Realtors Focus on Affordable Housing

Realtors Focus on Affordable Housing
By Maria Levitov

The Moscow Times
Tuesday, June 8, 2004. Page 9.

Staff Writer The National Real Estate Congress opened in Moscow on
Monday, taking as its central theme how major real estate players can
help President Vladimir Putin achieve the goal of enabling a third
of Russians purchase their own modern homes by 2010.

Organized by the Russian Guild of Realtors for the seventh consecutive
year, the congress has grown from hosting 160 delegates in 1997
to welcoming over 1,000 delegates from Russia, the United States,
Ukraine, Poland, Bulgaria, Czech Republic, Kyrgyzstan, Armenia,
Georgia and Azerbaijan for this year’s five-day event.

But despite the international attendance, the keynote speeches of
the opening day focused on the relationship between government and
private sector players in light of new legislation that will come in
front of the State Duma this week.

Aimed at making housing more affordable, the 28-point draft law is
one of the largest one-topic legislation proposals to appear in front
of the Duma in the history of post-communist Russia.

“Currently, only a tenth of the [Russian] population owns modern
housing,” said the president of the Institute of City Economics Fund
Nadezhda Kosareva, who also heads the working group for developing
the draft legislation. “Affordability of housing is the main obstacle
standing in the way of those people who want to improve their housing

Kosareva said five major issues hinder affordability and stand in the
way of the 60 percent of the Russian population who want to improve
their housing quality.

The proposed legislation aims to battle these obstacles, which
include the absence of long-term credit, high mortgage interest rates,
insufficient housing supply, high real estate transaction costs and
lack of legal guarantees for consumers and other real estate market

“Price stabilization will follow in 2007 to 2010 if the draft
legislation is ratified,” said Kosareva, who expects development of
the mortgage system to have a positive affect on housing affordability.

The chairman of the mortgage committee of the Association of Russian
Banks, Andrei Krysin, also expressed optimism about the prospects
of consumer mortgages. He said that “because of greater competition
among banks, mortgage interest rates have already decreased from 15
percent in ruble terms to 13 percent in currency terms.”

Even though 75 percent of all consumer mortgage applicants are unable
to prove their income because it is undeclared, the amount of real
estate deals financed with mortgages has grown from 0.7 percent in
2001 to 3 percent last year, according to Russian Guild of Realtor’s

Nevertheless, some experts attending the congress expressed concern
that the wider availability of mortgages will increase the demand
for housing, pushing prices even higher, especially in places where
construction will be unable to keep pace with demand.

Despite the 4.7 million square meters of housing that was constructed
in Moscow last year and the 5 million square meters that will be
completed by the end of 2004, the unfulfilled demand for real estate
in Moscow remains acute.

“Some of the last land reserves in Moscow are located in manufacturing
zones, which are owned by the federal government,” said Galina
Hovanskaya, member of the State Duma committee on legislation. “This
complicates access to that land.”

Increasing transparency in the land acquisition process and removing
the monopolies from the market that currently allow developers and
construction companies to make “hyper profits” was also a recurring
theme at the conference.

Vitaly Votolevsky, general director of a large developer, Skanska,
defended the need for greater transparency, but added that “companies
need to be profitable to be stable, which is in the best interest
of consumers.”

At the conclusion of the opening ceremony, delegates broke into
smaller groups to discuss practical aspects of working in the real
estate industry.

“We hope to have a greater focus on practical business issues this
year and share experience,” said Yelena Dranchenko, who has recently
been elected president of the Russian Guild of Realtors.

Drachenko said that this year the introductory part of the congress
was shortened to allow more time for roundtable discussions and visits
to exemplary real estate businesses.