CONSTRUCTION COMPANIES ARE FACING A WAVE OF BANKRUPTCIES

The analytical department of RABC, which studies the construction market, calculated that at the moment, about 10 million square meters of housing remain unfinished in the Russian Federation. Since the completion of construction will require additional financial allocations which many companies simply do not have funds for, this might lead to bankruptcy of the real estate developers.

According to the representative of RABC Fyodor Vylomov, almost 200 companies building 40% of the unfinished housing stock are at risk of going bankrupt by the end of the year.

The analysts of RABC reported that the first six months were marked by a decrease in the total number of developers who went bankrupt. According to the data provided, only 73 developers building 1.2 million square meters of housing were declared insolvent.

In the first half of 2019, 90 developers became bankrupt, and their real estate portfolio amounted to the total of 2 million square meters.

However, the experts explained such positive dynamics not by the economic optimization in the real estate market, but by the practice of the moratorium on bankruptcy caused by the pandemic.

The experts of RABC note that the construction market is influenced not only by the risk of bankruptcy, but also by the reduction in the number of active developers. Many developers left the market of their own free will, as a result of which their total number dropped from 3 thousand to 2.2. In addition, in spring the experts noted that a new trend in the market was the growing interest in real estate investments from the potential home buyers. This interest was fueled by the devaluation of ruble and general economic instability.

The reduction in the pace of construction was recorded by Rosstat and confirmed by the representatives of the Ministry of Construction of the Russian Federation.

Nikita Stasishin, the Deputy Head of the Ministry, noted that the volume of housing construction has dropped to 98 million square meters. This is 28% less than the indicators that the industry showed earlier.

This year, the Ministry of Construction is betting on the industrial housing construction, intending to subsidize the interest rates for developers and increase their duration. For these purposes, 12 billion rubles have already been allocated. This monwy will be received by the banks that have concluded agreements with developers before the beginning of May 2020.

According to the amount of housing space put into circulation, Russia lags behind by almost 15% from the last year's indicators, according to the data of Rosstat. For example, 5.3 million square meters were commissioned last month. In total, residential buildings in the amount of 32 million square meters were constructed in the Russian Federation in January-July 2020. This also differs from the indicators of 2019 by 12%.