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. Last Updated: 07/27/2016

Moscow Region Turns to 'Holistic' Development

VedomostiNew apartment buildings in the suburb of Khimki. Moscow's middle class is increasingly looking to buy beyond the MKAD.
The countryside around Moscow is no longer just for luxurious one-family homes or decrepit wooden shacks.

More and more high-rise apartment buildings are springing up outside the city, and the Construction Ministry for the Moscow region estimates that a further 21 million square meters of new housing will be erected in the region over the next four years.

"Large construction companies are moving outside Moscow, where there is more open land and its cost is much lower than in the city," explained Oleg Kolinkov, vice director of realtor MIAN's sales department.

It is also easier for companies to purchase land in the Moscow region than in the city.

"In Moscow, developers own the buildings, but not the land on which they stand," said Oleg Repchenko, head of IRN.ru, a real estate analysis, marketing and consulting company.

City Hall explains its policy of retaining property rights to the land in the capital by its need to ease future urban planning and infrastructure modernization.

But unlike the Moscow city government, "the government in the region sells land to developers instead of providing them with long-term land leases," Repchenko said.

Developers such as DSK-1, Stroimetresurs, Stroiteks, and Uasstroi are investing in, and constructing, apartment houses outside the Moscow Ring Road, or MKAD, to satisfy the growing demand for affordable housing.

"There is no inexpensive housing left in Moscow, even in such remote areas as North Butovo, where you won't find any newly built apartments for less than $1,000 per square meter," Repchenko said.

Real estate consultants and realtors project that Moscow's overheated real estate market will ensure that apartments in the Moscow region will remain in demand.

Budgetary constraints increasingly mean that Moscow's middle class needs to look beyond the MKAD for affordable housing.

"Housing quality in the Moscow region is now the same as in the city, but, on the whole, prices are still about 30 percent lower in the region," said Yevgeny Redkin of Miel realty. "Close proximity to Moscow is very important to our clients."

However, the distance from the MKAD is not the only price determinant for housing in the region.

"Apartment prices in Krasnogorsk [about 10 kilometers west of the MKAD] have surpassed the $1,000-per-square-meter mark, but prices in Reutov [about 1 kilometer east of the MKAD] remain at an average of $800 per square meter," Repchenko said.

Mainly because of environmental factors, the housing located west of Moscow is more prestigious than the real estate east of Moscow.

The Moscow Center of Hydrometeorology and Environmental Monitoring, an organization that probes air quality two to four times every 24 hours for harmful substances, rates the ecological makeup of most western areas in Moscow and its surrounding areas as "good" or "fair." However, most eastern areas, where several factories are located, get the "poor" or "very poor" rating.

The quality of infrastructure also affects apartment prices in the Moscow region.

Vast apartment complexes are built on sparsely populated land outside Moscow, where there are not enough schools, entertainment centers, stores and hospitals to support the basic needs of residents in the new apartment houses.

And even if a new development is built in or around one of the region's 72 towns, much investment is still required to modernize and improve the existing infrastructure.

"Regional government and private construction companies negotiate and agree on who will bear the burden of developing and modernizing the infrastructure of each town on a case-by-case basis," said Andrei Gorin of the region's Construction Ministry.

Stroimetresurs paid for 70 percent of the total school construction costs in Dmitrov -- about 50 kilometers from the MKAD -- while the local government covered the remaining 30 percent.

"We paid only part of the cost in Dmitrov, where other apartment buildings were already erected in close proximity. The town needed to build another school regardless of our construction project," said Andrei Smakhtalen, second vice general director of Stroimetresurs.

"Things were different in Shcherbinka, [about 5 kilometers from the MKAD], where we built 10 apartment buildings on a vacant lot and paid independently for the construction of a child-care center, an elementary school, a shopping center, a four-level parking garage and a physical recreation facility," Smakhtalen said.

Investment in infrastructure makes it easier for developers to obtain construction permits from the government and increase the attractiveness of their properties.

Boris Gromov, governor of the Moscow region, has said on numerous occasions that to develop the region, construction companies cannot build single sites, such as one house or one store.

The Moscow region government now only invites companies to bid on "holistic" construction projects, where a slew of buildings including hotels, schools and entertainment centers will be erected by the chosen company along with housing.

The construction of single sites is being phased out.

"Holistic construction is the only way to develop the countryside," said a Moscow region expert at Uasstroi. "It means modernization of areas, which for the most part are already urbanized, but lack such conveniences as modern supermarkets, banks, physical recreation centers and movie theaters."

Over the last several years, Uasstroi has built a hotel, several high-rise apartment buildings and nearby shops and offices in Odintsovo, located about 7 kilometers from the MKAD. The company is also involved in similar construction projects in Mytishchi, about 5 kilometers from the MKAD.