Alec Luhn / REQ

A home standing in Novoye Stupino, an “eco-city” for 60,000 residents that MR Group has been developing 90 kilometers south of Moscow.

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The car shimmies over the icy road, past an abandoned collective farm and a village of traditional houses around an Orthodox church to arrive at what looks like a moon colony in comparison.

In the middle of a vast, bleak field, workers in bulky snowsuits are erecting buildings of incongruous shapes and colors, some made partly of prefabricated panels. Across a cluster of deep craters, work continues on four larger cement structures jutting above the horizon. Located 90 kilometers south of Moscow, this is Novoye Stupino, Russia's first eco- city, satellite city or simply "city for comfortable living," depending on whom you ask.

When developer MR Group first conceived the project seven years ago, it was supposed to incorporate more green technologies and materials, said MR Group sales director Alexei Timakov.

But since then, Novoye Stupino's actual greenness has diminished as many of those elements proved too expensive — and required too much time for recouping costs — for a large-scale project with more than 2 million square meters of residential real estate, he said.

Governor Boris Gromov has trumpeted the settlement as a satellite city offering affordable housing, social infrastructure and an eco-friendly industrial park. MR Group plans for more than 60,000 people to live in Novoye Stupino's mix of townhouses, duplexes, cottages and low-rise apartment buildings. Yet despite the accent on affordability, the homes here will be 30 percent to 50 percent more energy-efficient than if they had been built with traditional materials and methods, Timakov said.

"No technologies will allow us to produce renewable energy cheaply, although technically it's already no problem to use them, even in Russia with its current laws," he said. "But as it stands, the expenditures we would need to make during construction would have to be transferred partially onto future inhabitants."

As a compromised eco-city, Novoye Stupino captures the excitement of recent firsts for the nation's green real estate market — and the uncertainty over the financial feasibility of this kind of project in Russia. Green builders hope that their projects will demonstrate the practicality of this type of construction and spur both government support and consumer interest.

Pioneer Projects

Novoye Stupino is part of a wave of high-profile projects in the incipient green real estate market. The World Wildlife Fund, for instance, held a kickoff ceremony Feb. 15 for a project to renovate its central Moscow headquarters into the capital's first "eco-house." Contingent on the approval of city government, the $3.4 million renovation will see the three-story, 19th-century building outfitted with cutting-edge lighting and plumbing technologies and encased in a glass and wood facade. Those features would make it 11 times more energy-efficient than the average office building.

In November, a factory opened in Tver by Swedish rolling-bearings producer SKF Group became the first commercial building in Russia to be certified with the U.S. environmental assessment method LEED, earning the second-highest rating, LEED Gold. The next month, Ducat Place III, an office building in central Moscow owned by real estate firm Hines, became the first commercial building in Russia to be certified with British green building standard BREEAM. The building, which opened in 2007, received the third-highest rating after Hines implemented features such as more-efficient lighting and sanitation systems.

Also last fall, the nonprofit Green Building Council Russia signed a memorandum of understanding with the steering committee of the 2014 Winter Olympics in Sochi and with Olimpstroi, the state corporation constructing the Olympic sites, to develop a national environmental standard. All construction for the Sochi Olympics is required to meet this standard, and the 10 largest buildings must also be certified LEED or BREEAM.

Such high-visibility pioneer projects are vital for any new green building market, including the fledgling Russian one, said Guy Eames, CEO of Green Building Council Russia.

"It's great that in the first year of the market, you've already got several large-scale projects like this," Eames said.

Various estimates put the number of upcoming green projects in Russia between 10 and 20, though Eames said only about half of those have begun the international certification process. Many more are proposed — including a plan by architectural firm AB Elis Ltd. for a domed city in a 550-meter-deep former diamond mine near the Siberian city of Mirny.

Large-scale green projects, such as the SKF plant in Tver, demonstrate that environmental awareness and interest in green buildings is increasing in Russia, said Snezana Stojkovic, regional design director for Aecom. The project management firm will conduct environmental assessments of four Sochi Olympic venues and already has participated in the SKF project.

"Demand for green buildings as 'future-proofed' will incentivize developers to utilize advanced building technologies more and more," Stojkovic said.

But energy-efficient construction also needs to be cost effective, or these initial projects, all but one of them prompted by the policies of international corporations or nonprofits, will remain rare examples of green building in Russia. On average, green buildings cost slightly more, but they can recoup the extra expenses with savings on utilities. According to a 2010 report by the World Green Building Council, green buildings typically cost 3 percent to 5 percent more to construct, but reduce water usage by 40 percent and energy usage by 30 percent to 50 percent.

