PROESTATE.Live: Private Housing Construction Commission Proposed Improvement Package
Today, on 10 September the International Real Estate Investment Forum PROESTATE.Live hosted a meeting of the Private Housing Construction Commission. This Commission is part of an exert group that was established to put through the Business Climate Transformation action plan. The Forum is being organized by the Roscongress Foundation; the Ministry of Construction, Housing and Utilities of the Russian Federation; the Academy of Real Estate (ARE), and IMMERGITY.
10.09.2020
The meeting started with a discussion on private housing construction with regard to urban development. Many territories needed for further development of cities and localities belong to the State Forest Fund. Even if this territory has no forest in reality – it's just wasteland or even a street already, it cannot become part of the locality. The root cause is the lack of appropriate legislative procedures that will help new general layouts include new territories and get approved.
Spatial transformation of territories that lie within existing localities is another obstacle. Thus, 30–50% of private housing in central parts of Russian cities and towns is dilapidated housing, hardly suitable for living in it. At the same time, these territories are sought-after for building apartment complexes, infrastructural facilities, and public spaces. Experts believe the mechanism for giving these buildings the status of dilapidated housing needs to be improved. It will help local authorities relocate their residents through the same procedure that is used for apartment complexes.
"As of today, investors are interested in transforming certain territories. Sometimes, it happens so that owners of those dilapidated houses, who don't always live in them, are willing to earn millions on this property. At the same time, we need to remember about the opposite situation. We cannot allow this housing to be taken away for peanuts. Likewise, people should have the opportunity to stay in the same area or move to a suburb, should they want to," shared Dmitry Mishchenko, Commission Chairman; advisor at the National Association of Housing Developers in the Republic of Tatarstan, the Republic of Chuvashia, and the Republic of Mari El; expert and consultant for housing construction at the Agency of Strategic Initiatives to Promote New Projects.
The use of escrow mechanisms in private housing construction is another important topic the Commission members addressed. Experts believe that a well-developed infrastructure for low-rise housing can be ensured only through efficient financial instruments. According to Dmitry Mishchenko, shared participation in private housing construction hasn't been used for over 10 years. Nowadays, real estate developers sell the land together with a construction agreement. As a result, the promised appearance of the community may not be final.
A whole lot of difficulties appear after the community construction is completed. First and foremost, it applies to utilities. The task of the real estate developer is to create them instead of just servicing them. At the same time, municipalities are reluctant to get involved, too. It's not critical for the first 5–10 years, while the equipment runs smoothly.
"The lack of crystal-clear rules in this market makes it nearly impossible for a real estate developer to get project financing. It results in a lower quality of the infrastructure, as the real estate developer needs to construct utilities and roads before the first house is commissioned," notes Mr. Mishchenko.
The Commission was created in summer 2020, while this meeting is not its first one. According to Commission Chairman Dmitry Mishchenko, all proposals developed at the previous meeting were submitted to the expert group for further consideration.
The International Real Estate Investment Forum PROESTATE.Live will be held from 10 to 13 September 2020. It covers the topics most relevant for housing buyers and is part of the BUSINESS FOR PEOPLE track of the Forum's business programme. The Forum is organized by the Roscongress Foundation, the Ministry of Construction of the Russian Federation, the training centre of the Academy of Real Estate (ARE) and IMMERGITY.
PROESTATE.Live partners: Official Partner – Mosinzhproekt; Partners – ANT Development and YugStroyImperial; Official Session Partners – A101 and Colliers International Group Inc.; Session Partner – Cushman & Wakefield.
Official website of the event: proestate.ru/en
Spatial transformation of territories that lie within existing localities is another obstacle. Thus, 30–50% of private housing in central parts of Russian cities and towns is dilapidated housing, hardly suitable for living in it. At the same time, these territories are sought-after for building apartment complexes, infrastructural facilities, and public spaces. Experts believe the mechanism for giving these buildings the status of dilapidated housing needs to be improved. It will help local authorities relocate their residents through the same procedure that is used for apartment complexes.
"As of today, investors are interested in transforming certain territories. Sometimes, it happens so that owners of those dilapidated houses, who don't always live in them, are willing to earn millions on this property. At the same time, we need to remember about the opposite situation. We cannot allow this housing to be taken away for peanuts. Likewise, people should have the opportunity to stay in the same area or move to a suburb, should they want to," shared Dmitry Mishchenko, Commission Chairman; advisor at the National Association of Housing Developers in the Republic of Tatarstan, the Republic of Chuvashia, and the Republic of Mari El; expert and consultant for housing construction at the Agency of Strategic Initiatives to Promote New Projects.
The use of escrow mechanisms in private housing construction is another important topic the Commission members addressed. Experts believe that a well-developed infrastructure for low-rise housing can be ensured only through efficient financial instruments. According to Dmitry Mishchenko, shared participation in private housing construction hasn't been used for over 10 years. Nowadays, real estate developers sell the land together with a construction agreement. As a result, the promised appearance of the community may not be final.
A whole lot of difficulties appear after the community construction is completed. First and foremost, it applies to utilities. The task of the real estate developer is to create them instead of just servicing them. At the same time, municipalities are reluctant to get involved, too. It's not critical for the first 5–10 years, while the equipment runs smoothly.
"The lack of crystal-clear rules in this market makes it nearly impossible for a real estate developer to get project financing. It results in a lower quality of the infrastructure, as the real estate developer needs to construct utilities and roads before the first house is commissioned," notes Mr. Mishchenko.
The Commission was created in summer 2020, while this meeting is not its first one. According to Commission Chairman Dmitry Mishchenko, all proposals developed at the previous meeting were submitted to the expert group for further consideration.
The International Real Estate Investment Forum PROESTATE.Live will be held from 10 to 13 September 2020. It covers the topics most relevant for housing buyers and is part of the BUSINESS FOR PEOPLE track of the Forum's business programme. The Forum is organized by the Roscongress Foundation, the Ministry of Construction of the Russian Federation, the training centre of the Academy of Real Estate (ARE) and IMMERGITY.
PROESTATE.Live partners: Official Partner – Mosinzhproekt; Partners – ANT Development and YugStroyImperial; Official Session Partners – A101 and Colliers International Group Inc.; Session Partner – Cushman & Wakefield.
Official website of the event: proestate.ru/en