Tag Archives: land development

State of industrial-use land market in the capital

“State of industrial-use land market in the capital” (“Sostoyanie rynka zemli promyshlennogo ispolzovaniya v stolitse”), Russian Real Estate, 23 June 2010.  23 July 2010 http://www.1rre.ru/news/doc/40071/.

Less than 500 hectares of Moscow suburban (less than 15 km outside of MKAD) lands zoned for industrial use are being sold this year, which is half as much as before the crisis.  A large portion of the lands in the 10-15 km zone had been sold before the crisis: they were often bought to be resold, and were always taken as collateral for loans.  Before the crisis, about 10% (100 ha) of the land area on the market would have been purchased, though this year, that figure could go as high as 60% (300 ha), as capital-holding investors will purchase the land to sell it after the crisis is over.  The most attractive plots are those on which it will be easy to begin construction, or otherwise are already built-up (i.e. business parks).  Moderate price increases are forecasted.  The average cost for 100 m2 of land (usually purchased in 2.5-5.0 ha plots) 15 kilometers from the MKAD is $6,000-7,000; before the crisis, land was sold in plots larger than 5 hectares for at least $20,000 per m2.

Also: “Amount of transacted land on industrial market will rise to 300 hectares,” Commercial Real Estate, 22 June 2010. 26 July 2010 http://www.cre.ru/rus/archivnews/0/0/14568/.  Analysts of Management Company “Absolute Management” predict that sales of lands located in the 30-kilometer zone from the MKAD could rise to 300 hectares this year. Before the crisis, 500 hectares were annually put up on the market; this number decreased to 100 during the crisis.

Industrial parks

Koshcheyev, Sergey. “Ravil Muratov: Why dirty Moscow? Why don’t you build here?” (“Ravil Muratov: Zachem zagryaznyat’ Moskvu, luchshe davayte stroit’ u nas”), BiznesOnline, 3 June 2010. 22 July 2010 http://www.business-gazeta.ru/article/25010/16/.

Article discusses different regions’ systems of industrial parks: Moscow Oblast doesn’t invest a kopek in them, but leaves their construction up to investors; Leningradskaya and Kaluzhskaya Oblasts rent land with infrastructures; and Tatarstan offers ready-to-operate facilities.  This can serve to lessen concerns of entrepreneurs that new niches in markets will disappear before necessary capital is gathered to begin production: this way, the government takes on the obstacles of land registration and re-zoning, often a two-year process.  In Moscow, however, the returns on industrial parks in 2009 reached 5 trillion rubles.  Both the Republic of Tatarstan and Moscow Oblasts have programs for bargain mortgages on residential spaces in these parks.

Helping developers

“Helping developers” (“Zastroyshchiku pomogli”), Ekspert Ural 6 (408), 15 February 2010. 1 July 2010 http://www.expert.ru/printissues/ural/2010/06/news_zasrtoischiku_pomogli/.

Report on the Ekaterinburg city Duma’s decreasing the rates on yearly taxes paid by developers owning land plots occupied by multi-story buildings, from 0.1% to 0.06% of the land’s Cadastral value. This will affect 108 privately-owned land plots in the city (the largest portion of which are held by development firm “Renova-Stroygrupp”), including many in the sizable Akademicheskii region (9,000 m2) under development now. This will free up vast amounts of money for many firms: taxes incurred by Akademicheskii developers will drop from 52 to 31 million rubles, for instance; small firms will benefit, too. Some are raising their voices against the “privileges” (e.g. special buy-out prices) being afforded to large developers, mistrusting Duma deputies’ claims that the Akademicheskii region is primarily being built for accessible, low-cost housing, or alternately, that it will catalyst greater economic growth in the region.

Note: Other various articles (since February) have reported the general success of the first Akademicheskii regions to open.

Braverman’s Land Patrol

Stupin, Ilya. “Braverman’s Land Patrol” (“Zemel’nii patrul’ Bravermana”), Ekspert 41, 26 October 2009, 28-34. 28 June 2010 http://dlib.eastview.com.ezproxy.middlebury.edu/browse/doc/20828585.

An examination of the federal government’s practice of distributing seized land in auctions to developers via the Residential Construction Development assistance fund (RZhS Fund).  The new government organization, an initiative of Medvedev’s aimed at creating a renewed market for construction, has begun seizing land from agricultural institutes on grounds of underuse.  Developers in Tyumen’, Kirov, Cheboksarakh, and Kursk have already begun leasing these lands, promised the opportunity to privatize the land after 9-11 years of use.  The article criticizes the RZhS Fund institution as short-sighted, as it is so far unclear as to who will consist the buyers and renters in this new, real-estate-flooded residential building market.  Although, both RZhS Fund head Aleksandr Braverman and construction business heads credit the Fund’s creation with the streamlining of bureaucratic processes and incentivizing of developers’ building-up and eventually privatizing the plots.  Controls on where developers can set rent rates, as well as insufficient budgetary funds allocated for the RZhS count among the Fund’s problems.

