RenCap Sees Forced Sales, Bankruptcies

The real estate sector is facing forced sales of development portfolios, and small players will go bankrupt because of a lack of refinancing resources at home and abroad, Renaissance Capital said Thursday.

Russia's largest investment bank said in a research note that it expected early stage projects and land holdings to be the hardest hit because of cash-strapped developers attempting to offload large land banks.

"However, we believe that after an initial bout of forced or accelerated selling, the tightening of credit or the effective closure of the credit market will have a more pronounced effect on the supply, rather than the demand, side of the property market," RenCap said.

"This means that given the healthy demand backdrop, tightening supply will eventually push prices up across all segments of the market sometime in the future."

"Tighter credit market conditions should eventually prompt consolidation in the property market, with larger players boosting their market share to the detriment of smaller, highly leveraged companies."

Russian residential property prices have risen more than 10 times over the past decade, and many analysts and industry watchers predict a steep decline in the next six to 12 months.

Fitch ratings agency has also repeatedly warned that heavy short-term debt positions of some real estate companies might ultimately lead to forced asset sales.