Housing focus turns away from luxury as affordability becomes key driver

With affordable housing being declared a state priority, luxury developments will take a back seat while developers face up to the challenge of providing quality cheap housing.

Four thousand dollars per square meter – that’s the average price of a flat in Moscow. Even before the economic downturn not that many could afford such a price tag. With mortgages becoming scarce, as the global credit crunch bit, and unemployment jumping, the government is putting an increasing priority on affordable housing.

Money is the key issue, with the government in the position of being the largest lender – both to the banks who do the lending, as well as the property development companies doing the building. Pyotr Kudryavtsev from construction and development consultants ‘Building’ says there has been a sea change in the industry over the last year.

“Before that you could very easily get banking loans – banks were running to developers asking them to take the money, now it’s vice versa, also not actually the banks, but the state because the state banks are now actually the main developers and the main source for the developers.”

With city-centre locations the most expensive ones in which to build, cheaper affordable housing could be forced to the outskirts. But not so says Jean-Paul Viguier, President of the French Academy of Architecture – whose experience is that mixed developments can bring in a bigger range of investors and offer more scope.

“I try to put everything into each other – so I have a shop in the basement, I have a hospital, I have a nursery, I have a school on top, then housing – and this creates conditions for modern living, and this in terms of financing and cost, because you have different sources of financing put together in the same building.”

But experts say that existing Russian building technology doesn’t allow for comfortable and cheap housing. Star Village in the Moscow region – a resort development with cottages available for long term-rent – will become the first attempt at building small low-cost houses, using international best-practice. Pyotr Shura, from developers Rusresorts says international experience is crucial, and the base cost will be significantly reduced.

“We’re working with an international team of 15 architects. Thirty experimental homes with a base cost of $1000 per square meter will be built by the end 2010.”

The project cost is $5 million. It's hoped it will provide a template to launch similar mass-produced developments across Russia. With an increasing number of Real Estate analysts saying prices are about to turn higher, with shortages possibly driving demand, cheaper quality options for millions of Russians are vital.