Developers in Danger: Over One-Fifth Face Potential Bankruptcy, as per Marat Husnullin's claims
The housing construction sector in Russia is facing a fragile outlook in the near future, according to Deputy Prime Minister Marat Khusnullin. The main reasons for the increased risk are high mortgage interest rates, the end of state-subsidized mortgage lending programs, and the resulting plunge in property sales.
Khusnullin has identified nearly 20% of Russian property developers as being at serious risk of bankruptcy due to these financial pressures. If mortgage conditions and investment flows do not improve in the next six months, this figure could exceed 30%.
Conventional housing loans have almost ceased to exist as a class since the broad government mortgage support program ended in July 2024. Currently, 80% of mortgages are only issued under targeted government schemes, such as those for families with children, while only 20% are available on market terms. This scarcity of affordable financing has drastically reduced household investment in real estate, pushing many developers into financial distress.
The risks of a reduction in housing volume and an increase in real estate prices were discussed by Vitaly Mutko, the CEO of "Dom.RF," in a meeting with Russian President Vladimir Putin in April 2024. If financial conditions remain tight, the backlog and insolvencies could worsen, reducing housing completions in 2027-2028.
Local legislative initiatives, such as potential bans on multi-storey building permits in areas with over 50% infrastructure deficits, may further restrict new large-scale housing developments, exacerbating supply issues.
Authorities are closely monitoring each developer to identify shifts in deadlines and their causes. Some projects are delayed by six months or more, contributing to the risks of a reduction in housing volume in 2027-2028. These delayed projects, often referred to as 'defrauded' homebuyer projects, are a cause for concern and may require personal intervention from governors to resolve.
Marat Khusnullin predicted that housing construction in 2027 would either be non-existent or significantly reduced. He stated that if the current 'key rate situation' persists for another six months, the share of developers at risk could exceed 30%. However, he did not specify what constitutes the 'key rate situation'.
The halt of new projects in the construction sector is a "serious, negative trend," according to Khusnullin. He instructed governors to oversee the completion of buildings in each region on August 7. The leaders in key construction indicators are Saratov Oblast, Perm Krai, Penza Oblast, Adygea, Buryatia, and Tatarstan.
[1] [Russian news source 1] [2] [Russian news source 2] [4] [Russian news source 4] [5] [Russian news source 5]
The fragile outlook in the housing construction industry in Russia raises concerns about the future of businesses and finance, as proposed legislative restrictions could further exacerbate supply issues and delay projects, potentially leading to non-existent or significantly reduced housing construction in 2027. If financial pressures on developers persist, the share of developers at risk could exceed 30%, posing a threat to the overall business and financial landscape.
