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Real Estate

Moscow Grows
Vladimir Kozlov

he recently announced plans to radically expand Moscow’s city limits into the territory of the Oblast are likely to have a serious impact on the real estate market in the longer run.

As a result of changes, proposed last summer, the territory of Moscow is going to increase by 144,000 hectares, or by 2.4 times. A huge stretch of land, which currently lies outside the city’s South-Western border, is to become part of it, the area between the Kiev and Warsaw motorways.

The main idea behind the plan is that headquarters of several government agencies are to be relocated to a specifically constructed area outside the capital’s current limits, thereby easing the burden on the city’s infrastructure and improving the traffic situation. The new governmental compound, the exact location of which is yet to be determined, is also expected to become an international financial centre.

Apart from housing administrative buildings, the new land will also be used for residential construction. Over the next 20 years, more than two million new homes are to be built on the “new Moscow” territory. Also, there are plans to reconstruct the Kiev and Kaluga motorways.

The proposals are expected to become law in 2012, after which ordinary residents could feel the impact, although some changes could begin to be felt in the shorter term.

“Given international experience of executing such largescale mass-construction projects, the creation and approval of a new general [development] plan could take at least two to three years,” Alexandra Kadchenko, head of the consulting and evaluation department at MIAN, told PASSPORT. “So, execution of new projects would not start before 2014.”

According to Alexander Ziminsky, director of the elite property sales department at Penny Lane Realty, the main impact from the expansion of Moscow is to be felt in the areas that are to become part of the city.

“Moscow has a considerable budget,” he told PASSPORT. “So, areas that will become part of the capital, will be developing better, especially when it comes to the social and transport infrastructure. Also, situations when Moscow expands a motorway [on its territory] but beyond MKAD it turns into a bottle-neck unable to handle traffic, will become history.

“Developers that bought plots of land in that area before the crisis and later faced problems because the value of the assets went down, now will be able to re-evaluate the land because of a change in its status, and could then feel some relief,” he went on to say. “Certainly, land prices in that area are set to go up.”

Meanwhile, Ziminsky is skeptical about the prospects of a major international financial centre beyond the current city limits. “I think big business won’t leave central Moscow to move in the direction of Podolsk,” he said. “State officials are not independent, they’ll do what they are told. But businesses could just open new representative offices.”

At the same time, the change of status from Moscow Oblast to the capital may not come as pleasant news for developers used to a simple approval procedure in the Oblast, which would now have to be replaced with a more complicated one that applies to the capital.

“Primarily, developers that have connections to federal agencies are likely to benefit from the situation,” Ziminsky observed. “But there will be not only winners but also losers. The latter will completely lose chances of getting their projects approved and will have to leave the market with losses.”

Realtors agree that the expansion of the capital is set to bring about an increase in real estate prices in the new territories.

According to Kadchenko, in the short-term, the changes are not going to have a tangible impact on the property market but in the longer run, demand and prices for properties located to the south-west of today’s city limits are likely to go up. “In the long term, prices for new, good-quality residential property in Shcherbinka, Troitsk and Kommunarka could go up,” she said. “But a sharp increase in prices is unlikely as the territory [added to Moscow] is huge, and new residential neighborhoods are likely to compete with each other.”

However, other experts say that there have already been increases in property prices, related to the expansion of Moscow. “Some buildings currently under construction have already seen a 15% to 20% increase in prices,” Yulia Geraskina, head of the new construction department at Est-a-Tet, told PASSPORT. “One example is Dom V Kommunarke from the developer MITs. In late May, the maximum price for one-room apartments was 65,850 roubles per sq m, which is now between 77,850 roubles per sq m and 83,850 roubles per sq m, and the project is still in its middle stage. We also forecast increases in buildings under construction in Shcherbinka.

“Secondly, price increases are expected in towns located next to the ‘new Moscow’ territory,” she went on to say. “For instance, in Podolsk, which is not part of expanded Moscow, prices are likely to be pushed up by the improved infrastructure and transport situation.”

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