"The construction industry remains one of the most resilient"

This year the national project "Housing and Urban Environment" will come to an end. Its goals - providing housing for Russian families and improving the quality of the urban environment - will now be realized within the framework of a larger project - Infrastructure for Life. In an interview with Izvestia, Anton Medvedev, Deputy Chairman of the Management Board of Bank DOM.RF, talked about how these goals are being realized and what support measures the construction industry needs today.

"KRT changes cities for the better".

- The national project "Housing and Urban Environment" is coming to an end this year. How is the implementation of the national project going and what is DOM.RF doing in this respect?

- One of the strategic priorities of the DOM.RF Group of Companies is the development of the housing industry. Today DOM.RF Bank is among the top 3 in terms of the area and number of financed housing construction projects in the country, with the total amount of transactions with developers, concluded by the bank, reaching the mark of 6.8 trillion rubles. Thanks to these funds, developers will be able to build objects with a total area of almost 82 million square meters. m.

- In which regions is housing built with the bank's financing?

- We finance projects in 78 regions: from Yuzhno-Sakhalinsk to Kaliningrad, we plan to further develop cooperation with developers in the regions. Almost 2/3 of the funds under the deals concluded with the bank will be used by developers to implement housing construction projects outside the Moscow agglomeration and St. Petersburg. The regional leaders (excluding Moscow, the Moscow Region and St. Petersburg) in terms of the area of projects financed by the Bank are the Tyumen Region (5.1 million square meters), the Republic of Tatarstan (4.4 million square meters) and the Novosibirsk Region (4.2 million square meters).

- One of the main goals of the National Project "Housing and Urban Environment" was to renew the housing stock in combination with increasing the comfort of the urban environment. What tools, in your opinion, are the most effective for solving this set of tasks?

- The key tool that makes it possible to solve this task is the mechanism of integrated territorial development (ITD). CRT changes the cities of our country for the better, as it provides residents not only with modern housing, but also with all the necessary social and transportation infrastructure. It effectively solves several issues at once - it reduces the investment and construction cycle, resettles dilapidated and emergency housing, as well as more efficient use of urban areas and attracts private investment to create a comfortable environment, including infrastructure development. Today, our bank's portfolio includes more than 60 such projects in 24 regions with an urban development potential of more than 12 million square meters, which will provide housing for more than 160 thousand families. Almost a third (27%) of regional transactions of Bank DOM.RF in 2024 will be realized just within the framework of CDT with the resettlement of citizens from emergency and dilapidated housing.

- Could you give examples of CDT projects?

- One of the most large-scale CDT projects with resettlement in our portfolio is a residential complex being built by RIA Group in Yakutsk. The Bank provided the developer with RUB 38 billion for the construction of a residential complex with a total area of almost 500,000 square meters with all the necessary infrastructure, commercial and social facilities on the site of outdated neighborhoods. And we are already seeing the first results - now 80 thousand square meters of outdated stock is being prepared for resettlement, the first residents will soon move into new apartments.

"We need targeted support for certain categories of projects"

- How do you assess the current situation in the construction industry? To what extent is it threatened by the crisis in modern conditions?

- Despite the challenges - reduction of preferential mortgage programs and high key rate, shortage of personnel, rising production costs and many others - today the construction industry remains one of the most stable. At the end of 10 months of 2024, the launch of new housing construction projects in Russia increased by 8% compared to 2023 and amounted to 40 million sq. m. In fact, this is the very groundwork that will make it possible not to drop construction volumes in a year or two.

At present, the ratio of sold-out to construction availability is very high - above 80%. At the same time, the natural value is considered to be about 70%. Thus, the primary housing market in Russia today has a safety margin. In the projects with the planned commissioning date in 2024, 67% of areas have been sold out, in 2025. - 43%. In general, this will allow most developers to survive the period of low sales and high rates on the market.

- Do developers need any support measures today?

- I would say that it should be a specific targeted support for certain categories of projects. We can already see how such programs are being implemented today. This is a cluster program, the operator of which is DOM.RF, designed to support housing construction in regions with insufficient supply. The program is now operating in 61 subjects. The area of projects financed by the bank under this support program has now reached 2.1 million sq. m.

Another example of targeted regional support measures is the program "Affordable Rental Housing in the Far Eastern Federal District", which envisages the construction of more than 10,000 rental apartments in the Far East. To date, we support the implementation of 23 such projects in 10 constituent entities of the Far Eastern Federal District. Upon completion of these residential complexes, the regions of the Far East will receive 8,312 apartments for rent at a preferential rate for young professionals, students, orphans and other categories of citizens.

Thus, the government continues to develop the construction industry and create conditions to maintain its stability in the long term. Bank DOM.RF is directly involved in the development of new support measures and forms proposals to improve existing ones.

"To maintain construction volumes, it is necessary to support housing projects that are at the initial stages of realization"

- What support measures will make it possible to maintain the current volumes of construction and commissioning of housing?

- One of the most important, in our opinion, is to support housing projects during the high key rate period in 2025 and 2026. Why is this important? If the key rate remains high and sales remain low for longer than currently forecasted by the Central Bank and analysts, projects with a planned commissioning date in 2026 and beyond may be at risk. This is about half of the current construction volume. The sell-out rate for these projects, although it corresponds to the current level of construction readiness, is at the level of less than 20%. Therefore, subsidizing the interest rate on project financing at the initial stage of project implementation will reduce industry risks and stimulate the launch of new projects.

- What support tools are needed for integrated territorial development projects?

- CDT projects are, as a rule, large-scale construction projects that form a modern urban environment of new quality and transform cities. As an example of financed CDT projects, we see a significant amount of pre-project and infrastructure costs, which on average amount to 10-15% of the project budget, and in some projects can reach 25%. Of course, the economics of not every integrated territorial development project can bear such a burden. Preferential financing and support tools are needed here.

First, ensuring the sustainability of CDD projects that involve significant costs at the initial stage of implementation. For example, payment for the right to conclude a CDT contract, resettlement, demolition, and modernization of the existing engineering and transport network. At this stage, the developer does not yet have the opportunity to attract funds to escrow accounts and bears a significant interest burden.

Here I would emphasize such an instrument as a non-monetary form of settlement when acquiring rights to a project. We already have experience in this area: DOM.RF as an operator of the CDT has already successfully conducted 5 such auctions. The essence of this tool is that the developer does not pay money for the right to conclude a CDT contract, but transfers to the regional authorities ownership of the built areas, which can be used, for example, for the social needs of the region, such as providing housing for large families, resettlement of dilapidated and emergency housing. Such a mechanism will significantly reduce the credit burden on the developer at the pre-project stage, when it is not yet possible to use the escrow economy.

In addition, it is necessary to consider the distribution of responsibility between the authorities and developers in the construction of infrastructure facilities. And here I would note the high potential of such an instrument as the buyout of social facilities in installments from the developer. This is when a subject makes equal payments throughout the entire period of implementation of the CDT to pay for a social facility. The Urban Development Code allows this to be realized under a CDT contract. In fact, it is a kind of analog of public-private partnership and concessions. Unfortunately, it is not as widespread for social facilities, but it is much simpler and cheaper in terms of the cost of attracting financing, as the developer can reduce the interest burden by accumulating funds in escrow accounts during the construction phase of the facility.