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Crisis Is Putting Brakes on Russia's Construction Boom
Lutsenko said Mirax had enough cash to weather the crisis and continue construction on projects already underway, including what will be Europe's tallest skyscraper, the Federation Tower in Moscow. But he said small and mid-size developers will face serious trouble. "A struggle for survival is coming," he said.
A slowdown in construction growth could present a political problem for the Kremlin, which has made providing more affordable and comfortable homes a priority in a country where surveys show as many as two-thirds of residents are unhappy with their current housing. Most Russians are still living in the cramped, Soviet-allocated apartments that were given to them in the first round of privatization in the early 1990s.
The housing crunch is especially severe in Moscow, where a mix of growing demand and speculation -- and tight control over land by the city and its powerful mayor, Yuri Luzhkov -- has caused prices to triple over the past three years to nearly $465 per square foot.
Young people like Andrei Filatov, 27, an editor at a trade magazine, feel the effects of the housing shortage most sharply. He has lived his entire life in the small, three-room apartment the Soviet state assigned to his grandmother when she was hired to work in a truck factory decades ago. Growing up, he shared the 450-square-foot space with his grandparents and parents, as well as an uncle and aunt and a cousin. Now he, his wife and their 2-year-old daughter use one bedroom, while his parents use the other.
Filatov said he hopes to save enough to get a mortgage for a one-bedroom apartment in a few years, but is worried about the impact of the crisis on interest rates. "Firms don't build affordable apartments for people like me," he said.
In recent years, the government has been trying to expand the fledgling mortgage market, which equals 2 percent of gross domestic product, compared with more than 100 percent in the United States. But mortgages remain out of reach for most Russians.
Timur Khursandov, 31, a journalist for the Interfax news agency, said he has been trying to get a bank to give him a mortgage for two years, including four attempts in the past six months.
"They keep saying no, and they don't say why," he said. Meanwhile, interest rates have climbed to about 16 percent. "It's high, of course, but I think I can afford it. If it keeps going up, though, I don't know."