Moskovsky Komsomolets: "Prime Minister Instructs Builders"
Over 40% of the population will be able to afford housing made cheaper by command.
Vladimir Putin's surprise trip to the supermarket caused a decrease in the prices of some foodstuffs. Now the Prime Minister is attempting to extend this approach to other areas.
At the recent meeting of the Council Presidium on National Projects, Mr Putin gave an instruction for affordable housing to be sold to Russians for no more than 30,000 roubles per square metre. At least 40% of the population must be able to afford these apartments. It is not the first time that the Russian Prime Minister has taken an informal approach to influence the market. However, analysts say that his instruction alone will not suffice in this case. What are the obstacles to Mr Putin's method?
Developers will stop selling apartments below the market price. developments. According to data from the Quantity Surveyors Union, one third of Russian regions are able to comply with Mr Putin's price guideline.
However, Konstantin Aprelev, vice-president of the Russian Guild of Realtors, thinks that the regions' enthusiasm for cutting their prices to Mr Putin's level will not last long. Developers have to work at full stretch in order to keep afloat and pay off loans. They apartments at prices below construction costs. However, analysts say that in future apartments will not be available so cheaply, because there will be fewer on the market.
Construction will be suspended. Currently about 80% of construction projects have been frozen across Russia. Moscow is in the same situation, says Nikolai Koshman, president of the Builders Association of Russia. Builders in the capital are in the process of finishing projects started some time ago. According to the Association's data, housing construction in Russia will fall short of the target by 20 million square metres. The Prime Minister admitted at the meeting that construction volume had already fallen by nearly 20%. Mr Koshman said: "It was planned that 73 million square metres of housing would be built this year, but only 53 million will be commissioned."
There is no reserve for 2010. However, we need to build 140 million square metres each year in order to ensure the housing market is adequately supplied.
There is a lack of building materials. The production of building materials has fallen by 18% to 40%. "The situation looks especially grim in the production of basic building materials. Cement production has fallen by 71% and brick production, by 59%," said Vladimir Yakovlev, who heads the Russian Union of Builders. All this will not make housing cheaper.
There is no money for construction. The construction sector badly needs long-term investment. However, banks are unwilling to issue loans. Besides, businessmen have repeatedly complained to the President about exorbitant interest rates. He agreed with them: annual interest rates of 20% and even higher are ruinous. Meanwhile, cheap long-term money remains inaccessible, consequently a wave of bankruptcies has swept the construction market.
There are additional burdens on construction companies. According to the Russian Guild of Realtors, payments for land, utility connections and approvals account for 70% of housing costs. The rates approved by government officials are too high; for example, water supply connection in Tyumen can cost up to $50 per square metre. Mr Aprelev cited one more example: near Yekaterinburg, construction companies are required to buy mini thermal power plants which will generate ten times more electricity than needed. Mr Putin will have to relieve developers of all these extra burdens. This means, among other things, the abolition of the local authorities' share, which averages 10% of the total building cost per square metre and which in Moscow stands at 50% (according to the Real Estate Market Indicators Centre). The state would also have to pay for the preparatory work on construction sites, road construction and communications. Developers will then only have to pay for the building frame. Can we afford to be so extravagant?
Corruption must be done away with. According to unofficial sources, 25% of the building cost per square metre is due to the share taken by corrupt officials. There is no need to discuss whether this obstacle could be removed in one stroke.
And, finally, there is red tape. In the United States, it takes 40 days to negotiate and execute the required documents, in Russia, 702 days.
If nothing is changed, the real estate market may offer you, for Mr Putin's 30,000 roubles, a building frame somewhere in the provinces. How many of our "well-to-do Russians" will agree to move there?
By Tatyana Zamakhina