The initial construction cost of a green project in Russia isn't necessarily higher than that of a traditional project, Eames and Stojkovic both said, but they stressed the need to make a project ecological from the very beginning to avoid extra expenses. The same goes for design costs, said Alexander Korolyov, project manager at Proma Estate, which is handling the WWF renovation.

"As the management company, we're not noticing that the planning of the project is more expensive if the technical tasks are set at the very start," Korolyov said.

Despite low domestic energy prices, Russia in some cases is actually more ripe for energy-efficient building than other countries, Eames said, because power companies, depending on available capacity, often charge high upfront fees to connect a new building to the power grid. In Moscow, the going rate for a connection is $2,000 to $4,000 per kilowatt of requested capacity, a cost that mounts quickly for commercial projects requiring a supply of several megawatts, he said. Reduce your electricity needs by half, and you halve the upfront fee.  

"You get [your money] back immediately, which is something people don't even realize," he said.

The Cost Dilemma

With only one certified, newly built, green commercial building in Russia, however, the supposedly comparable costs of green construction remain untested. For Novoye Stupino, MR Group had to choose between affordable pricing and advanced environmental technologies, Timakov said.

To attract customers, the project had to focus on keeping prices low, since the idea of environmentally friendly housing hasn't taken hold in Russia, Timakov said.

"With economy housing, it's important to a person what he will pay now, not what he will save later," Timakov said. "They like to know they'll save in the future, but all the same, it's much more important to spend 3 to 4 million [rubles] on a home now than to pay an additional 1 million rubles and build a completely green project."  

What's more, though the government has been actively financing the construction of affordable housing, it offers no subsidy programs for large-scale green developments. Timakov said two-thirds of the project's roughly $2.5 billion price tag will be covered by two federal programs that promote affordable housing.

About 60 cottages, 60 apartments and 15 townhouses and duplexes had been sold as of mid-February, with about 300 residents expected to move in as early as May. Several owners and potential buyers said they were less concerned with environmental aspects of Novoye Stupino than with low prices and financing options, such as a mortgage program for members of the military.

"I'm sure you know the Russian mentality," said Dmitry Doroshenko, 33, who bought a 95-square-meter duplex unit. "I'm not thinking about preserving the environment at all. It's more like I just want a little peace and quiet."

Future inhabitants did propose via the project's Internet forum to separate metal, plastic and food waste for more efficient garbage processing. Forum user and sales director Timakov has asked MR Group's management company to put that idea into effect.

MR Group is building one green unit in the settlement "as an experiment" using available green technologies, including solar panels, geothermal heating, cellulose heat insulation and energy-efficient windows. The construction price tag for the other Novoye Stupino houses will be 17,000 rubles to 18,000 rubles ($580 to $620) per square meter, and the experimental house will cost another 5,000 rubles to 6,000 rubles per square meter. In the smallest cottages, each consisting of 90 square meters, the installation of green technologies could therefore add 540,000 rubles ($18,000) to the construction cost, part of which would be passed on to the buyer.

Risks Versus Benefits

Besides the greater cost, some green technologies present additional risks. For instance, energy savings would have allowed

homeowners to recoup after six to seven years the cost of the solar panels MR Group was considering, but the warranty on the panels was only four years, Timakov said.

Nevertheless, Novoye Stupino is more energy-efficient and less harmful to the surrounding environment than a traditional housing development, he maintained. Buyers of individual units can choose the building materials for their home, such as timber-frame technology and structural insulating panels, which allow for more effective insulation.

In addition, individual houses in the settlement will have their own boilers so customers can adjust their heating and save on gas. Also, a system of ponds will filter the most dangerous pollutants from waste water before it flows into a nearby river, Timakov said.

"Effectively, by reaching a balance between energy-saving technologies and sensible use of energy carriers, you can say we indeed have a green project," he explained.

A lack of materials certified to quality standards and sustainability standards, as well as a dearth of experience, add to the challenge of building Novoye Stupino green, said Sergei Ignatiyev, MR Group deputy director for the Moscow region, who has also worked in the Canadian construction industry.

"Right now, nobody knows what eco-construction is in Russia," he said. "No one knows what they're doing."

Building regulations dating to the 1950s and '60s also pose a major hurdle for green projects, Eames said. For example, MR Group will need to encase its timber-frame homes in brick walls, since outdated Russian regulations forbid fiber-cement siding even though such siding would be more efficient, Timakov said.

Several developers said the growth of green projects in Russia hinges on the government's willingness to aid commercial and residential green projects. If recent pioneer projects are successful, it will lead to better regulation and possibly even incentive programs, they think.

"There's no legal framework to do large-scale projects of this type," Timakov said. "If the federal government sees the problems and changes the corresponding laws, then Russia will move in the direction of this kind of construction."