Quoting from an interview with Kirov Oblast governor, Nikita Belikh, the second half of the article examines what may be the RZhS’s greatest weakness: a lack of a central region development plan and poor cooperation with the regions in which these infrastructure-less lands are being auctioned.

Russians buy up lands, look to Kashir

“Russians buy up lands, look to Kashir” (“Rossiyane skupayut zemli po Kashirskomu napravleniyu”). Finam.info, 1 July 2009.  22 July 2010 http://finam.info/news/article2028000001/default.asp.

Update on land market demand structure.  Pre-crisis levels of speculation have dropped off, especially by manufacturers, retailers, logistical operations, developers, etc., which now prefer the system of renting built-to-suit land plots.  From 2008 to 2009, a decrease (5-10 ha to 3-5 ha) in the average and median size of land plots sought by individuals has been observed, which can be explained by an increase in small-scale private projects, and the aforementioned decrease in speculation.

Moscow fiddles with its land

Stupin, Ilya. “Moscow fiddles with its land” (“Moskva khimichit s zemlëy”), Ekspert 25, 29 June 2009, 47. 28 June 2010 http://dlib.eastview.com.ezproxy.middlebury.edu/browse/doc/20287329.

Announcement of a new state land asset company, “Moszemsintez,” and reporting on initial transactions.  Moscow vice-mayor Aleksandr Ryabinin will head the company, formed in order to “manage building projects, mixing the functions of a land bank and of developers, including attracting loans for land assets and real-estate to carry out the company’s goals.”  A few dozen acres in southwest Moscow may be transferred to “Moszemsintez” from Moscow-administration-run OAO “Stroitel’no-sberegatel’naya kassa.”  The lands of jewelry factory “Krasnaya Presnya,” bought out by the city, will now be used as a residential area for resettled residents of Kamushka near Moscow City.  Developers are wary of the new organization, as its role in seizures has yet to be defined.

Land cadaver

“Land cadaver” (“Zemel’niy kadavr”), SmartMoney 22 (112), 23 June 2008. 12 July 2010 http://www.vedomosti.ru/smartmoney/article/2008/06/23/5760.

On the situation of unused state-owned land in the capital.  The Gosduma under the auspices of Medvedev has passed a new law (on the Assistance Fund for Residential Construction Development) aimed at redistributing currently unused federal lands that are the most valuable for residential development (as construction lands or as lands for construction material factories).  Out of the 10,000 most attractive hectares, half are located in settled areas, many of which are in Kaliningrad.  A special commission will assess whether or not suspected lands are being used, but the criteria for such categorization and seizure are not delineated in the law.

In one case with the Russian Academy of the Sciences (RAN), whose lands (under permanent perpetual use, according to Vikiteka at http://ru.wikisource.org/wiki/Устав_Российской_академии_наук) are threatened by the new law, RAN proposed to Putin directly to construct residential buildings for young scientists in order to avoid a supposedly temporary restructuring takeover by the state company “Rostekhnologiya;” nonetheless, in April 2009, operations on these lands were expected to be frozen by a special order of the administration, and then after the passage of the new law, will most likely be given over to the Land Fund or directly to the region.  (An order regarding this freeze of RAN lands from the Kremlin appeared on the Federal State Cadastre website on 30 July 2009 at http://r41.kadastr.ru/news/media/999725/; the first of these lands were to be put up for auction in November, according to http://www.nep08.ru/agroprom/news/2009/10/09/fond_rzhs/).

Difficulties with disagreements over fair compensation and with insufficient monies in the Moscow Department of Land Resources are described, although the new law is expected to inject new momentum and resources into the coffers of available, valuable lands; within the week, first vice-director of the department Oleg Ryzhkov planned to send notices to involved lands.  Some of these Moscow lands will be seized for but small roadway expansions, though seizures for transport were not intended to be enabled by the law.  The fate of a 500-hectare plot in Kaliningrad under military ownership is also discussed.

Profit spot: Land races

Terent’yev, Ilya. “Profitable spot: Land races” (“Dokhodnoe mesto: zemel’nye gonki”), Vedomosti 199 (1973), 22 October 2007.  23 July 2010 http://www.vedomosti.ru/newspaper/article.shtml?2007/10/22/134777.

