Page 100 - RusRPTMay20

The construction and real estate development sector will get a number of support measures from the state, ​such as a special subsidised mortgage programme at 6.5% interest rate and state guarantees provided by the state mortgage agency DOM.RF, Interfax reported following the meeting of President Vladimir Putin with the representatives of the industry. Russian real estate developers could see ​sales decline by 5-25% and lose RUB45bn-200bn ($589mn-$2.6bn) in revenues, depending on the duration of the anti-coronavirus (COVID-19) lockdown, as Moscow and Moscow region suspended all construction activity​. According to the Ministry of Construction the demand for new housing declined by 30% and may drop a further 50% in the short-term. The market leader PIK developer sees demand dive by 65% for the first 2 weeks of April versus same period of March and estimates April sales for the sector overall may collapse by 70%. The subsidised 6.5% mortgages launched in response will be valid from May 1 until November 1 2020 for new comfort class housing at a price of up to RUB3mn in the regions and up to RUB8mn in Moscow and St Petersburg. The total volume of program may total RUB6bn in 2020, but could be revised, Putin said. The state guarantees for DOM.RF will amount to RUB50bn, and the agency can use the funds to purchase new comfort class apartments from developers during time of volatile demand.
The Moscow and Moscow Region governments have prolonged the freeze on residential construction until 1 May​, VTB Capital (VTBC) reports on April 21. The freeze on construction was initially brought in from 13 April for a week, but as the Russian lockdown was rapidly extended as the infections by the coronavirus (COVID-19) escalated alarmingly the authorities have extended and increased measures to enforce social distancing. “This prolongation is a negative update for the sector, which could trigger incremental costs and issues with subcontractors,” VTBC warned. “Last week, PIK estimated that some 50,000 employees had stopped working at its construction and prefabrication sites, while monthly incremental costs could reach RUB800mn (1.7% of 2019 EBITDA).” While the big listed developers have sufficient cash reserves to weather the story, VTBC warns the developers’ subcontractors do not and their bankruptcy will cause a dislocation
100​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com