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. Last Updated: 07/27/2016

Market Has Become Cleaner, Report Says

Russia's real estate market is becoming cleaner as more developers adopt Western practices a new global report by Jones Lang LaSalle says, classifying Russia alongside EU member states Greece and the Czech Republic as "semi-transparent."

While the difficulty in measuring of market transparency gives the report a certain subjectivity, the report accurately reflects a significant maturing of Russian real estate, analysts said.

Since the last survey in 2004, Russia has leapfrogged over developing rivals Brazil, Thailand and the Philippines to climb three places to No. 35 of 56 countries surveyed. In doing so it has lost its classification of "low transparency" and is now "semi-transparent."

Semi-transparent countries ahead of Russia include Poland, Israel and South Korea. Below Russia in the semi-transparent category, the middle of a five-tier ranking system, are Brazil, the Philippines and India.

While it is hard to quantify the gains of the past two years, the market has improved significantly over the past five years, said David O'Hara, general director of real estate consultancy DTZ.

"Developers recognize that the more transparent they are, the more money they are going to make.

"If by meeting someone else's due diligence standards and spending $100,000 in advance your sale price is $1 million higher as a result, the developer realizes that is a wonderful return," he said.

He said the best indicator of the improvement in transparency were international banks like Hypo, EuroHypo and Aareal that are starting to do business in Russia.

"We now have true western project financing, which was not there a few years ago," he said.

Multinational occupiers who have entered Central and Eastern Europe in the past few years are now starting to look to Russia, said Alastair Hughes, European CEO of Jones Lang LaSalle.

In the past few years this has been a powerful force for change in Central and Eastern Europe, he said in a statement.

"A new generation of cross-border investors and occupiers demand more information, consistent regulatory treatment and higher ethical standards," he said.

Commercial real estate is benefiting as retail and office landlords insists on rent being paid in a legal and transparent fashion, said Yulia Dalnova, director of retail at Knight Frank.

"Every developer is thinking of its exit strategy, of how to sell," she said. "To get the best price for a development, cash flows must be fully legalized, fully clear."

She said developers in the regions were catching up quickly with Moscow in terms of transparency.