Underground facilities for Ukraine’s defense industry: a step-by-step guide for investors

The Government has expanded opportunities to attract private investment in protected production infrastructure for Ukrainian defense industry enterprises.

The relevant amendments to the Cabinet of Ministers of Ukraine Resolution No. 1494 dated November 19, 2025, allow other legal entities (developers) to build underground facilities using their own or externally sourced funds under simplified procedures.

Once construction is complete, the developer transfers the entire facility or part of it to a defense industry enterprise for ownership, lease, or another right of use provided by law.

This mechanism helps attract private capital to create, relocate, and expand protected production capacity.

What do investors gain from simplified construction?

The new mechanism allows investors and developers to build real estate under simplified procedures by transferring part of the area to meet the needs of the defense industry.

To participate in the experimental project, it is sufficient to transfer at least 25% of the total area of the completed facility to a defense industry enterprise through a transfer of ownership, a lease, or another property right provided by law. These premises must be suitable for housing, relocating, or expanding production capacity.

The developer may use the remaining area, up to 75%, for its own investment and commercial projects in accordance with the law and the facility’s legal regime.

The investor can thus combine building protected infrastructure for defense companies with developing its own business. It can also benefit from the simplifications under Resolution No. 1494 related to land plots, urban planning documentation, and permitting procedures.

Which developers and investors can take part in the project?

To use the simplified mechanism, the developer must conclude an agreement with a defense industry enterprise that meets at least one of the following criteria:

• it is a Defence City resident;
• it is listed in the annex to the Procedure approved by Resolution No. 1494 or was created through the reorganization of such an enterprise;
• it is included in the electronic register of selection participants and contractors under state contracts (agreements);
• it has been designated by the Ministry of Defence of Ukraine as critically important to the functioning of the economy during a special period in the defense industry sector or to meet the needs of the Armed Forces of Ukraine or other military formations.

Meeting one of these criteria is enough. The developer itself does not have to be a defense industry enterprise, a Defence City resident, or a state contractor.

Who can be a developer of defense industry facilities?

The construction client may be another legal entity acting on its own behalf that finances construction with its own and/or externally sourced funds and carries it out at its own risk.

At the same time, the Procedure restricts legal entities linked to the aggressor state or the occupying state.

In particular, legal entities established under the laws of such states may not take part, nor may entities that have ties to them, as defined in the Procedure, through their participants, ownership structure, or ultimate beneficial owners.

The restrictions also apply to legal entities that are subject, or whose ultimate beneficial owners are subject, to sanctions and other restrictions provided for in the Procedure.

The developer must provide documents confirming that it meets the established requirements.

Facilities eligible for the simplified procedure

The mechanism covers the construction of:

• underground production infrastructure facilities;
• above-ground buildings, structures, and structural elements functionally connected to such underground facilities.

An underground production infrastructure facility is a construction project or part of one located below the planned ground level and intended to house, relocate, or expand production capacity.

Above-ground elements may be part of the project if they support the construction, operation, maintenance, protection, cover, camouflage, or intended use of the underground facility.

Important: the simplifications do not automatically apply to any commercial development. The facility must meet the requirements of Resolution No. 1494.

How to organize construction of underground defense facilities: seven steps

The procedure for organizing the construction of underground production facilities and the buildings functionally connected to them consists of the following steps.

Step 1. Identify the defense industry enterprise’s needs

First, the developer must identify the defense industry enterprise for which the facility will be built and agree with it on the main parameters of the future facility.

In particular:

• the purpose of the premises and the nature of the production activities;
• the required area;
• requirements for utility networks and communications;
• technological requirements for production processes;
• requirements for protection, access, and operation;
• the estimated timeline for the facility to be ready for use.

The developer may initiate construction on its own. However, to use the simplified mechanism, the developer must identify a specific need of a defense industry enterprise and then set it out in an agreement.

Step 2. Identify the land plot and the legal grounds for construction

The developer must identify the land plot, building, or structure on which, or using which, construction is planned.

To act as the construction client, the developer must have:

• the rights to the land plot, building, or structure required by law; or
• the authority to act as the construction client granted by the owner or user of the land plot, building, or structure in accordance with the law.

Resolution No. 1494 allows construction to proceed without first completing the procedures for the purchase, withdrawal, or allocation of a land plot.

If land is used under this special mechanism before the proper paperwork is completed, the relevant approval must be obtained:

Approval to use a land plot does not replace the need to confirm the developer’s rights or authority to act as the construction client. These are two separate requirements.

Step 3. Agree on the terms of financing and transfer of the facility

The developer finances construction with its own and/or externally sourced funds.

Once construction is complete, the entire facility or the part specified in the agreement is transferred to the defense industry enterprise under one of the following rights:

• ownership;
• lease;
• another right of use provided by law.

If only part of the completed facility is transferred to the enterprise, that part must account for at least 25% of the total area of the construction project.

This part must be functionally suitable for housing, relocating, or expanding the enterprise’s production capacity.

If the facility or part of it is transferred under a lease or another fixed-term right of use, additional conditions apply:

• the term of use is at least one year from the date of transfer;
• the defense industry enterprise has the right to demand that its use be extended until martial law is terminated or lifted;
• the developer must provide for such an extension at the enterprise’s request.

Resolution No. 1494 does not oblige the Ministry of Defence to buy the completed facility or to guarantee compensation of the developer’s costs. The parties set out the economic terms of the project in the agreement.

Step 4. Prepare an agreement with the defense industry enterprise

Concluding a civil law agreement between the developer and the defense industry enterprise is a mandatory condition for applying the simplified mechanism.

