million hryvnias subvention for school canteen modernization, projects selected exclusively through DREAM.

However, the main challenge for DREAM is the colossal gap between needs and available funding. The total cost of registered projects reaches 1.8 trillion hryvnias, while confirmed funding (from state and local budgets, as well as international partners) is only 166 billion hryvnias, or 9.2% of the need. This transforms DREAM from a powerful financing tool into a transparent but largely unfunded “project bank.”

Analysis of state initiatives shows fundamental mismatch between support structure and industry needs for long-term development. The most financially secured programs (“eReconstruction” and “eHome”) stimulate the market of small repairs and secondary housing. This doesn’t create demand for large, long-term contracts needed by major developers for investments in new technologies, equipment, and production capacity expansion. As a result, the market remains fragmented and focused on short-term tasks.

Table 3: State Support Program Performance (as of Q3 2025)

Regulatory Maze and Wartime Challenges

Besides economic and personnel problems, the construction industry in 2025 operates under complex and changing regulatory policies, as well as faces unprecedented challenges generated by the war.

Urban Development Reform (Law #5655)

The urban development reform embedded in Law #5655 is one of the most ambitious and controversial initiatives. Adopted in December 2022, the law remains subject to heated discussions. Its key ideas are maximum digitization of all processes, creation of a unified electronic system, strengthened responsibility, and involvement of private authorized persons in urban development control instead of state bodies.

Reform supporters claim it minimizes corruption by eliminating the “human factor” and accelerates permitting procedures. Opponents, including the Association of Ukrainian Cities and the architectural community, warn about risks of power centralization in the Ministry of Development hands, nullification of local government’s role in planning their community development, and creation of private control market monopolies. This prolonged uncertainty creates an unfavorable investment climate, as developers lack clear understanding of the rules of the game. The situation is complicated by the fact that the regulatory framework continues to change: during 2024-2025, the Cabinet of Ministers adopted several resolutions (particularly #1557) that adjust the procedure for developing urban planning documentation at the local level.

Demining Challenge: Prerequisite for Construction

For a significant part of Ukraine’s territory, any construction is impossible without prior humanitarian demining. The problem’s scale is colossal: potentially contaminated with explosive ordnance areas remain between 139 and 156 thousand km².

The cost of demining is a significant financial burden. According to Prozorro auction data, the average market price for clearing one hectare of agricultural land in 2025 ranges between 60,000-62,000 hryvnias. The total funding need for clearing all territories is estimated in trillions of hryvnias, while the 2025 state budget allocated only 2 billion hryvnias for these purposes. This financial gap means the demining process will be prolonged and become the main constraining factor for starting reconstruction projects in de-occupied territories.

The combination of regulatory uncertainty around Law #5655 and unpredictable, enormous demining costs creates a “risk paralysis” effect for private investors. A developer considering a project in liberated territory faces two uncontrollable variables that make it impossible to compile a reliable business plan. This makes reconstruction of such regions almost entirely dependent on state and donor funding.

Adaptation to Energy Crisis

Constant attacks on energy infrastructure create additional obstacles. Power outages directly affect construction sites, stopping cranes, concrete mixers, and other equipment. This leads to schedule disruptions and increased costs due to downtime. Overall, 76% of Ukrainian companies confirmed the impact of outages on their activities. The indirect impact is even stronger: rising electricity tariffs for industry increase construction material costs, spinning the inflationary spiral in the industry. The industry adapts by investing in generators, but this raises capital and operational costs. Some hope comes from the planned transition to a new, zonal blackout schedule system in 2025, which should make them more predictable for business.

Table 4: Comparative Analysis of Humanitarian Demining Costs (2025)

Architecture of the Future: New Projects and Standards

Despite all challenges, 2025 became a period of forming a new vision for Ukraine’s future reconstruction. The war forced rethinking approaches to urban planning and housing standards, prioritizing safety, sustainability, and modern architectural solutions.

