Competition Making Renovation Cheaper

Nadezhda Karavayeva and her husband had been on the fence about remodeling their apartment. Companies were demanding high prices for their services, and bargaining, she said, was not an option.

But this spring -- with the remodeling business now fully exposed to the financial crisis and competing with cheaper, unregistered firms -- Karavayeva has stopped hesitating.

"It finally became easy to make a decision and renovate. Remodeling companies have significantly lowered their prices, and now it's completely realistic to negotiate with them," she said. "Last year, they were booked all summer and wouldn't take on new clients. Now, they have tons of free time."

In 2008, 18 percent of Muscovites renovated their apartments, down slightly from 22 percent in 2007, GFK-Rus, a market research organization, said in a report released over the weekend. Of 1,000 respondents polled in 2008, 17 percent said they intended to begin remodeling work in the coming three months, compared with 29 percent a year earlier.

The survey did not give a quarterly breakdown of the figures.

Remodeling companies say that while they don't expect the modest decline in demand to change much this year, the number of people enlisting the services of registered remodeling companies will tank.

In the first quarter, Moscow-based renovation firms saw client volumes drop by 40 percent to 50 percent, the owners of several such firms told The Moscow Times.

"Everyone is running to unregistered foreign contractors because they are giving the cheapest rates," said Sergei Lim, owner of LikStroiDesign.

"Before the crisis, Muscovites were willing to pay a premium for higher quality work, and the security of knowing the company is legitimate. Now, they're just trying to save where they can," he said.

Unregistered contractors, who typically advertise through social networking web sites, are charging as low as $100 per square meter for flooring, or half the $200 they charged on average last spring.

To stay afloat, registered companies have been forced to be more flexible.

"Last year, no company would think of taking on a client offering 6,000 rubles [$180] per square meter because there were tons of others willing to pay 10,000 rubles," said Andrei Yurkin, owner of Moscow remodeling and design company Remont Kvartiry.

"Now that demand has fallen and people from Central Asia are willing to do it for $100, we are very willing to take these offers," Yurkin said.

But even with the lower prices, many homeowners are still turning to cheaper contractors.

"Despite the crisis, we decided to remodel," said Mila Agafonova, a marketing and sales executive. "Instead of going through a company, we hired some Moldovans whom colleagues recommended to us. We were very pleased with the final result."