Homeowners Who Cannot Go Home

Many apartment buyers are finding themselves in the unenviable position of owning a home in an unfinished apartment: The builder has been paid, but only the frame of the house has been finished and there's not a worker in sight.

Sergei Shunilov bought an apartment in the Gagarin region of Balashikha, about 25 kilometers east of Moscow, from Giza 21st Century. The company was obligated to finish Building 24 by March 30, 2009, but the frame has only been finished to the ninth of 24 planned floors, and workers haven't been visible at the site in months, Shunilov said.

When called by unsettled buyers, Giza 21st Century says it's out of money.

Dmitry Gulyayev purchased an apartment from SU-155 in Odintsova, in the Novaya Tryokhgorka complex.

"The building was supposed to be finished in the fourth quarter of 2008. It's still a vacant lot where the 44-story building was supposed to be. SU-155 has a note on its web site now saying that the building will be finished in 2010," Gulyayev said.

The company proposed changing the contract to an apartment in Building 34, which is already well under way. But there are some people, Gulyayev said, who want their money back, and according to the contracts they're allowed to request it after paying a 10 percent fine.

But SU-155 won't return the funds and has suggested that he take his complaint to the courts, Gulyayev said.

Fyodor Sarokvasha, a SU-155 spokesman, declined to comment on the matter.

"When we bought our apartment, they promised to finish the building by the end of 2007," said Dmitry Shishkin, who also purchased a flat in Novaya Tryokhgorka. "Now SU-155 is saying it will be finished the third quarter of 2009. The frame for my building, No. 27, is finished, but almost no work is being done inside. At best, we're counting on getting the keys in 2010."

A Regional Development Ministry spokesman confirmed that there are many such buildings throughout the country but said there was no system for registering them.

A source in the ministry's building agency said there were 64 million square meters of unfinished construction and 5.6 million square meters that were frozen, according to data the body was collecting at the end of last year.

Experts, however, gave a wide range of figures.

Construction has stopped "nearly everywhere," said Andrei Pashkovsky, chief executive of ORSI Group. Real estate firm MIEL estimated that 20 percent to 25 percent of projects in Moscow and as much as 50 percent in the Moscow region are frozen. MIAN said 30 percent to 40 percent of Moscow construction was stopped, while Inkom put the figure at about 10 percent.

Buildings that are under construction and in which most of the apartments have been sold are continuing to be built, said Dmitry Taganov, head of Inkom's analytical center. He said there were 309 such residential buildings.

Analysts agree, however, that sales have all but stopped in new buildings. Valery Barninets, head of real estate agency Doki, said sales of new apartments have fallen 76 percent compared with February 2008.

Anton Mitrofanov, head of the Zhilishnaya Strategia real estate agency, said many companies had eliminated the departments that handled sales of newly built apartments.

"People are afraid to buy them," he said.

None of the builders interviewed for this article would say on the record that they had stopped work. At worst, they said, there has been an "interruption," or the building pace has "slowed down."

Giza 21st Century deputy head Yelena Tadevosyan said construction on Building 47 in Balashinka's Gagarin region was stopped "in connection with the closure of a credit line from MDM-Bank" and that the bank's loan committee was considering Giza's request.

Tadevosyan added that 24 workers were "laying bricks inside the building."

MDM-Bank's press service declined to comment.

"SU-155 isn't freezing projects. Delays are a standard problem in construction, and for obvious reasons it will be a difficult one to resolve in the coming years," said Sarokvasha, the company spokesman.

The majority of builders are currently not creditworthy and have debts that are several times their annual turnover, said Pashkovsky, of ORSI. According to his firm's calculations, six developers -- PIK, SU-155, DSK-1, Glavmosstroi, Mospromstroimaterialy and MSM-5 -- had a combined 260 billion rubles ($7.5 billion) in debt at the end of November.

The scale of the problem will become evident by the end of the first quarter, said Omar Gadzhiyev, managing partner of Panorama Estate. And by the end of the first half, if the government's support measures turn out to be insufficient there will be a mass wave of developers not meeting their obligations, he said.

Housing Built

Million square meters
 RussiaMoscow RegionMoscow City
200030.32.63.3
200131.72.83.7
200233.83.44.3
200336.44.14.4
200441.05.74.6
200543.65.34.6
200650.66.54.8
200761.07.84.8
200863.87.83.3