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. Last Updated: 07/27/2016

Developer Plugs Apartments, Cheaper Mortgages

By Nadia Popova

Mirax Group chairman and co-owner Sergei Polonsky said Wednesday that supporting demand for apartments, including through cheaper mortgages, could lead Russia out of the economic crisis.

"There's no sense in building roads in times of financial turmoil, as it will yield results only after many years," Polonsky said on the sidelines of the Troika Dialog's Russia investment forum. "But active demand for apartments will have an immediate effect."

The country's construction industry has been among the hardest hit by the financial crisis, which all but closed foreign capital markets to Russian borrowers. Polonsky took over chief executive at the developer, one of Russia's largest for residential real estate, after then-CEO Alexei Kunitsyn quit in October.

In September, Polonsky said Mirax had canceled the development of 10 million square meters of both residential and commercial real estate because of soaring interest rates.

To help boost demand, Polonsky said Wednesday, banks should give out mortgage loans at 3 to 4 percent. The current average interest rates for mortgages are more than 20 percent in ruble terms.

The government has to finance such mortgage programs using the money of the Reserve Fund, he said.

German Gref, chairman of state-controlled Sberbank, said spending money from the stabilization fund — split last year into the Reserve Fund and the National Welfare Fund — to support mortgage programs would speed up inflation to as much as 30 percent, which would in turn send interest rates soaring.

Russia had inflation of more than 13 percent in 2008, and consumer prices rose more than 2 percent in January alone.

"Fire can't be extinguished with gas," Gref said, adding that only state banks would continue to give out mortgage loans this year.