The Housing And Communal Services Segment, Part II: Stereotypes — To Break, The Credit Bar — To Raise, Industry Standards

IHS market players are confident that in order to develop the segment, it is necessary to expand the mortgage opportunities of buyers and at the same time adopt clear rules of the game for all construction companies

At the annual round table “Let’s decide on the shore 3.0: Prospects, risks and opportunities of the suburban real estate market. What the experts are silent about”, which was held at the end of June in the cottage settlement “Pavlovy Lakes”, head of the department “Individual housing construction” “House.Russian Federation” Georgy Prozorovsky told me which houses, according to statistics, “House.The Russian Federation”, Russians choose today. It turns out that buyers (most often families with above-average incomes, who have two children or even more) especially like two-storey, at least four-room houses with an area of 110-125 square meters, built of aerated concrete, brick or wood.

At the same time, according to the head of the “Suburban real estate” department of CIAN Anna Berezina, the proportion of those who prefer to buy land rather than houses is increasing. As a result, according to the results of the first half of 2024, prices for land plots in key residential housing markets increased more noticeably than for houses. For example, according to CIAN analytics, houses in the Moscow region have risen in price by 6% in six months, and land plots by 16%, in the Leningrad region the gap is even more significant — 7% and 24%. Although, if Moscow, St. Petersburg and their surroundings are excluded from the calculations, the national difference will be only 1 percentage point (14% and 15%, respectively).

At the June forum “Movement”, Sergey Eremkin, Managing Director of the secondary and suburban real estate department of Avito Real Estate, gave several more interesting figures*. According to the company’s estimates, the share of demand for private craftsmen for the construction of houses is quite high and amounts to 49%, medium—sized companies account for 39% of demand, large ones – 12%. At the same time, 57% of clients build houses with a turnkey contractor, of which 25% choose private companies for this purpose, another 30% build partially turnkey and partially with the involvement of contractors for some types of work, and only 13% build houses completely independently.

“Since 2020, the market for individual housing construction has doubled, while the number of transactions has increased 1.8 times. Such dynamics suggests that in the next three years we will see a doubling of the housing and communal services market in monetary terms,” Sergei Eremkin believes.

Do market players agree with the opinions of analysts? How do they assess the current state of affairs in the industry and the prospects for the development of individual housing construction? What problems are considered the most difficult to solve? What technologies and approaches are the main focus on? These are just some of the questions that BFM.ru I asked representatives of the housing and communal services segment to respond. Dmitry Andriadi, CEO of the Bauhaus company, tells:

— We work in the category of… well, a good average, “comfort + with business views”. We have only one technology — reinforced concrete panels, and only typical houses in the range from 50 to 160 square meters. We have our own production facility, where we cast panels, come and assemble a house on a finished foundation plate — in fact, this can be called prefab technology. Before that, the company had been building from aerated concrete for 12 years, but when materials and workers began to become more expensive, they switched to reinforced concrete panels. No, at first we tried to place orders on other people’s DCS, we looked-we looked – and realized: all or almost all of them are very old, from the time of the Soviet Union, they put up protective price tags for us and they only want to do something familiar and understandable to them — here are fences, for example. Then it was decided to simply buy equipment in St. Petersburg, and Russian-made, and we already had industrial land, so we organized production from scratch.

— How would you describe today’s interest in individual housing construction? Do you agree with the estimates that demand is growing by leaps and bounds?

— Yes, of course, we have an insane demand, but this is all a mortgage product: people have the opportunity! Previously, what was the stereotype: people who are ready to live in a house are 45, 50, 60 years old, when they want something of their own on their land, they want peace and quiet… But for the last three or four years, young families have been coming, guys 25-27 years old. At the age of 25, I didn’t even think about a private house. In general, the housing and communal services market used to be perceived as something incomprehensible, murky, long, even there were no regulations! And even now, to be honest… Here’s some company saying: we build 200 houses a year. But let’s figure it out: What is a house? We have a house kit, there is a box, there is a thermal circuit, there is a thermal circuit with utility networks, there is a white box, there is a house with finishing, there is a fully furnished house — that is, seven variations! So where does this substitution of concepts come from? You watch an advertisement — a house from 3 million rubles: Where do you get these prices from? A person sees a luxurious render and tries to buy such a beautiful picture for 3 million — well … this is pure deception. But now, it should be noted, the market has become more honest, clearer and more interesting. Companies are growing, communicating with each other and even making friends, although they continue to compete.

— And also, according to Avito Real Estate, you have a lot of competitors among private brigades…

— Private traders, if they work well, are still half the trouble. Unfortunately, the whole Internet is full of some kind of “homemade”, some craftsmen, some advice like “why do you need a construction company, you can do everything anyway.” No, guys, let’s be honest: you can’t do this for the money that a construction company offers, you just can’t physically do it! Well, unless the client will be comfortable at the moment to save money, to spread the amount for three to four years. But in general, the residential housing market has great potential: we have a lot of land, and for the money that apartments in Moscow or St. Petersburg cost, you can buy very good land and a very good house.

