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baseline or an optimistic scenario will depend on the macroeconomic situation, PwC said. Among the factors that may have a negative impact on the sales, the company lists a rise of VAT to 20% from 18%, possible volatility of the ruble and worsening of the macroeconomic situation if new sanctions are imposed, a higher scrappage fee, and reduction of state support to the sector. But the car industry may start growing if there are no external shocks, no devaluation of the ruble, and no new sanctions. Further improvement of the car industry will depend on conditions of transition from industrial assembly to a new investment regime, and PwC expects the car market in Russia to rise by 7% per year on average until 2023. The company also said that Russia’s sales of light commercial vehicles may grow by 1% to 114,000 in 2019, while the sales of trucks might increase by 4% to 86,000 and bus sales may contract by 9% to 11,800.
9.1.4 Construction & Real estate sector news
Russia’s real estate completions were down 5% y/y in 2018 to 75.3mn sqm, but the outlook for the sector is a medium-term recovery, Rosstat reported on January 28. The reported completions primarily reflect the slowdown in residential sales, which was observed in 2015-16, according to Rosstat. Volumes declined with a 9% compound average growth rate (CAGR) during the period, pressured by negative real incomes and the high-interest rate environment as blended mortgage rates rose again to 13%. The result also undermines Rosstat revision up for real estate activity from zero to 5.3% that has raised eyebrows amongst Moscow based analysts. However, some subsections, like elite housing in the capital, are booming. In 2017-18, the number of registered deals on the primary market increased at a CAGR of 4%, which is going to support completions in 2019 and 2020. This year pre- financing construction has been banned and upcoming regulatory changes and the introduction of escrow schemes from July 1, 2019 are the key uncertainty and downside factor, as tighter operational requirements and access to capital is challenging for smaller and regional developers.
Russia’s Ministry of Construction proposes exemption criteria from the new ban on pre-selling real estate developments Russia will ban pre-selling apartments by developers to individuals this summer in a move mandated by president Vladimir Putin as part of regulations to improve consumer protections. However, the rules are expected to hurt smaller companies
104 RUSSIA Country Report March 2019 www.intellinews.com