The agreement must contain six main groups of terms:

• Subject of the agreement. The developer’s obligation to build the specified facility with its own and/or externally sourced funds and to transfer it, or part of it, to the defense industry enterprise, and the enterprise’s obligation to accept the facility or part of it.
• Type and scope of the right. The right under which the facility or part of it is transferred, and the conditions and moment at which this right arises.
• Characteristics of the part of the facility. If only part of the facility is transferred, the agreement must specify its description and area, its suitability for production, and compliance with the minimum 25% requirement.
• Timelines and procedure for transfer. Terms for transferring the completed facility or part of it to the defense industry enterprise.
• Duration of use. For a lease or other fixed-term use, at least one year and the enterprise’s right to demand an extension until martial law is terminated or lifted.
• Intended use. The obligation to use the facility or part of it to house, relocate, and/or expand the enterprise’s production capacity.

It is also advisable to define the facility’s technical specifications, the financing procedure, the parties’ liability, the terms for accepting the premises, and how land issues will be settled.

Step 5. Submit documents to the Ministry of Defence

No later than one month before the planned date of concluding the agreement, the developer must submit the following to the Ministry of Defence of Ukraine:

• the draft civil law agreement with the defense industry enterprise;
• documents confirming that the developer meets the requirements of paragraph 6 of the Procedure.

Documents can be submitted:

• in writing by post to the address of the Ministry of Defence of Ukraine;
• electronically to the email address of the Ministry of Defence of Ukraine listed on its official website, in compliance with the law on electronic documents and electronic trust services.

Step 6. Pass the document review

Within five working days of receiving the documents, the Ministry of Defence of Ukraine checks whether the draft agreement and the developer meet the established requirements.

The developer is then informed of the review results.

If discrepancies are found, the Ministry of Defence of Ukraine specifies:

• the specific discrepancies;
• the requirements of the Procedure that the documents do not meet;
• how to correct the discrepancies;
• the deadline for correcting them, which may not be less than five working days from the date the notice is received.

Once the discrepancies have been corrected, the developer resubmits the documents. The repeat review follows the same procedure and timelines.

Discrepancies that have already been corrected may not be raised again on the same grounds.

Important: the Ministry of Defence review does not replace the construction expert review and is not a separate building permit.

Step 7. Conclude the agreement and start construction

After the review and the correction of any discrepancies found, the developer and the defense industry enterprise conclude a civil law agreement.

The agreement must be concluded before construction work begins.

If the requirements of the Procedure are met, the developer may start construction using the simplified procedures.

Construction simplifications under Resolution No. 1494

Resolution No. 1494 allows construction to be carried out:

• without prior purchase, withdrawal, or allocation of a land plot, provided that the special requirements for its use are met;
• without mandatory compliance with urban planning documentation;
• without obtaining urban planning conditions and restrictions;
• without an environmental impact assessment;
• without a permit or approval for construction from the Ministry of Culture of Ukraine or its territorial bodies;
• without obtaining the authorization normally required to carry out construction work;
• using the Unified State Electronic System in the Field of Construction without making the relevant information public on its portal.

At the same time, the simplified mechanism does not remove the requirements for proper design, mandatory expert review, construction quality control, and the legal grounds the developer needs to act as the construction client.

If the developer acts as the construction client, it is responsible for arranging designer’s supervision and technical supervision.

Connections to electricity, water, gas, heat, and other necessary resources can be arranged in parallel.

The defense industry enterprise has the right to conclude supply agreements for such resources even before the declaration of readiness for operation is registered or the certificate is issued.

Commissioning a completed facility

Once construction is complete, the facility is commissioned using the Unified State Electronic System in the Field of Construction without making the relevant information public on its portal.

Depending on the facility, this is done on the basis of:

• a registered declaration of the facility’s readiness for operation;
• or an act of the facility’s readiness for operation, through the issuance of a certificate.

In this case, there is no need to provide information on the state registration of land rights, urban planning conditions and restrictions, documents granting the right to perform construction work, or the results of the control geodetic survey.

If construction is divided into phases, the facility can be commissioned phase by phase in accordance with the design documentation.

Facilities whose construction began under the experimental project but was completed after the project ended can also be commissioned.

After the facility is commissioned, the developer transfers the entire facility or the part specified in the agreement to the defense industry enterprise within the agreed timeline, with the relevant rights and documents properly formalized.

If the defense industry enterprise’s status changes

If, after construction begins, the defense industry enterprise no longer meets certain criteria set out in the Procedure, this alone does not mean the project has to be stopped.

Construction can be completed, and the facility can be commissioned and transferred to the enterprise under the concluded agreement.

Such a loss of eligibility is not in itself grounds for terminating or amending the agreement.

Land issues after martial law is terminated or lifted

The simplified use of a land plot during the experimental project does not remove the need to settle land relations later.

After martial law is terminated or lifted, the defense industry enterprise takes measures, if necessary, related to:

• forming the land plot;
• its withdrawal, purchase, or allocation;
• state registration of the land plot in the State Land Cadastre;
• state registration of property rights to the land plot.

If construction was carried out by another legal entity, the purchase, withdrawal, or allocation of land plots is also carried out at that legal entity’s own expense, without using state or local budget funds.

It is therefore advisable to set out in the agreement how the parties will interact, how the relevant procedures will be financed, and how obligations will be fulfilled after martial law ends.

Detailed terms for applying the simplified mechanism are set out in the Cabinet of Ministers of Ukraine Resolution No. 1494 dated November 19, 2025.

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