— Are banks your assistants today? What is your current relationship?

— Better. Previously, there were simply draconian conditions, many banks, by the way, they remained draconian, but still banks are now trying to be in the market and are becoming more loyal. The requirements for construction companies were very high, they provoked companies to build almost at their own expense. Now the escrow account mechanism is being implemented — so far on a voluntary basis, and then we’ll see. This means that the market will be cleaner, and all fraudulent schemes will disappear over time. But in general, we work with only one bank, we work in close conjunction, we have bank supervisors, all transactions are reflected on the bank’s websites. And what else do they do: without even notifying us, they call our customers, get feedback and post all reviews in the public domain. They control, in a word.

Answering the question of what needs to be done to make the housing and communal services market develop even more actively, Dmitry Andriadi said without hesitation: we need to work with mortgages. “Maybe we need to increase the amount (of course, in proportion to salaries). Because there are people who really want their house, but they can’t. And I recently read that children are born faster in IHS… In general, it’s not for us, it’s not for companies to help, we’ll adjust – we need to do more for people,” the expert is sure.

Photo: Raev Denis/Lori’s Photo Bank

The story is continued by Egor Gribov, Commercial Director of the Izburg Group of companies:

— Our houses are such a classic Scandinavian frame. This is a wooden frame, power elements integrated with glued beams, LVL beams, and a combined “pie” of insulation. It turns out that we have an average price range of houses for permanent residence — technology implies non-seasonal accommodation, after all, these are warm enough houses to live all year round. If we talk about the cost of a box without interior decoration, without engineering, then it starts somewhere from 8-9 million rubles.

— How do you assess the current state of the housing and communal services segment? Does your internal statistics confirm the data provided in numerous parade releases?

— Definitely growth. This is evident in the market as a whole, and in our sales and construction volumes. This growth has been observed over the past few years, and, of course, the mortgage gave a huge boost. We are represented in two regions — Moscow and St. Petersburg (and initially we were in St. Petersburg, we have production there, and the head office of sales, and designers, and architects, but about six years ago, it seems, we went to Moscow, and at the moment we are, of course, more in Moscow, more than in St. Petersburg), so according to internal statistics in these two regions over the past year, probably seven out of ten of our houses were definitely built on a mortgage.

— So the recent mortgage changes concern you directly?

— Alas, there is no preferential mortgage as such anymore, but the buyers of houses are mostly families, and with small children, so they hit the nail on the head here. The only thing is that we do not always fall into the price range, because everything is limited to 12 million rubles (this is the loan amount). In most cases, people want to get a turnkey house, but not always these 12 million limits for Moscow and St. Petersburg are enough to carry out their plans. Buyers either have to make the house a little smaller and a little simpler, or limit themselves to the amount of services they receive from the construction company, and then get everything at their own expense.

— Would you advocate raising the credit bar?

– yes. To avoid fantasies, I think this way: if you raise it to 18-20 million rubles, it will cover most of the “wishlist” (I don’t like this word, but in this case I will use it), most of the wishes of the customers of the segment in which we work.

— According to your observations, are there any drastic changes and developments in the work of your segment with banks?

— It’s hard to say… They are trying to work with individual representatives of the segment. By the way, we were at the origins when “The House.The Russian Federation” launched its suburban mortgage program, even, in my opinion, the contract was recommended by us – at least in St. Petersburg, for sure, and we were the first to be accredited at the time. Now I like the way Beber works: they have clearly built a scheme of interaction, with personal accounts, with storefronts — this is very convenient from an operational point of view for both the consumer and the contractor, because it allows you to speed up the process. But as for the use of escrow accounts in residential housing, there are certain concerns and certain contradictions within the professional community, since this is more interesting to banks than to the builders themselves. It seems to me that the story is not fully thought out, giving rich ground, including for consumer terrorism. The scheme helps to protect against the very fact of “non-construction”, but does not control the quality parameters of the rented housing in any way.

— And if today you were offered to take the initiative to adopt some new law, norm or rule, which would you choose?

— Like most respectable and high-quality housebuilders, we, as a company, would choose greater regulation of the residential housing segment. Unfortunately, everything in the fence is more advisory than mandatory, so the rules of the game are conditional, let’s call it that. We are in favor of regulation. We are for clear GOST standards, for clear SNiPs, so that they are adequate and modern, and not some 60s of the last century. We are in favor of industry standards and certain quality parameters that houses under construction must meet. And we are for the rules of the game, which will be equally prescribed for everyone: this will also protect the consumer.

And if so, it is worth recalling that on August 1, the national standard for green individual housing construction (GOST R for residential housing), developed by Dom, came into force.RF” together with the National Agency for Low-rise and Cottage Construction (NAMIKS) according to the roadmap of the Ministry of Construction. The new GOST R was created taking into account the experience of the leading international certification systems LEED and BREEAM, the green GOST R for apartment buildings and the standard of integrated territorial development “Dom.RF”.