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Consumer Cyclicals
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Market Cap £370.6m
Enterprise Value £610.5m
Revenue £864.6m
Position in Universe 593rd / 1809

Moscow's new high-rise housing plan casts shadow over local homebuilders

Fri 18th August, 2017 4:33pm
By Olga Sichkar 
    MOSCOW, Aug 18 (Reuters) - Moscow's local government project 
to build hundreds of thousands of new homes threatens to cause a 
supply glut, forcing private sector developers to cut back on 
their own projects and depressing apartment prices, real estate 
analysts and experts say. 
    The authorities in Moscow intend to re-house over 1 million 
citizens living in decrepit Soviet-era apartments, which they 
plan to demolish, in new high-rise blocks of flats as part of a 
15-year programme. 
    But officials have said some of the new housing could be 
built for sale, in a market where developers including PIK Group 
 PIKK.MM , Etalon  ETLNGq.L  and LSR  LSRG.MM  compete. 
    PIK and Etalon declined to comment while a spokeswoman for 
developer LSR said that while it was not planning to cut the 
size of its own projects some homebuilders might choose to 
reduce prices. 
    These homebuilders are not expected to have a stake in the 
municipal project as the authorities have said they only plan to 
engage them as sub-contractors for the supply of components.*:nL8N1J52ZE 
    The authorities have also said that the first flats under 
the programme are likely to be ready in about three years time 
with apartments for sale likely to follow in around 2024. 
    Julia Gordeyeva, a real estate analyst at Sberbank CIB, 
estimates that an additional 1.3-1.4 million square metres of 
housing could be supplied to the market each year once the 
resettlement project gets going. 
    "Taking into account the scarceness of demand, developers 
will have to reduce their volumes accordingly," Gordeyeva said, 
adding that the reduction could amount to 30-35 percent. 
    Pavel Bryzgalov, director for strategic development at 
Lider, one of Moscow's biggest real estate companies, expects 
the city to have around 1.2 million square metres of new 
residential property to sell each year, or a quarter of all 
flats built in Moscow. 
    As a result he said that for developers building standard 
apartments it is possible they will have to abandon their own 
projects in the districts where the new municipal housing is 
going to be built. 
    However, Alexei Shepel, owner of real estate company 
S.Holding which had been involved in earlier resettlement 
programmes in Moscow, said the developers might yet be able to 
go ahead with their own projects but would need to cut prices to 
    If a developer's project ends up competing with a municipal 
one, the company will have to either put its project on hold or 
carry on but sell flats for a lower price, Artyom Eiramdzhants, 
a real estate analyst who was formerly in charge of the Moscow 
market at developer Pioner, said. 
    "Imagine the city starts a large-scale renovation in, for 
example, Izmaylovo (district), builds homes for re-housing and 
sale. If a developer had planned a major project there, it will 
most probably have to drop its plans or put it on hold 
indefinitely," Gordeyeva added.   
 (Reporting by Olga Sichkar; Writing by Maria Kiselyova; Editing 
by Greg Mahlich) 
 ((; +7 495 775 1242; Reuters 
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