‘Developers were cautious with the start of projects’: how 2023 to be remembered in real estate sector in Tatarstan
A rise in the Central Bank rate, a new housing maximum, and the end of preferential mortgages — how the construction industry has survived the year and what it is preparing for
The Russian real estate market faced a new series of challenges in 2023: a series of unexpected ups and downs were followed by sharp declines. Builders owe their sales records not to favourable conditions at all, but to the desire of buyers to “jump into the last car” in anticipation of rising rates and the end of preferential mortgages. In general, the situation in the industry was more stable than in the conditions of shocks a year earlier. Tatarstan managed to overcome the new level of 3.4 million square metres of housing, however, by reducing the volume of apartment buildings. Nevertheless, it seems that the republic will prematurely close the task set by Moscow to increase the volume of commissioning.
Records and market falls
The main event that changed the Russian housing market in 2023 was the increase in the Central Bank's rate. The regulator raised it five times, starting from July and up to December inclusive (from 7.5% to 16% per annum). As a result, project financing of construction and mortgage loans rose in price.
But the increase in the Central Bank's rate also caused a rush for mortgages. It is expected that by the results of the year, banks will give Russians about 7.6 trillion rubles for the purchase of housing, or by almost 60% more than in 2022.
Another incentive for the development of the market was the upcoming completion of preferential mortgage programmes with state support. If they decided to extend the “family” programme everywhere, then the “preferential” one is only in regions with low demand, Russian Deputy Prime Minister Marat Khusnullin stated at the end of the year. The list of these subjects has not yet been made public, but Tatarstan is unlikely to get into it — there is still a high demand for apartments in the republic. Earlier, the down payment for state support programs was raised to 30%, and the limits were reduced to the same level for all regions — 6 million rubles.
In winter and spring, the construction market experienced a recession and stagnation, in summer there was a surge in sales, which was due to government support measures. According to the Ministry of Construction of Russia, the main indicators for housing commissioning are 93.2 million square metres, in the stage of housing construction — 107.3 million square metres (as of December 1). Russian Deputy Prime Minister Marat Khusnullin said at the beginning of the month that the country would break a new record — it would commission more than 103 million square metres of housing by the end of the year. Tatarstan has set its maximum.
Half of this volume (1,702 million square metres) fell on residential housing, the rest (1,737 million square metres) — on apartment buildings. Other indicators are given so far only based on the results of ten months of the year. Tatarstan residents have issued almost 60 thousand mortgage loans totalling 223.6 billion rubles. Of these, about 82 billion were issued under equity agreements.
Innovations of the year: escrow accounts in housing and communal services and modernisation of public infrastructure
The Tatarstan real estate market is going through drastic changes this year. Already at the beginning of the year, the rais of the republic, Rustam Minnikhanov, supported the idea of transferring the powers of municipalities to develop basic urban planning documents to the republic level in order to avoid uncontrolled residential development. In December, deputies of the State Council of the Republic of Tatarstan voted for this decision, making an exception only for Kazan and Naberezhnye Chelny.
At the same time, large-scale work on the master plan of the Kazan agglomeration was carried out in the republic during the year. Developers are also waiting for the release of this document — it will determine how much housing and where exactly can be built around the Tatarstan capital. In the meantime, new housing construction in the vicinity of the city has been frozen. As Oleg Grigoriev, one of the developers of the master plan, director of the Institute of Spatial Planning of the Republic of Tatarstan, announced to Realnoe Vremya, the planned volumes of housing commissioning within the agglomeration will have to be greatly reduced, in some areas — by 2 times, since the level of development of social and engineering infrastructure lags far behind.
Another grandiose event of the year was the launch of the M12 Vostok highway, which connects Kazan and Moscow by a high-speed route and cut the path to the first capital in half. The longest bridge across the Volga has also been introduced on the new road. The opening of the autobahn will contribute to the development of the territories through which it runs.
But increasing the volume of housing remains an important task to achieve the parameters of the national project, and therefore in Russia, they rely on the private sector, which also accounts for almost half of the input nationwide. For the development of the residential housing segment, starting this year, it has been decided to extend the same conditions as in apartment buildings — mortgages and escrow. It is noteworthy that Tatarstan was the first in the country to introduce this innovation.
In September, the contractor from Tatarstan received project financing for the construction of individual residential buildings. DOM.RF Bank also undertook to finance the project for the first time. The Kazan company KST will build private houses under a contract using escrow accounts. The credit line in the amount of 20 million rubles is opened at a special rate of less than 6% per annum. The bank estimated that the introduction of escrow accounts for the residential housing market with a contract will triple the volume of commissioning of such facilities, since the share of those wishing to build a private house with the involvement of contractors may increase from 13% to 39%.
