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. Last Updated: 07/27/2016

Developers Bid for Access to City Sites

To get a shot at winning property titles for construction sites, a group of real estate developers have set up a lobby for cutting City Hall's red tape.

"We want to be in a position to formulate requests to lawmakers," said Alexei Shepel, director of S.Holding, the driving force behind the Moscow International Developers Union.

Before 1990, City Hall awarded some 2,000 construction contracts, Shepel said. But new investors with fresh funds may now have trouble obtaining a contract, he added, even for uncompleted sites that are languishing because developers lack the funding to proceed.

"We're trying to develop a sales mechanism for property titles," Shepel said.

Last year, City Hall reported that construction work had been completed at 563 sites, a 110 percent improvement on an annual basis.

Shortly before the new year, the Property Ministry and City Hall set up a joint body to review all unfinished construction projects. And now, City Hall is speeding up its efforts to redistribute the property titles on stalled projects.

"We've tried to review the results of the auctions several times, but it's a very laborious task," said Nina Kitayeva, head of a City Hall department involved in the review. "In one year from now, we'll see the results [of our efforts]."

However, so far, there is no mechanism allowing investors to sell property titles for failed sites other than for City Hall to auction the land again.

"It's clear that if an investor fails to meet his obligations, City Hall will try to hold another auction," said Sergei Riabokobylko, director of Stiles & Riabokobylko real estate consultants.

"So it may be that the [lobby's] idea is to develop sites using the owner of the property title as a front company, which should waive its right immediately when the project is completed."

Riabokobylko said a number of sites are currently being offered for sale by cash-strapped developers.

"One should be very careful," he said. "Many sites come to the market because their owners know about City Hall's plans to strip them of their property rights [for failure to meet investment conditions]."

So far, the newly formed lobby group is nothing but a club made up of four mid-sized developers, among them S.Holding, KB Engineering, Barkli Stroi and Group Podyom Orbita Polysytem. Its future remains uncertain because the major developers have not joined the group.

"There's a long way to go between declaration of intent and [accomplishing] real things," said Yelena Dranchenko, president of the Moscow Association/Guild of Realtors. "Many declarations [of a similar sort] have been made in the past."

Moscow Association/Guild of Realtors unites about 70 members, while another major real estate lobby group — the Moscow Investors Association — hosts about 80 members.

There are about 400 real estate companies active on the Moscow market.

S.Holding posted sales of about $50 million in 1999, up roughly 30 percent on an annual basis. Other group members' sales figures were not available.