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. Last Updated: 07/27/2016

Builders Welcome Low-Rise Housing Plan

Builders say they are pleased with a government plan to develop the construction of low-rise housing, which they plan to offer for no more than 30,000 rubles ($1,050) per square meter.

"We need to pull people out of the slums," Prime Minister Vladimir Putin said Friday during a government meeting on the housing sector. In the first nine months of the year, 35 million square meters of housing were constructed, although Putin said the yearly goal of 52 million square meters could still be reached thanks to construction starting before the crisis.

He also ordered the government "to create the conditions for the start of new construction," with low-rise housing being among the priorities.

Starting next year, regional governments will be able to seek funding from the Housing and Utilities Reform Fund for low-rise construction, under rules approved by the State Duma in a first reading Friday.

The fund currently cofinances regional programs to remodel buildings that could be used as housing and resettle residents from dangerous buildings, regardless of the number of stories in the new house. When the bill in the Duma is passed, the fund will be able to allot money specifically to resettle people into low-rise buildings, said Grigory Volkov, a spokesman for the fund. "There is a certain logic to it, since building low-rise housing is cheaper and faster," he said.

The law gives the regions simplified access to the fund's resources, Volkov said, adding that only five of the 12 current requirements would be maintained.

This is the first time that the government has moved to support the mass development of low-rise construction, a government official said. Previously, its support was limited to specific programs through the national project on affordable housing.

State guarantees or subsidized interest rates will be available to secure land, while young families will be given subsidies to buy houses, he said.

The spokesman for the Housing and Utilities Reform Fund was not immediately able to say how much the state corporation would direct toward the project, saying it "depended on the requests from the regions." A member of the fund's supervisory board said calculations would be wrapped up next month, but that the figure would not exceed 10 billion rubles ($348 million).

The Residential Housing Development Fund promised that it would join in the effort. "We're planning to have low-rise housing on 60 percent of our plots," a spokesperson for the fund said.

Low-rise construction is promising in areas where there is no shortage of land or building capacity, said Andrei Pankovsky, deputy chief of DSK-1. The production cost per square meter varies by region, but the government's average price of 30,000 rubles is entirely possible, said Konstantin Popov, chairman of Incom Real Estate.

The cost of the land can account for one-third or even half the price per square meter in low-rise housing, said Anton Danilov-Danilyan, head of Delovaya Rossiya's expert council. Building low-rise settlements would require buying a large plot of land and installing utilities, he said. "And those are both expensive things to do in Russia."