Experts attributed one more innovation to the most important events of the year — the programme of modernisation of municipal infrastructure. In total, 42 billion rubles were distributed among 65 regions, where the first step is to upgrade linear facilities. In total, thanks to the 5-year programme, about 100 infrastructure facilities and 8 thousand kilometres of networks are being modernised. Three million people will be provided with high-quality public services. According to the new mechanism, the regions receive subsidies for the renovation of public utilities facilities and networks.
“In other regions, the budget does not amount to as much as our construction complex”
The head of the Tatarstan Ministry of Construction, summing up the results of 2023, told how the builders of the republic worked and what challenges they had to face. The turnover of the construction complex of the Republic of Tatarstan is growing annually, as well as in the country as a whole. If last year it amounted to 573 billion rubles, then this year it is expected to be 685 billion rubles, and the industry occupies about 7% of the republic's economy.
“Housing construction has gained good momentum. Today, the bar for Russia has been set — more than 102 million square metres of housing. The task by 2030 is to introduce 120 million square metres, where the republic will contribute at the level of about 3.5 million square metres. Every year, we strive for this level," the minister said.
Housing construction is inextricably linked with the renewal of social and engineering infrastructure. Therefore, all 44 regional programmes continue to be implemented in the republic, which remain for next year: “We have implemented five state programmes related to federal money, seven national projects and a total of more than 4 thousand facilities per year totalling 126 billion rubles. This is also a huge amount for us compared to other regions where the budget is not as large as our construction complex," Marat Ayzatullin said.
A major renovation programme is also being implemented on a large scale — 740 apartment buildings were renovated for a total of 6.7 billion rubles in 2023. The Our Yard programme in 2023 covered 960 yards, their landscaping cost 9 billion. Plans for next year are to renovate the adjacent territories of houses for 10 billion. As part of the formation of a comfortable urban environment, 68 public spaces were landscaped, and almost 3 billion rubles were spent.
Housing and communal facilities have been built in a number of districts. Thus, the city of Nurlat and several neighboring villages received a new water supply system and high-quality drinking water. A water treatment plant was commissioned in the village of Alekseevskoye, and treatment facilities were built in the village of Nurlat.
The project of reconstruction of sewage treatment plants in Kazan has been implemented for three years. Upon completion in 2024, the capacity of the treatment plants will increase to 650 cubic metres a day. Today, the design capacity is 430 cubic metres. Besides, the reclamation of silt fields is underway in the capital: “This is about 100 hectares of silt deposits accumulated since the 1960s, which lie along the Kazanka River. Now we are geotubing them using technology, and in four years they will turn into ordinary soil that can be used for landscaping," the minister added.
The development of new residential areas is impossible without the commissioning of social facilities. In 2023, 11 schools for 10,000 students were built in the republic, of which five schools with 1,521 places each and all with swimming pools. 83 educational institutions have been renovated as part of the overhaul programme. Not a single year for the construction complex of the republic is complete without iconic objects. In 2023, work began on the new building of the Kamal Theatre in Kazan.
Iskander Yusupov Deputy Director General of Unistroy development company
The main events, in my opinion, were generated by the Central Bank, which is trying to cool the market by applying a number of measures such as increasing the down payment under the state support programme first to 20%, and then to 30%, increasing requirements for banks, reducing the credit limit for capitals to 6 million rubles and prohibiting concessions on preferential programmes. Plus, right before the New Year, Sberbank announced that now participation in state support programmes for developers will be paid, all this together will negatively affect the construction industry in 2024, demand will shrink, apartments will become less affordable, therefore, developers will be less willing to start new projects, as a result, this will lead to a decrease in the volume of housing commissioning in 2025-2026. At the same time, it should be noted that 2023 was a record year in sales for most developers in the country, this was facilitated by the news background about the measures of the Central Bank, the increase in the key rate and the depreciation of the ruble.
As for Tatarstan, this year we can highlight the active entry of federal development companies into Kazan, someone announced the entry, someone purchased a plot of land and plans to start construction next year. Another distinctive feature was the rather low level of commissioning of multi-apartment housing in Tatarstan, this is a consequence of construction projects started during the pandemic, then developers, as now, did not really understand how the market would behave and were cautious with the start of new projects.
Nail Galeev Director General of SMU-88 Group
This year has been a year of recovery for the real estate market, as well as for the rest of the economy. And in many ways, this happened not because of, but in spite of. Despite a serious shortage of materials, a decrease in purchasing power, a reduction in tools for buying a home and an increase in rates. Despite all the circumstances, the industry has not collapsed, but has resisted, recovered and even has quite ambitious plans for the future. Across the country, the industry is setting another record for the volume of housing commissioned — 103 million square metres. This is a tremendous result, even at such a difficult time. This is the main event, in my opinion.