Informative cataloguing of recent changes to the land market of the region up to 30 kilometers outside the Moscow ring road (MKAD), as a need for infrastructure to support growing numbers of suburban dwellers attracts commercial and industrial land buyers.

In the demand structure of the Moscow suburban land market, pre-crisis buying-up of land by speculators for cottage (individual house) construction has been replaced with developers and investors buying land zoned for industrial use, intending to launch manufacturing and building infrastructure; large retail firms and foreign logistic operators are especially active.  Since the completion of new residential complexes and houses, prices on industrially-zoned lands have gone up in anticipation of developers’ seizing on the opportunity to cater to new suburban residents: 50 kilometers from the MKAD, industry land costs $9000 per 100m2, and 10 kilometers from the MKAD, it can be $30,000 to $35,000 per 100m2.  These prices seem to scare foreign companies the least, as they often invest in these land with long-term plans in mind.  Competition among supermarkets and commercial chains (Auchan, Perekrëstok, IKEA, etc.) is expected to increase.

Side note: French chain Auchan purchases the land used under its supermarkets.  Although standard Auchan stores are 12,000-14,000 m2, the most recently opened Russian store in Petersburg was 9,000.  In Petersburg, Auchon representatives say the opening of new branches is in question due to the lack of desirable land available for purchase.  Additionally, the company has begun to experiment with different formats for new garden and bargain supermarket chains across Russia, the sizes of which range from 3,000 to 5,000-7,000 m2 (see http://www.bn.ru/articles/2009/10/14/49745.html and http://realty.lenta.ru/news/2009/12/11/raduga/).

Administration has little reason to block the increased purchases of land, as the population increase in the Moscow suburbs strains financial resources on the region budget for developing infrastructure.  However, difficulties remain in the process of land acquisition.  In the opinion of one commercial real estate specialist, those companies that have already successfully bought land in the region have less difficulty in obtaining more land for their enterprises than others; they have the necessary experience, and presumably, the capital and credit, to purchase non-agricultural land and to apply for the land’s rezoning as industrial land, taking on the risk that this back-door purchase strategy might not work.  However, forecasters speculate that landlords will next year see and fill the empty hole in the supply-side of the market. Accordingly, it seems administration will be less inclined to fulfill rezoning requests of this sort, and that prices will continue to grow.  Swiss cosmetics company Oriflame decided to buy a 40-hectare plot in an under-construction industrial park for 175 million euro, though investors expect a quick profit turnover once the factory begins work in 2013 (http://rus.ruvr.ru/2010/02/27/4878971.html).

“Many proprietors simply hold back their land, waiting until it becomes more expensive (i.e. private landowners holding property rights to 5-10 plots in the most in-demand areas of Moscow Oblast).  This way, a tacit agreement about the regulation of the market is in effect: a limited quantity of land goes up for sale in order to not saturate the market and to preserve the deficit of liquid land.”  In some cases, it is necessary to be personal acquaintances with sellers: “Sales [in these regions] carry a political character.”

Also: “Industrial lands towards Kiev Highway get expensive,” Arendator.ru: Commercial Real-Estate, 23 April 2008.  26 July 2010 http://www.arendator.ru/articles/1/art/21122/.  The 30-40% growth rate of land prices along the Kiev Highway outside of Moscow went up to 58% between 2007 and 2008.

Note: This falling of prices is an interesting fulfillment of a favor, with which the RSPP came to Medvedev in 2005, asking to lower prices for industrial land (Kommersant, 46.3130, http://www.kommersant.ru/doc-y.aspx?DocsID=555248).  It is conceivable that the barriers to land purchases (i.e. “political character,” etc.) are now what should be dealt with.

The Surveyor

Belykh, Anton.  “The Surveyor” (“Zemlemer”), Biznes-Zhurnal 7, 10 April 2007. 15 July 2010 http://www.business-magazine.ru/trends/government/pub282369.

Survey of Moscow land reform.  Article discusses the unwillingness of the Moscow bureaucracy to let go of land ownership, despite the April 2006 passage of No 431-PP “On the transfer of land plots in the city of Moscow to private ownership,” which was aimed at bringing Moscow land legislation and procedures in line with the federal Land Code.  More precisely, it was to change what had been, for all intents and purposes, a non-existent procedure for land privatization into its first existence.  For the law firm Vegas Lex, despite the significant number of land buy-out applications filed with the firm in the first nine months of the new law being in effect, no more than 10 privatization transactions have been successful.  Oleg Ryzhkov and his officers promise that the number of unsuccessful privatizations will soon start to come down.  In addition the bureaucracy’s grasping onto its land rights as a power control, the article also points out that lease payments from land tenants (mostly developers) generate more revenue than would land taxes (i.e., than they did in 2007 at publication).