Regional Projects Feeling Credit Crunch

SAMARA — As cash-starved developers freeze construction projects in Moscow and St. Petersburg, the country's regions are starting to feel a financing crunch of their own, with dozens of high-profile projects being postponed because of uncertain economic times.

Samara developer Indest Development recently canceled plans for the construction of 30 to 40 shopping and business centers, said Mikhail Nenashev, the company's general director. The company plans to direct all of its resources toward projects that are near completion, including two 10,000-square-meter business centers and a 6000-square-meter bank and office center.

X5 Retail Group, the country's largest food retailer, has frozen the construction of what was to be Samara's biggest shopping mall, a $180 million, 215,000-square-meter complex that was slated for completion in 2010, said the company's general director, Vladimir Rizhkov.

Both Rizhkov and Nenashev said their companies would return to the unfinished projects once the country's financial situation stabilized.

Up to 70 percent of all construction projects in Samara might not meet completion deadlines, said Ivan Salnikov, head of the real estate research department at Marks Group, a consulting firm.

Over 35 shopping centers with a total area of 750,000 square feet were scheduled to open in the city in 2009, he said.

Grifon Group, a developer in the Ulyanovsk region, recently shelved a $70 million dollar shopping center construction project because of rising credit costs.

"Credit is pretty expensive at the moment," said Igor Orlov, the company's general director. "We would rather hold off."

A top Ulyanovsk region bureaucrat who asked that his identity not be disclosed said local builder Maksima-X will stop construction of Pushkaryovskoye Koltso, a 17,500-square-meter shopping center with a price tag of over $40 million dollars.

Another of the region's developers, Dars Development, will freeze the construction of Akvamoll, a 4.5 billion ruble ($165 million) shopping center with a total area of 115,000 square meters, he said.

A Dars Development spokesperson had no comment on the company's activities. A spokesperson from Maksima-X confirmed that the Pushkaryovskoye Koltso project will be halted.

Interest rates offered by banks to developers have risen to 30 percent a year, up from 15 percent to 20 percent in the beginning of September, said Alexander Osin, head economist at Finam Management.