Analysts say the Government should nationalise the construction industry.
Russian developers are sharply reducing construction and are renouncing new projects. This may jeopardize the high-priority Affordable Housing national project and prevent the Government from commissioning 80 million square metres of housing by 2010, as promised by Prime Minister Vladimir Putin last year. Regional authorities say developers are no longer interested in available construction sites.
The Government predicts that the construction industry will not rebound even in the mid-term. Analysts believe that Russia will never post adequate housing-construction volumes without massive state intervention.
The Tomsk municipal administration says there is no demand for available construction sites. "Although we are ready to auction off the sites, people are not buying land," Deputy Mayor for City Development Yevgeny Parshuto told the paper. He said developers were not interested in the ten multi-story apartment-block construction sites. "As soon as we perceive demand, we will hold such auctions. There are ten sites with a starting price of 18 billion rubles ($629.4 million)," Parshuto said.
In mid-2008, developers complained about a lack of construction sites. President Dmitry Medvedev ordered the Government to set up a special federal land-plot fund for regional developers.
The Affordable Housing national project calls for commissioning 80 million sq m of housing in 2010, a 20 million metre increase from 2007. In his April 2007 State of the Nation address, President Vladimir Putin said 80 million square metres per year could no longer meet the current nationwide housing demand. Up to 100-130 million sq m of housing must be commissioned each year. "To be frank, per-capita housing-construction volumes must total at least one square metre," Putin told the Federal Assembly (Parliament).
However, these plans were thwarted in 2008. It appears that the country will be unable to annually commission 80 million sq m in the next few years. The Regional Development Ministry predicts that about 61 million sq m, or nearly as much as in 2007, will be commissioned this year. The construction industry will face an all-out recession in the next two years. "Analysts predict that 52 and 53 million sq m of housing will be commissioned in 2009 and 2010, respectively," Deputy Regional Development Minister Sergei Kruglik told the paper.
Analysts say the major problems now plaguing the national construction industry will make it impossible to build affordable housing, and that the financial crisis has only aggravated these problems. Moreover, the presidential national project will probably have to be shelved.
"An official decision to scrap the national project is primarily a political issue. However, end customers, producers, and the state will have to revise their plans for the next few years," UFG Real Estate chief analyst Yevgeny Naumov told the paper. He said there would be no other projects unless residential building developers were able to assess projected demand and initial-investment sources. "How can the industry launch new construction projects at this time of zero apartment sales and unaffordable bank loans?" Naumov asked.
Analysts say the construction industry cannot be revived, even if the government allots free sites. "The inability to annually build at least 80 million sq m of housing is an indication of all-out problems plaguing the construction industry, which cannot and does not want to commission cheap housing," Dmitry Shusternyak, CEO of the consultancy Finexpertiza Consulting, told the paper.
He said federal assistance to the national construction industry was ineffective, and that even the allocation of free sites to developers would not bring down declared housing prices and would not swell construction volumes.
"Developers face major initial expenses in order to coordinate their projects, to obtain requests for proposal and access to lines of communication, while such projects are unlikely to pay back in the foreseeable future. In addition, developers have to finance municipal budgets, build roads, lay out parks, replace substations, and do much more. In this situation, site-purchase expenses are irrelevant," Naumov told the paper.
"The state must display its desire and political will in order to expand housing construction. Right now, municipal or regional authorities can buy cheap building-materials companies and local construction-assembly administrations, making it possible to launch large-scale housing construction; such housing would cost several times less than that now offered by developers," Shusternyak said.
"Construction-site prices are not the main problem plaguing the industry. There has been no real solvent demand for the last two years, and prices were inflated. It would be possible to commission at least 80 million sq m of housing only after the re-division of property and the creation of new developers and real-estate agencies with state capital," said Alexandra Maltseva, director of the 2K engineering company's cost-estimate assessment department.