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. Last Updated: 07/27/2016

Protests Erupt Over Unbuilt Flats

MTPodolsk group members protesting at their Kitai-Gorod rally on Oct. 11.
When Marina and Maxim Stepanov paid for a planned apartment in an unbuilt Moscow region block two years ago, they expected to be ringing in 2005 in their new home.

The building was due to be finished by the end of 2004. Work had already begun -- and at $650 per square meter, the planned 34-square-meter flat seemed like good value.

Now, however, the Stepanovs are still waiting for their home to be built. They say all they can see at the Dolgoprudny site is a pit that has been snowed in, flooded and iced over for two winters in a row. Despite having paid, they've been unable to pin down any firm completion dates.

"Now we're being told we're suckers, that we fell for cheap prices," Marina Stepanova said.

"We were planning to start a family and were thinking of children -- and we were left with nothing."

They and others who paid for more than 400 apartments in the block have held several protests in the center of Moscow and in Dolgoprudny to try to draw attention to their case.

And their case is not unique. Recent months have seen a series of protest rallies, pickets and hunger strikes involving several groups of people who paid for apartments in planned Moscow region housing developments or novostroiki, only to have the construction drawn out indefinitely or ownership claims disputed.

The Moscow region Construction Ministry has responded by publishing a list of four companies that it said had failed to fulfill obligations under construction contracts. The number of homebuyers affected was approximately 8,500, and criminal proceedings had been instigated in seven cases, an Oct. 21 statement on the Moscow region government's web site said.

Stroyindustria, the company that was to build the block in Dolgoprudny, is included on the ministry's list. A staff member who answered the telephone at the company's offices said the only person authorized to comment was unavailable.

In the town of Zheleznodorozhny, other protesters have been rotating on weeklong hunger strike shifts since Oct. 11 over stalled construction by another company on the ministry's list, Stroimetresurs.

One of the protesters, Boleslav Kulifeyev, 75, said a group of 20 protesters had occupied a room in the unfinished building and planned to stay until they had official guarantees that their demands for resumption of construction were met. Their action already had some effect, he said.

"The authorities have already begun talking to us," he said. "Before, they would tell us to go to court. Now, we have results and we have hope."

Stroimetresurs could not be reached for comment Monday as its telephone line was constantly busy.

Not all of the recent protest actions relate to companies named by the ministry as unreliable, however.

At an Oct. 11 picket in Kitai-Gorod, a third group of protesters alleged that a company not mentioned in the ministry's list had disappeared after receiving their payments for 88 apartments at a planned construction at Podolsk.

Andrei Gusev, vice president of the Russian Guild of Realtors, said that although buying into incomplete apartment blocks was widespread, it could be compared only to gambling. It was a risky investment made in hopes of high returns, he said.

Alexander Trofimov, a lawyer at Miel real estate agency, said that although such apartments were cheaper than those on the secondary market, they were sold under contracts that did not immediately grant property ownership rights. Buyers are initially considered co-investors, with the right to claim ownership after construction is completed.

A federal law that applies to apartment and other real estate construction and came into effect in April regulates the funding of planned apartment blocks' construction, defining necessary contract terms and requiring that all contracts be registered by the state.

The law forbids collecting funds from co-investors before all the necessary construction permits are obtained. Other provisions include fines for construction companies that fail to build on schedule.

Many construction companies had been using the funding from new co-investment contracts to erect previously contracted buildings, Gusev said.

"They all worked in a mode close to a pyramid scheme," he said, adding that the Moscow region and St. Petersburg were the two areas where co-investors were most frequently disappointed.

Alexander Molodykh, a spokesman for the Moscow region Construction Ministry, said the ministry had formed a workgroup to address the protesters' problems and was addressing each case individually.

Commenting on the old arrangement, Molodykh said the construction companies and the co-investors were private parties signing a private contract, and that the contracts were frequently illegal.

This was ruled to be the case for a group of would-be apartment buyers at the Zvezda Rossii residential complex in the Moscow region district of Khimki. Nikita Kuznetsov, a spokesman for the Zvezda Rossii co-investor initiative group, said there was a problem the legality of the land's allocation. The district's new administration had disputed the old administration's contract in an arbitration court, which found it null and void -- and the co-investors' subcontracts were voided as well, Kuznetsov said.

He said local authorities began sorting out the co-investors' problems only after they held a protest rally and hunger strike in central Moscow. Now, the building project is to be completed by a new construction company, Kuznetsov said, adding that the Moscow region authorities had now promised the co-investors the housing they paid for.

In Dolgoprudny, the Stepanovs -- now renting an apartment, and expecting a baby -- said their group had also been informed that its building would be completed by a new contractor.