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. Last Updated: 07/27/2016

City Ends Growth of 'Exclusive Club of Realtors'

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The Moscow city governments property sales department will not accredit any more realtors to market its more than 1 million square meters of residential property, Leonid Krasnyansky, head of the department, said this week.

We will continue to work with realtors that have already been accredited and we will keep to our policy of selling our stock of completed buildings only through them, he said at a press conference earlier this month.

Krasnyanskys department has granted accreditation to 15 realtors to market the residential apartments built for City Hall.

Krasnyansky declined to mention those lucky enough to be members of what local newspapers dubbed the Exclusive Club of the Accredited Realtors.

Krasnyansky and other top officials of the department have not said what criteria were used for granting accreditation.

However, Oleg Repchenko, the deputy director with the Moscow Investment Realty Agency, or MIAN, said accreditation was granted through a tender.

Repchenko said applicants for any tender are required to perform a specified task for example, selling a specified number of apartments in a given time.

This allows the bidders to demonstrate professionalism in the marketing of real estate properties, Repchenko said.

Denis Gaba, managing director of Gaba Estates Realty, said the desire of realtors to be among the accredited few is understandable because the department allows only those accredited and affiliated with the city government to market its stock of residential properties.

Accreditation is very important as the department has monopoly rights over most prime locations in the citys center, where infrastructure and other social amenities are very well-developed, he added. These make properties on such sites very competitive on the market.

MIANs Repchenko said the departments properties constitute the most stable source of apartments for sale on the local market.

It goes without saying then that those without accreditation are cut off from this market segment, Repchenko said. In a competitive market like the Moscow real estate market, this is really a very disadvantageous position.

However, Vladimir Kiselyev, marketing director at Best-Realty, said accreditation is not a panacea to all of a real estate businesss problems.

Its mainly important to those working in the primary sector of the real estate market, that is, those marketing new apartments in newly delivered buildings, he added. As for us, we do not need it as we specialize mainly on the secondary market segment.

According to the department data, accredited realtors sold about 69,000 square meters of its new residential stock for 980 million rubles ($35.4 million) in the first 10 months of the year. During this period, construction firms contracted by the department built 387,000 square meters of residential space.

Earlier this year, marketing managers and retail experts with the department had forecast a sales turnover of about 16 billion rubles ($580 million) by the end of the year.

However, going by the low figures of the first 10 months, it is most unlikely that this target will be reached this year, with only two months to be added to the tally.

To boost sales of these new apartments, a special sales center will be set up, Krasnyansky was quoted by Interfax as saying.

The center, which will become operational by the end of November, will help to simplify and speed up the sales/purchase procedures, eliminate most of the middlemen between the department and the buyers of these apartments, who are known to bloat prices for the end-users, he said.

Another important function of the center will the elimination, or at least the drastic reduction of risks, swindling and other evils that are rampant in the sales/purchase sector of the property market, Krasnyansky said.

In the center, people will be able to sign a purchase agreement and have the full consultants services as well as legal documents, which usually accompany such a deal, he said.

Other services in the center will include banking, currency exchange bureau and notarial services, he added.

However, the departments marketing experts noted that the department would fail to complete 220,000 square meters to 320,000 square meters of residential living space that was contracted to be delivered by the end of the year.

Its almost unrealistic to think that they will be able to meet the deadline, they added.

This deficit has prompted some key players on the local property market to forecast a possible upward shift in the price dynamics of the delivered portion of the residential properties.

Rates per square meter for these newly delivered residential apartments may rise, said Irina Sergeyeva, a top marketing manager affiliated with the Moscow Construction Alliance, or MCA, a recently formed consortium of seven leading construction firms in Moscow.

Under a City Hall contract, the alliance plans to build 1.5 million square meters of residential apartments in 2001.

Explaining the MCAs construction and marketing strategies for 2001, Sergeyeva said that the consortiums load of socially oriented projects included in the contracts would not allow it to function within the present price policy without violating the terms of the contracts with City Hall or raising the prices of its products.

Of course, we are also very interested in low, stable rates, she said. But at present, hikes in rates are almost inevitable.

Later, when MCA has adjusted its overall construction and marketing strategies to the situation on the local property market, then there be a possibility for maintaining their rates at a lower, stable level, she added.

Krasnyansky agreed.

Since the beginning of the year, the cost of building 1 square meter of space in the new buildings has increased from 5,500 rubles to 8,000 rubles, he said.

He attributed this increase to high prices of construction materials, transportation costs and high tariffs on energy resources.

In 2001, we expect the cost of building 1 square-meter space to reach 10,000 rubles. Under these conditions, though we have managed to maintain these rates at a relatively lower level this year, we do not exclude the possibility of increasing them next year, he said.

Deputy Mayor Vladimir Resin said the city government would not condone any unnecessary increase in apartment prices. The Moscow government will not tolerate an uncontrollable price policy in this market segment, he was quoted as saying by the media.

Meanwhile, Interfax quoted Resin on Wednesday as saying that the city government did not expect any increase in apartment prices provided the nations economic situation did not change.

He said prices depended on objective and subjective factors.

Among the objective factors, he named the price of basic building materials, electricity and fuel prices, wage levels and inflation.

Resin also said that the Moscow municipal government is on pace to build a total of 3.5 million square meters of property in 2000, including 411,000 square meters for municipal use, 640,000 square meters for commercial, and 1.5 million square meters for residential use.