Construction companies, accustomed to doing business on credit, are becoming victims of the recent problems in the banking sector, research by Vedomosti indicates.
The liquidity squeeze that banks began experiencing after Sodbiznesbank's license was revoked in May -- resulting in a group of banks, including Guta Bank, temporarily stopping payments -- has made banks less eager to loan money, and there are signs they are tightening up their credit policies.
Dmitry Lepetikov, an analyst at Development Center, estimated that people withdrew $2 billion in funds from private banks in the past month.
Having developed a taste for bank credit, this situation is proving particularly painful for the construction industry. More than 90 percent of real estate construction in Moscow is now done on credit, according to the head of information and analysis at Vizavi, Sergei Sviridov.
Georgy Dzagurov, general director of Penny Lane Realty, said the banking crisis has already led to a 1 1/2-times increase in bank credit interest rates.
"A bank that considered investing in additional credit for real estate sites at relatively low rates does not even want to talk about 26 percent [in rubles] today," Dzagurov said.
While Promenergobank left its interest rates as they were, it is now demanding additional credit backing -- such as other real estate sites or developers' funds -- to finance new projects.
Or, as Vladimir Talaver, deputy chairman of Promenergobank's board, put it: "We help developers realize the mortgage mechanism exclusively at the cost of their own means."
Sources from the top management of nine developers told Vedomosti about similar situations, although they declined to name particular banks.
"The majority of banks prefer not to give credit now, and we were also refused credit," said Oksana Basova, spokeswoman for developers S. Holding. She did not disclose which bank refused to give credit.
Even the large Russian banks have stopped providing credit for large-scale real estate projects, said the general director of Ost West Development, Yuly Kaloyev. His company, however, has not been affected. It borrows from foreign banks' subsidiaries, whose terms have not changed.
Market players are hoping that all will end well after the biggest bank run since 1998.
"It's too early to say that interest rates will be increased across the board. This is probably a nervous reaction by banks, or they wish to profit from the situation," said Yevgeny Fetisov, vice president of developer VMP.
Andrei Pankovsky, deputy general director of DSK-1, said he hopes that banks will now choose their borrowers more carefully.
"Credit should only be given to reliable companies that have proven themselves on the market," he said.
There was consensus that it is still impossible to draw any conclusions about the impact of the "confidence crisis" on the real estate market.
"In Moscow, real estate sales are slowing down, developers are noting the decrease in consumer demand," said Vladimir Ponomaryov, deputy head of the Federal Construction Agency.
"Under the guise of [developers'] summer sales, prices for some sites have decreased by 15 to 20 percent," added Promenergobank's Talaver.
However, realtors remain upbeat about the market. MIAN spokeswoman Dinara Lizunova acknowledged that two of their sites have been discounted, but said the sale prices are in line with common realtors' practice in the summer.
Sergei Yeliseyev, director of advertising and marketing at Inkom-Nedvizhimost, said he believed that "talk about a price crash is irresponsible. There are no objective reasons for it."
Yeliseyev added that the number of properties for sale is "uncharacteristically high" for the summer months: Roughly 33,000 apartments are up for sale, which is 1 1/2 times higher than the same indicator in the past four years. However, there is no crisis as far as demand is concerned and prices keep increasing, he said.
The managing director of Moskommertsbank, Alexei Godovanets, said that in the next two to three months the real estate market would either stagnate or show a slight price growth. He predicted temporary difficulties for the main construction companies because of the decrease in financing by banks.
The marketing director of Absolyut Bank, Svetlana Ivanova, said that if the situation in the banking sector stabilizes soon, the real estate market will not be affected. Ivanova said that her bank has not changed its terms of credit.
Vizavi's Sviridov, however, envisioned a more dramatic scenario for the commercial real estate market.
"While on the residential real estate market, it's possible to sell unfinished sites and reinvest the resulting funds in construction, there is zero possibility of selling or renting out unfinished commercial real estate spaces," he said.
The liquidity squeeze that banks began experiencing after Sodbiznesbank's license was revoked in May -- resulting in a group of banks, including Guta Bank, temporarily stopping payments -- has made banks less eager to loan money, and there are signs they are tightening up their credit policies.
Dmitry Lepetikov, an analyst at Development Center, estimated that people withdrew $2 billion in funds from private banks in the past month.
Having developed a taste for bank credit, this situation is proving particularly painful for the construction industry. More than 90 percent of real estate construction in Moscow is now done on credit, according to the head of information and analysis at Vizavi, Sergei Sviridov.
Georgy Dzagurov, general director of Penny Lane Realty, said the banking crisis has already led to a 1 1/2-times increase in bank credit interest rates.
"A bank that considered investing in additional credit for real estate sites at relatively low rates does not even want to talk about 26 percent [in rubles] today," Dzagurov said.
While Promenergobank left its interest rates as they were, it is now demanding additional credit backing -- such as other real estate sites or developers' funds -- to finance new projects.
Or, as Vladimir Talaver, deputy chairman of Promenergobank's board, put it: "We help developers realize the mortgage mechanism exclusively at the cost of their own means."
Sources from the top management of nine developers told Vedomosti about similar situations, although they declined to name particular banks.
"The majority of banks prefer not to give credit now, and we were also refused credit," said Oksana Basova, spokeswoman for developers S. Holding. She did not disclose which bank refused to give credit.
Even the large Russian banks have stopped providing credit for large-scale real estate projects, said the general director of Ost West Development, Yuly Kaloyev. His company, however, has not been affected. It borrows from foreign banks' subsidiaries, whose terms have not changed.
Market players are hoping that all will end well after the biggest bank run since 1998.
"It's too early to say that interest rates will be increased across the board. This is probably a nervous reaction by banks, or they wish to profit from the situation," said Yevgeny Fetisov, vice president of developer VMP.
Andrei Pankovsky, deputy general director of DSK-1, said he hopes that banks will now choose their borrowers more carefully.
"Credit should only be given to reliable companies that have proven themselves on the market," he said.
There was consensus that it is still impossible to draw any conclusions about the impact of the "confidence crisis" on the real estate market.
"In Moscow, real estate sales are slowing down, developers are noting the decrease in consumer demand," said Vladimir Ponomaryov, deputy head of the Federal Construction Agency.
"Under the guise of [developers'] summer sales, prices for some sites have decreased by 15 to 20 percent," added Promenergobank's Talaver.
However, realtors remain upbeat about the market. MIAN spokeswoman Dinara Lizunova acknowledged that two of their sites have been discounted, but said the sale prices are in line with common realtors' practice in the summer.
Sergei Yeliseyev, director of advertising and marketing at Inkom-Nedvizhimost, said he believed that "talk about a price crash is irresponsible. There are no objective reasons for it."
Yeliseyev added that the number of properties for sale is "uncharacteristically high" for the summer months: Roughly 33,000 apartments are up for sale, which is 1 1/2 times higher than the same indicator in the past four years. However, there is no crisis as far as demand is concerned and prices keep increasing, he said.
The managing director of Moskommertsbank, Alexei Godovanets, said that in the next two to three months the real estate market would either stagnate or show a slight price growth. He predicted temporary difficulties for the main construction companies because of the decrease in financing by banks.
The marketing director of Absolyut Bank, Svetlana Ivanova, said that if the situation in the banking sector stabilizes soon, the real estate market will not be affected. Ivanova said that her bank has not changed its terms of credit.
Vizavi's Sviridov, however, envisioned a more dramatic scenario for the commercial real estate market.
"While on the residential real estate market, it's possible to sell unfinished sites and reinvest the resulting funds in construction, there is zero possibility of selling or renting out unfinished commercial real estate spaces," he said.
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