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Less red tape is seen in construction

16.06.2016

“Moscow was not built in a day” – this line of a famous song does not correspond to the today’s Moscow. Construction of many buildings is in progress in Moscow, so it is not easy to recall the former appearance in the city. In five years, there was built 10% of all urban real estate fund, in other words 40 million square meters. However, developers proved to be very vulnerable in the period of protracted economic crisis.

The city authorities are making efforts to minimize the red tape problems, and this work cannot be stopped in order to support the construction business. This is the only way to keep the term of construction and price rate per square meter for consumers.

Three years ago Russia ranked 120th in the Doing Business report, now it has risen to 51st position. This is an excellent result, this example knows no equals in the world.

Lopez-Claros Augusto Director of Global Indicators Group at the World Bank Group

In times of crisis of 2008 Moscow has topped the list of regions with the highest administrative barriers in construction. A developer spent 589 days on obtaining various approvals. “Developers had to spend 1.5 years for getting necessary approvals, now the term was reduced to one year reached a minimum. A positive impact of introduction of e-document management and one stop shop principle is evident but, as practice shows, the system needs further improvement,” said the First Deputy Director General, GC MIC Daromir Obuhanich.

According to him, builders still do not have any feedback to the authorities that issue permits and approvals. For example, in order to get a development plan of a land plot (GPZU), you have to apply for in on Gosuslugi.ru website. Government agencies request other documents via interdepartmental interaction. 10 days are assigned for consideration; as a result a developer can get a refusal due to the lack of certain papers or the presence of inaccurate data.

Submitting of documents to Moskomarchitectura and Mosgosstroynadzor now takes minimum time since it can be done online. This fact not only simplifies the procedure of submitting documents, but also allows you to track their progress in real time.

Obuhanich Daromir First Deputy Director General, GC MIC

Another logical and correct decision, in expert’s opinion, would be the introduction of payment by installments for the payment in the city budget for lifting of the ban on construction. “For this procedure developers have to pay 80% of the cadastral value of land. This is rather big amount of money, which is then influence the cost of housing. The possibility to pay for it not at once, but in installments, would greatly facilitate the work of developers,” said Obuhanich.

However, changes in construction industry have made the market more civilized. The thesis is confirmed by the fact that Russia has risen from 92nd to 54th position in the World Bank Doing Business ranking, which reflects the ease of doing business in different countries. Due to improving the transparency of game rules for developers, a two-fold reduction of chargers for administrative procedures was achieved. In 2016, the average terms for obtaining permits reached 244 days.

Association of Investors of Moscow is set to submit a proposal on abolishing fees for change of permitted use of land plots during construction of technoparks.

Tsvetkova Lyubov Chairman of the Board, Association of Investors of Moscow (AIMOS)

The most notable result of the reforms was the repeal of the resolution of the Government # 857, which regulated the preparation and conduct of earthworks. It provided for a large number of procedures, many of them had to be passed through several times. In accordance with the new order, a few procedures were abolished including geotechnical expertise, coordination of works associated with changes in traffic with traffic police, etc. Revocation of the resolution # 857 also allowed regulating procedures that developers pass though in order to perform excavation works – deadlines are established, exhaustive lists of documents are fixed, and the clear grounds for refusal are prescribed.

During the last three years the Moscow government is actively hammering away administrative barriers. And the result is obvious.

Krylov Artemy CEO of PJSC OPIN

“During the last three years the Moscow government is actively hammering away administrative barriers. And the result is obvious. These measures help to establish general processes for efficient operation and centralized development of construction industry. Now developers can more accurately calculate the time required for procedures, so they do not only save their time, but also reduce their expenses. A number of state services in the field of urban development have been transferred to electronic format, which helps to optimize processes. We appreciate the repeal of construction permits for certain types of networks, which also affect the timing of construction and completion of a project,” said CEO of PJSC OPIN Artemy Krylov.

Despite the decline of business activity due to the crisis, the interest of foreign investors in real estate in Moscow is steady. One of the reasons is depreciation of the ruble and assets. Experts agree that in such a situation, the focus should be put on large infrastructure projects and adjacent commercial real estate. For example, representatives of investment and development company Eagle Hills Properties (UAE) announced their intention to fund the construction of several transport hubs (TPU) in Moscow. This is the TPU “Alma-Atinskaya”, “Novokosino”, “Seligerskaya” and “Rasskazovka”.

Despite the expected decline in volumes, we continue to see steady investor interest in Russian assets.

Bibik Stanislav Partner, Colliers International Russia

The ranking Japanese architecture firm Nikken Sekkei is ready to participate in similar projects. The delegation of the company visited the Russian capital in May to hold talks with representatives of the company “Mosproject-3”, which is engaged in designing TPU. Investors from France and China also show interest in construction of transport hubs in Moscow.

According the Chairman of Moskomstroyinvest Konstantin Timofeev, foreign investors are satisfied with the profitability of projects (it amounts to 20% per annum), but they need to be proprietors of land plots. Another important aspect outlined by foreign businessmen is the possibility to accurately estimate the cost and timing of the project at the initial stage. From an investor’s perspective, the most important point is the price predictability.

The second point is the process of project implementation and the possibility of its evaluation in time, which makes possible to calculate the final amount of project cost. All these intentions can turn into real money, square meters, kilometers of new roads only if the city authorities continue maintaining the integrated approach to the urban development of the city, including minimization of red tape problems for developers, development of tools for co-investment and firm guarantees from the state for decades to come.

Moskovsky Komsomolets