Moscow Tries to Speed up Construction Process

It is no secret the construction period in Moscow is as unpredictable as the weather forecast, or even more so. Various reasons prevent developers from being on time with project completion. It usually takes up to five years to construct a shopping centre, a business centre, or a hotel from scratch depending on financing availability, construction permits, and level of difficulties around the project. The construction site, if stalled, often creates an eye sore and can negatively impact infrastructure. That is why to increase the speed of construction is a priority for the City Government. According to Marat Khusnullin, more than half of 42m sq m of real estate which have got building permits has not started construction yet.

To improve the situation, the Moscow Government decided to adopt changes to the rules and rental rate scheme for using land during construction process. The new rules will imply a rental payment of 0.01-1.5% (depending on the future project use function) of cadastral value per annum during first two years. Starting from the third year, the developer will pay twice as much, 0.02-3%, from the fourth – 5%, from the fifth – 7%, from the sixth – 8%, and after that the payments will reach the maximum of 10%. These payments apply up to completion of a project.

Many projects after urban land commission remain without activity on site for months or even years. According to Moscomstroyinvest, only 30% of investors continue to realize their project after they get city development plan for land (GPZU), renew the investment or land lease contract. Others either try to sell it, or just keep it. We believe this change may potentially speed up construction process.