Bulldozing administrative barriers


One of the main topics of IV Business Forum “Development: change  points of 2016” was lowering administrative barriers for construction market.

Today, administrative barriers have ceased to be the main obstacle for builders, said Mikhail Men, Minister of Construction, at the Business Forum. According to him, over the past two years the number of mandatory procedures for the beginning of construction works was reduced from 220 to 131.

These changes have not gone unnoticed outside of Russia. The World Bank in its latest ranking of ease of doing business has lifted up Russia for 37 positions – from 156th place to 119th.

This success has largely been achieved due to the fact that the regions have a clear vision of the need and importance of reducing administrative barriers. It is no coincidence that there are no more major complaints on the part of developers.

However, success does not mean that all obstacles are eliminated. Take, for example, the acute problem of the technical regulation. It is managed by three state agencies: in the Ministry of Construction, the Ministry of Emergency Situations (fire safety) and Santehnadzor (Sanitary-Engineering Supervision Committee). But there is no one-stop-shop office which would allow builders to solve all these problems at the same time.

The city authorities put much effort in making builder’s life easier. According to the Deputy Mayor of Moscow on urban policy and construction Marat Khusnullin, magor changes are prepared for Moscow builders by the end of this year.

For example, by this time, GPZU (development plan of a land plot) will be issued simultaneously with permits for all necessary connections. It is not an easy task; it requires a lot of preparatory work. To fulfill it we need to know where all the networks are located, and it comprise tens of kilometers of underground utilities.

However, according to Marat Khusnullin, reducing the administrative burden it is necessary to seek a balance between the quality of construction works and safety of buildings. This thesis implies the necessary level of state control.

No sign of panic, not even expected

Today investors do not panic: housing demand has not collapsed, the construction complex is stable. In particular this is proven by the fact that we have no new hoodwinked investors.

Adomanis Mark MA/MBA candidate at the Lauder Institute and the Wharton School of Business
For example, the volume of the new homes delivered in the Moscow region in QI of 2016 has increased by 30%. The same situation is seen in commissioning of commercial real estate. Deputy Chairman of the Moscow region Government German Elyanyushkin believes that developers have confidence in the future.

According to him, today 112 million square meters of new homes are declared for construction in the region, of which 27 million square meters are already under construction. Another 13 million square meters of individual housing construction must be added to this volume.

Due to the multiplicative effect the Moscow region construction complex plays a significant role in the regional economy. This in turn makes possible to significantly reduce import component in construction process. Moreover, the quality of domestic materials show fight to foreign ones.

However, it is possible to increase the production of domestic building materials: the current manufacturing workload roughly amounts to 60%. According to the Deputy Chairman of the regional government, it is time to export this product, especially due to favoring currency rate.

The Construction Complex reaps advantages from the fact that today we face the most favorable situation for buying real estate: there were no such low prices for a long time. This is also achieved by building small apartments. Such measures ensure sales at the rate of 2013.

Common sense is applied

What can disrupt effectiveness in lowering administrative barriers? In the opinion of German Elyanyushkin, it is the endless changing of regulations, which are often devoid of common sense.

Today the Moscow region has to solve more complex problems. For example, people are not satisfied with an acute shortage of workplaces close to home. Many residents have to work in Moscow, spending a long while of time on commuting.

Another urgent issue concerns gaps of social environment. 24 new schools must be commissioned this year, and that is only a part of the infrastructure necessity, the region needs more hospitals, parks, etc.

In addition, there is a need to decisively change the dull architectural appearance of the suburban cities. Until now the effort for change was not enough, says German Elyanyushkin. In order to carry out these ambitious plans, administrative barriers should not scare investors, moreover they should attract additional efforts and funds.

With a glance to prospects

Whether we like it or not, in current economic situation the state cannot wait and look at what is happening in the market, mindlessly reducing administrative barriers solely for raising its prestige.

Today the already low profits of developers are reducing, so the authorities have to ensure that new projects have a margin of not less than 15%, otherwise more serious risks can emerge. This is the case when administrative control is beneficial to all, especially for end consumers of construction industry.

According to Denis Sokolov, Partner and Head of research department in Cushman & Wakefield company, regulatory principles for construction industry should be based on macroeconomic realities and forecasts. The Finance Ministry expects a long stagnation of the Russian economy: over the next 20 years its growth will hover around 1%.

The extent of public debt load will greatly influence the situation. Thus, the inhabitants of the Moscow region have an average of 270 thousand rubles debt per household, of which the mortgage amounts to 74 thousand rubles.

Due to shrinking income rates people have to allocate a bigger part of their revenues for payment of debt obligations. This reduces their ability to purchase real estate, which respectively affects the market.

Stroitelstvo.ru, Vladimir Gurvich