Despite Moscow's potential for commercial real estate growth, experts agree that financing remains the greatest major obstacle.


Taxes, politics and securing rights to titles are all issues that catch outside investors in a whirlwind of uncertainty and doubt.


And now, with the country's recent confidence crisis in the banking sector, yet another straw has been laid on the camel's back.


"There are many projects in development now based on local dollars, and a stable banking sector in Moscow will be a major factor," said Linda Breitel, general director of sales and marketing for developer S+T Handels GmbH.


"If a problem occurs with the banking market, local money currently financing these schemes will stop."


By most estimates, the Western-style office market is picking up speed, as much as doubling from last year's available space by early 1996.


But the growth in such projects is contained in a relatively small number of new buildings, with prospects for future growth founded on increased stability.


As long as banks and investment funds maintain their distance, experts say the construction boom necessary to put Moscow on a par with other world capitals will be lacking.


In the meantime, local Russian banks have moved to fill the void, financing both commercial developments and their own private offices. Their continued success affects not only current projects, but the confidence of outside investors, according to Breitel.


"It will impact the whole market on a broader scale," she said. "It will increase the panic or raise questions as to how stable is this market for outsiders."


Other factors also are detracting from foreign investor confidence.


Hines Interests, which entered the market in December 1992 as manager of Park Place in southwestern Moscow, has long been known for its development projects in the United States.


Now, the firm is aggressively expanding its overseas business, and has focused about 70 percent of its efforts on international markets, up from 10 to 15 percent just five years ago.


But in Moscow, Hines' plans to renovate and construct its own projects have been put aside.


Resources are currently being directed toward expanding its management and leasing projects in the city, according to Lee Timmins, managing director of the company's Moscow office.


It is a decision reached only in the past year, and the key reason is politics.


"We now believe that ... it's very scary to investors, and we aren't going to highlight it at all," said Timmins. "We think investors will be nervous until after the elections, both the [State] Duma elections and the presidential elections."


Entrepreneurial funds are a potential source of financing for projects as flight capital returns to Russia, Timmins said.


Large investments from the West, however, are unlikely. But not all developers blame politics for financing difficulties.


Security for loans, such as the ability to take possession of a property when developers default, has been the biggest concern, according to David Geovanis, director of the Brooke Group, developers of Ducat Place on Ulitsa Gasheka.


"The [financing sources] we deal with are more concerned about perfecting their underlying security interest in a project, rather than the political situation," Geovanis said, adding that to date his firm has had to finance its own projects.


Progress in loan security came recently in the form of a city order establishing an administrative procedure for pledging land lease or building lease rights to an investor.


While the practice has already been common in most agreements, it will help to have the city's support, Geovanis said.


"I think you'll see in the near future more traditional real-estate financing become available," he said.


"The first stage was very entrepreneurial ... It's developing, not into a mature market, but into the next stage."


? Westec Development Ltd., which is financing the construction of a 12,135 square meter office complex at Malaya Yakimanka 2/1, has awarded the design and construction contract to Consergio Codest Engineering, according to Linda Breitel of the project's developer, S+T Handels GmbH.


The project is currently in the pre-leasing stage. Tenant access is expected by August 1996, Breitel said.


? ERD-Domostroi, a joint venture between International Real Estate Development of Ireland and Narodnoye Domostrosnis of Russia, signed an agreement Aug. 23 to develop the residential complex Lyesnoi Park in the Severny region in northern Moscow.