Moscow makes developers’ life easier

24.03.2016

In Moscow construction is one of the spheres allowing the city to boost its budget revenues. With this in mind, the city officials are ready to maximally lift administrative barriers hampering developers.   

Information about underground utilities, structures and preliminary conditions for connection to water supply and sewage networks will now be present in the development plan of a land plot (GPZU), the Vedomosti newspaper was told by the Moscow Construction Complex.  This decision was taken on the instruction of Mayor Sergey Sobyanin and approved by the Ministry of Construction, the Ministry of Economic Development and the Agency for Strategic Initiatives (supervising working groups of the National Entrepreneurial Initiative developing mechanisms to improve the country’s business climate).

[citata id=54]The city officials are ready to issue extended GPZUs in a test mode until the end of April; then the experiment will be launched everywhere. The city authorities’ decision is a revolutionary step, taking into account difficulties (sometimes unsolvable) faced by developers.  For a developer or contractor any site is literally terra incognita: there are a lot unknown things underground. For example, there could be city utilities creating a serious constraint for construction works; so companies have to spend a lot of time obtaining permits to relocate pipes and cables.  Or let’s take connection of finished projects to utility networks: the majority of developers mention the same costs of this – about one third of the entire project cost, if we speak about complicated facilities.

As the first step the city authorities are launching the process of issuing GPZUs with preliminary conditions for connection to water supply and sewage networks. This is the way for the city authorities to minimize communication between developers, Moscow Water and Sewage Company (Mosvodokanal) and Mosgorgeotrest reporting to the Mayor’s Office. If the experiment proves to be successful gas and electricity providers might join it as well. This innovation will not change the timing for issuing a development plan – it should still be ready in no more than 30 days. Moreover, according to the Moscow Construction Complex, all information about underground facilities for projects under construction will be obtained by developers automatically and free of charge.  According to developers surveyed by the Vedomosti,  a GPZU containing information about underground utilities and preliminary terms of connection to water supply and sewage systems increases capitalization of the site for which the plan is issued. And lower costs will allow the industry to become more or less comfortable for investors.

 Without Barriers

[citata id=318]The key objective of this innovation is bringing down administrative pressure on business. It’s not the first year when the capital’s Mayor’s Office has been actively working towards this end. Its key indicator is the World Bank’s (WB) Doing Business ranking. Over the past five years Moscow has improved its place in the ranking by 60 positions in ‘Dealing with Construction Permits’ getting to 119th place. According to the WB’s estimate, in 2010 developers spent 589 days and 4.2% of the overall project cost on administrative procedures, and in 2016 it takes them 239 days and 1.7% of the cost, that is, the costs have been brought down by almost 2.5 times, says Deputy Mayor of Moscow for Urban Development and Construction Marat Khusnullin. The number of procedures has also shrunk proportionally over the same period of time – from 48 to 19. A month ago the city authorities came up with an optimistic forecast.

[citata id=129]According to Sergey Levkin, Head of the Urban Planning Policy Department of Moscow,  the capital’s objective for 2018 is 34th place in “Dealing with Construction Permits”; that is, the city needs to go 85 positions up. One of the first innovations aimed at simplification of administrative procedures and cancellation of excessive measures was getting construction and occupancy permits in electronic format, as well as state expert examination of design documentation.  Approvals by prefectures and district councils were cancelled completely at all stages of a construction project in 2013; these functions were transferred to the Construction Complex. At the same time, a list of documents required for getting an excavation permit shrunk to 5 from 28. The time required for various administrative operations also decreased. For instance, the time for state expert examination of standard design projects contracted from 50 days to 30 days and from 50 days to 45 days for non-standard design projects. A certificate of approval of the architectural and urban planning design for projects of district significance can be obtained within 14 days while earlier it took an entire month.

 E-Document Flow

Transferring the majority of administrative approvals to electronic format has become one of the most conspicuous reforms. In 2013 the city authorities provided seven services in this format while by the end of 2014 this figure reached 12 services.  The legislative base regulating this process was adjusted on November 1, 2014 when an amendment to government decree #145-PP dated April 12, 2012 came into force in Moscow. Demand for online services is confirmed by the positive dynamics of online state services. In 2013 only 12% of all applications were submitted in electronic format while in 2014 this figure stood at 45% and in 2015 reached 70%.

[citata id=48]”The Construction Complex receives about 20,000 requests for state services per year. 70% of applications are submitted and processed in electronic format and only one third of applications are submitted via the one-stop-shop service,” says Marat Khusnullin. “The work on lowering administrative barriers continued in 2015: services already available online are transferred to the electronic format only,” adds Sergey Levkin.

 Land Redistribution

Last year’s most conspicuous result is cancellation of government decree # 857 regulating earthwork preparation and execution that happened in May. Since the approval of this document in 2004 interdepartmental interaction technologies have developed and federal legislation on urban development activity has changed (City Law #18 ‘On Urban Land Improvement’ was passed in April 2014). The work on this new document reflecting the city’s new approach to earthworks had been ongoing since 2012.

[citata id=56]It resulted in three new decrees replacing the old text: 299‑PP, 283‑PP and 284‑PP. These documents cancelled a number of excessive procedures, such as geotechnical expert examination, getting the State Traffic Safety Inspectorate’s approval of design documentation for works related to damaging the road pavement, changing or limiting pedestrian and vehicle traffic, getting the State Committee for Sanitary and Epidemiological Oversight’s approval of construction organization plans and method statements for excavation, getting a report on compliance with civil defense requirements and emergency prevention for the construction project, approval of land improvement design for utility exclusion zones.

According to officials, the main achievement of the reform is strict regulation of procedures required from developers for earthwork execution: maximum timings, complete document lists, and grounds for refusal are now specified. That said, construction is not the only industry affected by these innovations. Amendments to legislation directly affect land improvement in the city, including preservation of cultural heritage sites, capital repair and furnishing of roads, tram tracks and railways, installation of lighting posts, an overhead contact system, architectural decorative lighting and a complex approach to urban amenities.

“Today Moscow authorities have assumed a position of maximum support regarding approval of urban development documentation,’ says CEO of Pioneer Group Andrey Grudin. ‘They support investors and contractors in this respect and understand that it is necessary to meet assumed obligations on time. It is especially acute amid contracting profitability and more expensive working assets. The faster we build and the quicker projects finish the more lucrative it is,” sums up Andrey Grudin.

Vedomosti

 

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