Nearly a third of Russia’s real estate developers are staring down bankruptcy, leaving the mass-housing sector most at risk as sanctions and steep borrowing costs sap the market.
About 20 percent of developers are already nearing insolvency, and that figure could climb to 30 percent, Ukraine’s Foreign Intelligence Service said this week, according to Newsweek. The agency blamed weak demand, dwindling state support and capital diverted to the war effort, adding that developers are delaying projects.
The warning echoes comments from Russian Deputy Prime Minister Marat Khusnullin, who last month conceded that one in five firms is at risk and the number could swell if the Central Bank keeps rates high.
Mortgage financing, once the lifeline of Russia’s housing boom, has collapsed since Moscow ended a subsidized lending program last year. That scheme had kept rates near 8 percent for four years, fueling sales and construction. Without it, most new mortgages carry effective rates of 25 percent or higher, factoring in fees and insurance.
The crunch is showing up in balance sheets. Nine of the country’s 20 largest developers reported sizable revenue drops in the first half of the year. YugStroyInvest’s sales tumbled 45 percent year over year, while Setl Group’s income fell 41 percent, according to consulting firm Macon, citing government housing agency Dom.RF.
The construction industry has long been a political pressure valve, both as a major employer and as proof that life remains stable despite sanctions. A slowdown threatens to undercut that narrative. “Such interest rates put pressure not only on households, but also on businesses,” Ukraine’s intelligence service noted.
Analysts say the problem is not just war-driven resource drains but also the Central Bank’s hard line on inflation, which hit 8.1 percent last month. Vienna Institute economist Vasily Astrov told Newsweek the CBR has opted to choke credit expansion at the expense of growth, a gamble that may accelerate developer failures.
The government faces growing calls, including from Sberbank CEO German Gref, to ease monetary policy further.
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