Page 90 - RUSRptSept18

in Russia spiral, so any budget commitment, no matter how large, is going to be misspent at some level. The proposed high-speed rail route connecting to Makhachkala in Dagestan and proposed bridge to Sakhalin are bellwethers. If they proceed, it's likely a great deal of projects will serve little development purpose. If not, there's more hope for rational planning in Russia's regions. By Putin’s decree this past May, the government must approve a comprehensive development plan for critical infrastructure by October 1. The primary aims of the plan are to develop Russia’s North-South and East-West transport corridors and to increase the country’s overall level of economic cohesiveness by 2024. Selected projects will receive 3 trillion rubles of budgetary funds—roughly the anticipated volume of the soon-to-be-created Development Fund. The White House’s initial draft plan included 690 projects, submitted by regions and interested agencies, worth 6.5 trillion rubles. After the first round of selection, 324 projects remain, covering air, road, rail, sea, and inland water transport. The Ministry of Energy will focus on the development of energy projects, also included in Putin’s decree. There are two types of projects considered in the plan: development projects, which progress the decree’s goals by improving transport accessibility, and life-support projects, which if not renovated, will have to be closed. All life-support projects under 1.5bn rubles automatically proceeded to the second stage of selection. Major development projects that still remain are the construction of icebreakers, the reconstruction of the M5 and M7 motorways, a new high-speed route from Kazan to Yekaterinburg, and the completion of the Moscow-St. Petersburg highway.
Moscow developers secured record number of construction permits in June. In June alone, the Moscow region government issued 216 permits for the construction of residential buildings against 16 permits in May, according to Vedomosti. In aggregate, in 1H18, Moscow region developers obtained permits to construct 7.2mn sqm of NSA against 1.3mn sqm in 1H17. The Moscow city government issued 132 permits against an average of 13-15 permits per month. In aggregate, Moscow developers obtained permits for 17.7mn sqm compared to roughly 4mn sqm in 1H17.
Russian developers are actively preparing for the new regulation changes, which are to completely change the rules of the game and eventually change the industry landscape. By securing permits for new projects, developers are trying to retain the opportunity to continue to work under the old rules, i.e., keep the right to sell real estate during the construction stage for some time. While this approach could soften the impact from the new rules for a while, the market will ultimately change, with most of the small developers being forced to leave the market and the large developers consolidating the market.
Russia is toughening the rules for attracting money from residential property buyers. Effective 1 July 2018, all residential developers have to contribute 1.2% of the value of shared-construction agreements into a special compensation fund. Effective 1 July 2019, the sale of real estate before completion will be banned – customers can buy apartments in unfinished projects only through escrow accounts in specially selected banks. It is important to note that developers will retain the right to sell properties under the old rules, i.e., using shared-construction agreements, for those projects that received construction permits prior to 1 July 2019, which explains the developers’ interest in obtaining as many permits as possible.
Yekaterinburg and Samara have the largest retail complexes built in the first six months of this year amongst the so-calledmnki cities with 671sqm and 616sqm respectively, real estate consultant Knight Frank reported on August 13.
That puts both the regional capitals ahead of Moscow where foot traffic in the major malls has decreased to its lowest level in four years , increasingly disrupted by online sales. Even St Petersburg was ahead of Moscow with a 528sqm project.
90 RUSSIA Country Report September 2018 www.intellinews.com