How Vitaly Mutko will change the real estate market

Former Minister of Sports Vitaly Mutko may soon become vice-premier. What tasks will the new curator of the construction industry in Russia face?
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The proposal of Russian Prime Minister Dmitry Medvedev to appoint Vitaly Mutko as curator of the construction sector in Russia was a complete surprise for the industry. From this news, real estate market players were stunned and did not know how to react. The first words coming out of the developers' mouths were the "Let's Build From May Hart", and all that could be squeezed out in the official media is that Vitaly Mutko has good organizational skills.

The organizer abilities of the former Minister of Sports, which the builders speak, were the brightest in the period when large infrastructure facilities were being realized for the Winter Olympics in Sochi. No one believed in them then. As a result, the grandiose event at the international level was brilliant. Of course, there are questions on the further development of the facilities, but look how today Sochi lives and actively "consumes" tourists annually and in all seasons. The objects of the World Cup are ready to receive all the fans even in a difficult geopolitical situation. But one thing is a concrete project, and quite another is the supervision of the construction industry in the current realities. And here it's not even the allocated federal budget, which you can juggle as you like. Here it is necessary to untangle a huge tangle of problems that has developed in the residential real estate market, and it needs to be done in the conditions that develop for both developers and home buyers.

So they found a "wizard" who can turn everything so as to achieve the set goals. After all, many ambitious projects fell on the shoulders of Vitaly Mutko, and the results of all satisfied. No matter how amazing the ways of achieving them, the results will be remembered.

So the new "wizard" may swing a magic wand in the form of budgetary funds to the right or left, but the new Zenith Arena, which was built for 10 years, can turn out as always. The real estate market is a very sensitive industry, and we need it gently, but we do not know how to gently.

Goals and ambitions

What are the challenges facing the construction sector today? Immediately after the inauguration, Russian President Vladimir Putin signed a decree "On national goals and strategic tasks for the development of the Russian Federation until 2024". In it, he instructed the government of the Russian Federation in the development of a national project in the sphere of housing and the urban environment to proceed from the fact that in 2024 it is necessary to ensure an increase in the volume of housing construction no less than 120 million square meters per year. The same decree also contains the requirement of an annual improvement of the housing conditions of 5 million Russian families.

In 2017, throughout Russia, 77-78 million square meters of housing have been built. m, and according to Rosreestr, registered more than 699 000 transactions in the primary housing market. It turns out that to increase the input rates by more than 40 million square meters. m of housing, and the demand to increase seven-fold - more than an ambitious task.

This task seems impossible, especially with the introduction of new amendments to Art. 214 FZ. These amendments, concerning the transition from equity agreements to project financing through escrow accounts, have created real difficulties not only for small and medium-sized developers, but in some regions and large developers. It will not be profitable for them to sell at the construction stage. Accordingly, the price of apartments in such new buildings will equal and even increase in comparison with apartments in the secondary market. That is, apartments in new homes will become even more inaccessible, even with the fact that the mortgage rate is decreasing and is projected to reach 6-7% in the next couple of years. How can we implement a full-scale program to improve housing conditions in such conditions? After all, you need not just build, you need and sell these square meters.

Obviously, at this stage, new introductory, bland look and non-standard moves are needed. The reality is that today you need to bet on young cadres, listen to innovators, walk away from old standards in construction. You need to think more about demand, how to make programs to buy housing and enable people to improve their housing conditions.