Russian President Vladimir Putin visits the Russian city of Chelyabinsk in May 2005. On the way, he visited the ancient settlement of Arkaim, whose name means "Cradle of the World."
Photo: Dmitry Azarov
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Unfettered Land
Yesterday Russian President Vladimir Putin signed a raft of amendments to the City Construction Code that significantly simplifies the transfer of land from federal ownership to private. Approximately 70% of the land in Russia is currently unused and in federal hands. Experts predict that the new legislation will lead to a sharp increase in the volume of large construction projects comprised of inexpensive suburban housing, as well as to the new phenomenon of "single-story Russia."
The amendments make a number of fundamental changes to the construction market. First of all, a rule was adopted that stipulates the transfer of unused land in the government's possession to the hands of district or municipal governments, who can then parcel it out for construction. Approximately 70% of the land in Russia falls under this designation. Secondly, investors will be able to receive parcels of government land for construction while only paying taxes on agricultural land, as long as they have a planning project and land survey in hand. Previously, this land would have been sold at auction. Finally, the process of drawing up land deeds has been cut from approximately a year to only a month, and the number of experts who must participate in the construction project has been reduced from twelve to one. "The main problem encountered by the drive to build more low-profile housing in suburban Moscow was that practically all of the land on which such construction could be done was already in private hands. The owners of the land were not ready to build affordable housing on their property. The amendments to the Land Code have helped us find land that did not yet belong to private companies," said Nikolai Dijour, the chairman of the organization "Our Land."
According to Alexei Shepel, the manager of city construction programs, whereas earlier the preparation of construction documentation could take four years or more, the recent amendments cut that time to two years. "The cost of drawing up documents for construction is currently estimated to take up 2-5% of the overall volume of investment is a project, but that number is expected to drop significantly," predicted Natalia Chukaeva, the director of the department of marketing analysis at the company Masshtab. One of those involved in writing the legislation, Duma deputy Martin Shakkum, calculates that the new amendments will increase the volume of construction in the country by 15-20% over the next two to three years.
In the last two years, several large construction projects on agricultural land have already appeared. In 2005, Suleiman Kerimov's "Nafta-Moskva" announced the construction of the town of Rublevo-Arkhangelskoe on Novorizhsky highway (the town occupies 2.7 million square meters and attracted $3 billion worth of investment), while in that same year the news also featured construction projects by the Coalco group on the outskirts of Domodedovo (12 million square meters; $11 billion) and by the Moscow River Steamship Line and shareholders of "Ist-Line" near Sheremetevo (5 million square meters; $4 billion), as well as the construction by Masshtab, which was founded by the owners of the agrobusiness Rusagro and Sobinbank, of a mini-suburb on the territory of the Kommunarka factory on Kaluga highway (14.5 million square meters; $7 billion). Natalia Chukaeva believes that the recent changes to federal law will speed up these projects.
The adoption of the amendments may also mean the appearance of "single-story Russia," believes Building BMG director Sergey Yeliseev. "The law effectively says to buy and build," he says, drawing a parallel with the building frenzy of single-family dwellings in the United States after the Second World War. Mial Real Estate general director Grigory Kulikov believes that suburban real estate cannot yet compete with industrialized city construction: "Right now, the cost of a cottage or a townhouse is equivalent to a 100-square-meter apartment. Around 5% of apartments in Moscow are that size, but the buyers who prefer to live in townhouses and cottages rather than in Moscow are less than 1% of the population, or around several thousand families." But the simplification of the process of registering land ownership could lead to an increase in the volume of construction of suburban, low-profile housing that costs less than $200,000, which is comparable to the cost of an apartment in Moscow, said deputy general director Dmitry Chertkovsky of the development company MCG. According to Sergey Yeliseev's estimate, currently a maximum of only 10% of proposals in the suburban segment are for low-rise housing. But he is certain that soon this fraction could rise to 80-90%, allowing that segment of the market to begin to lure buyers away from mass-produced housing in Moscow. "For $200,000 in Moscow, you can get a two-bedroom apartment in Biryulev with about 50 square meters. For that same price, the buyer can get a single-family home [in suburban Moscow] with 110-120 square meters. The choice is obvious," he says. Experts, however, believe that real changes in the market will show up only after a few years, once infrastructure problems have been resolved and developers have worked out plans for the construction of mid-range housing projects.
Ilya Terentiev, Margarita Fedorova, and Anton Pavlov
All the Article in Russian as of Dec. 20, 2006
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