New Vision for City Reconstruction

A striking example of the new approach is the development of a general plan for Mykolaiv. Leading world specialists are involved in this process, including Norman Foster’s architectural bureau (Norman Foster Foundation) and Italian company One Works. The project’s goal is not just to restore what was destroyed, but to create a “city of the future” that harmoniously combines historical heritage with innovative “green” infrastructure. The fact that the city allocated 4.5 million hryvnias for this work in the 2025 budget demonstrates the seriousness of intentions. A similar project is being developed for Kharkiv.

Involving world-renowned architects is a powerful signal to international partners and donors. This not only guarantees high quality of urban planning solutions but also increases trust in reconstruction projects. Such an approach transforms local initiatives into globally visible symbols of Ukraine’s revival, making them more attractive to international financial institutions. This could become a model for other affected cities: developing a modern master plan with authoritative international partners as a tool for attracting necessary funding.

Evolution of Housing Standards: Safety Above All

The war dramatically changed homebuyers’ priorities. Safety became a key factor when choosing real estate. This formed stable demand for residential complexes that have modern, reliable shelters and bomb shelters in their structure.

The market quickly responds to this request. Leading developers such as “Intergal-Bud,” “Kovalska,” “RIEL” actively integrate safety elements into their new projects, understanding that this has become a significant competitive advantage. The presence of underground parking that can serve as shelter, or specially equipped premises in new buildings offered under the “eHome” program, is an important argument for buyers. Thus, there is a market, organic evolution of construction standards where “safety premium” becomes an integral part of pricing in the primary real estate market.

Conclusions and Strategic Recommendations

Analysis of Ukraine’s construction industry condition in 2025 reveals a deep structural crisis that constrains the sector’s potential for large-scale country reconstruction. The key problem is acute shortage of skilled labor, provoking unsustainable wage growth and acting as a rigid constraint on production capacity. This crisis is amplified by high capital costs due to tight monetary policy, regulatory uncertainty around urban development reform, as well as colossal logistical and financial challenges related to demining and energy instability. State support programs, while important, mainly stimulate the repair market and secondary housing, not creating sufficient demand for new capital construction.

2026 Forecast

Further industry development will depend on whether these systemic problems are solved. Two scenarios are possible:

1. Scenario A (Stagnation): If the labor market crisis doesn’t receive systemic solutions, wage inflation will continue, making many reconstruction projects financially unprofitable. The industry will remain fragmented, focused on small repairs, while large infrastructure projects will be implemented slowly and over budget.
2. Scenario B (Structural Transformation): If the government, in partnership with business, launches large-scale professional-technical education programs, resolves legislative uncertainties, and supports localization of key material production (e.g., glass), the industry can stabilize its cost base. This will allow gradually building capacity, creating a foundation for accelerated growth in 2027-2028.

Strategic Recommendations

For the Government of Ukraine:

1. Launch National Professional Training Program: Urgently develop and finance a program for mass training and retraining in deficit construction specialties. The program should target veterans, internally displaced persons, and women, with financial incentives for students and employers.
2. Index State Aid: Compensation amounts under “eReconstruction” and credit limits under “eHome” should be tied to the official construction price index to preserve their purchasing power.
3. Prioritize and Fund Demining: Significantly increase budget financing for humanitarian demining and use the DREAM ecosystem to transparently determine priority territories for future development.
4. Complete Urban Development Reform: Adopt a final and clear decision on Law #5655 implementation and related bylaws to provide the market with long-awaited legal certainty.

For Business (Developers and Manufacturers):

1. Invest in Human Capital: Create own training centers, internship programs, and mentorship for preparing and retaining skilled personnel.
2. Implement Technologies and Prefabrication: Invest in technologies that reduce dependence on manual labor, particularly in prefabricated construction, modular structures, and modern construction equipment.
3. Develop Vertical Integration: Consider investment opportunities in construction material production to control supply chains and costs.
4. Focus on Niche Markets: Specialize in high-demand areas such as energy-efficient building modernization and construction of facilities with integrated high-class safety systems.