The second thing that can be highlighted is that the market was able to recoup last year's rebound in sales. If you remember, for the first six months everyone was worried about overstocking, accumulated since 2022: sales had risen, now everything would burst and so on. In reality, the market was steadily recovering, gradually leveling off, and in the wake of the increase in the key rate and the down payment, there was that jump in sales that helped smooth out last year's failure. Some experts even claim that in Tatarstan we were returning to the era of scarcity, and if the entire construction was stopped, the existing exposition of apartments would be sold in 3-4 months.
Unfortunately, despite the positive results, the forecasts are not so joyful. In December, due to the high “key” and “initial” prices, the market peaked again — we record a lag of about 30% from the plan. If the situation with the key rate and preferential family mortgage does not change dramatically, the market will continue to fall, flare up slightly before the end of the programme and remain stagnant until the end of the year.
Antonina Darchinova Commercial Director of Novastroy Group
Despite the decline in the first half of 2023, the main trend of the Tatarstan new construction market as a whole was the increase in prices and sales volumes of housing in the primary market. The number of residential real estate transactions exceeded 18 thousand, or almost 900 thousand square metres, which is by 25% higher than in 2022 and 2021. Since the beginning of 2023, there was an increase in prices in the primary housing market in Tatarstan by 14% from the average cost per square meter — 137 thousand in March, the price increased to 162 thousand rubles by November.
The price increase is facilitated by high demand for housing and the presence of panic in the market about rising mortgage rates and down payment conditions. At the moment, the weighted average rate for basic programmes in the primary market among the leading banks is already 16.2% and ranges from 15.5% to 17-19%. At the beginning of the year, the weighted average rate for basic programmes was about 10-11%, which was quite comfortable for consumers and led to an increase in real demand for apartments. Besides, the amount of the initial payment has increased to 30%, loans on preferential mortgages will now be issued subject to subsidies from developers.
Rinat Aisov Director of Territorial Development ASG
The year 2023 is marked by the consolidation of trends that have been forming in the industry for several years. The trend towards infrastructure development and the allocation of federal funds for large-scale projects, which was formed earlier this year, is already being transformed into tangible project results. The event of the year was the opening of the M12 Vostok highway, which is designed to connect Moscow and Kazan and give an impetus to the development of the territories through which it passes.
The next trend is the continuation of the expansion of developers into new markets: regional developers are focused on projects in the capital, while metropolitan ones are actively taking up construction in the regions. For example, in the past year, Kazan retained its attractiveness for developers and gained several new federal developers who are ready to start implementing projects in 2024.
In Tatarstan, 2023 was marked by the abandonment of chaotic development and an increase in the priority of agglomeration development issues at the level of urban planning policy in the region. An integrated, systematic approach to the development of territories and construction is becoming the main principle of work today. To consolidate these approaches, the Institute of Spatial Planning of the Republic of Tatarstan prepared a strategic urban planning document — the master plan of the Kazan agglomeration, work on which was completed at the end of December and the implementation of the solutions laid down in it will begin next year. The document plans the development of the Kazan agglomeration until 2050.
Olga Volchkova Development Director of Gran PLC
Thanks to the support of the president and the chairman of the government, the construction industry has shown steady growth in recent years, despite the challenges of the time.
It is planned to commission 108 million square metres of housing into operation. New projects have been launched in 2023, which will provide a foundation for the next year.
Developers continue to rent out new facilities, striving to be in time before the end of the year. There is a good groundwork for next year: 3-4 million square metres. Developers plan to introduce m in the form of transitional housing in the first two months of 2024. Besides, there has been an increase in the launch of new projects. The increase in new projects across the country is about 19%. We see a good increase in housing. The construction site is actively developing.
The growth of the Central Bank's key rate. At the meeting in December, the board of directors of the Bank of Russia decided to raise the key rate by 100 basis points (bp) to 16% per annum. This is the fifth increase since the beginning of the year.
Against the background of a decrease in the amount of state subsidies to banks on preferential mortgages, Sberbank decided not to “stop issuing loans”, but to continue lending under new conditions. For example, from January 11, 2024, the bank will issue a preferential mortgage for the purchase of housing only if subsidised by an accredited developer. This news has become one of the most discussed at the end of the year.
In December, the down payment under the programme was increased to 30%, and the limits were reduced for all regions to 6 million rubles.
Tatarstan has been recognised as one of the best regions for housing commissioning. The republic exceeded the housing construction plan by 8.6%. As of today, 3,365 million square metres have been commissioned. In total, 1.7 million square metres of individual facilities were built during the year, 1.5 million — apartment buildings, and 161 thousand square metres — on social mortgages.
In 2023, the number of transactions in both the primary and secondary real estate markets increased in Tatarstan. Over 11 months of the year, the Federal Register for the Republic registered about 23.5 thousand contracts for participation in shared-equity construction (DDU). The number of registered transfers of rights on the basis of purchase and sale agreements exceeded 219 thousand.