Real Estate & Construction Practice Newsletter (Issue 1, 2014)
major new projects in the Moscow Region
Moscow intends to raise RUB 18 billion of private investments in Yuzhnyi Port
On 17 December 2013 Moscow authorities approved a draft plan for the Yuzhnyi Port industrial area, located in the South-Eastern Administrative District.
Authorities cite the inefficient use of the territory and under-utilization of the road network as motivations for the development. The draft plan intends to promote the development of the industrial and administrative functions of the territory, with construction increasing from 650,000 sq.m. up to 1 million sq.m. This is planned to increase the number of jobs in Yuzhnyi Port by 6,000 to 10,000. Public financing will contribute RUB 6 billion, and is hoped to be supplemented by RUB 18 billion in private investment.
83 kilometers of new roads to be built in Moscow
The commissioned projects for 2014 include: three projects as part of the reconstruction of Dmitrovskoe Shosse complex; an interchange at the intersection of Volgogradskiy Prospect and MKAD; a transport junction at Mozhayskoe Shosse; the Mozhayskiy crossover as part of the completion of reconstruction of Mozhayskoe Shosse; and a railroad overpass over the right-of-way of the Smolensk railway in Moscow.
International business hub worth US$ 4 billion to be built in “New Moscow”
An investment fund managed by Kaltchuga Capital Management plans to construct an international business hub with a total area of 3 million sq.m. in “New Moscow.” Investments in the project are estimated at € 4 billion. Acquisition of 250 hectares near the Kaluga highway is scheduled to be completed during February and March 2014.
New industrial zone under way in “New Moscow”
Moscow authorities have announced the start of the implementation of a logistics center, 3 million sq.m. in area, near the Bekasovo railway junction. In addition, several other properties, including ones in the industrial and warehouse sector, are planned to be built in this area. In the coming years several projects for the construction of residential and commercial properties will be carried out not far from this area.
Development scheme of the Moscow transport hub may be adopted in early 2014
Approval of the overall development scheme for the Moscow transport hub is pending approval by the Russian Government and the governments of Moscow and the Moscow region.
The Moscow transport hub is planned for completion by 2020, with the first phase being completed in 2016. The scheme includes the territories of “New Moscow," the key areas related to the Moscow transport hub, the street and road network, and improved connectivity of the various regions that the Moscow transport hub will serve. The plan is intended to be a comprehensive structure for funding for all of these projects. Therefore, estimates will include not only the costs for completion of each specific project or initiative, but also the costs related to the transportation resources that will be needed overall, such as the purchase of new buses.
The Moscow transport hub plan is intended to be implemented in conjunction with a separate plan to attract private investments to the Moscow transport hub.
Reconstruction of the Serp i Molot zone to take 10 years
The demolition of buildings at the Serp i Molot plant in Moscow is part of the reorganization of the neighboring industrial zone, and could begin in late 2014 or early 2015, after receiving all necessary planning documentation.
Five international consortiums are engaged in designing the urban architectural concepts for the development project. These include Project Meganom from Russia, LDA Design from the United Kingdom, Ateliers Lion Architectes Urbanistes from France, and two teams from Holland: MVRDV and De Architekten CIE. The results of the competition will be announced on 6 February. The winner will work with the customer of the reorganization of the industrial zone, the Don Stroy Invest company. Investments in industrial zone reorganization are estimated at about RUB 140 billion. The project will take at least ten years.
Moscow authorities announce a competition for the construction of a football field in Chertanovo
Moscow authorities have announced a competition for the construction of a football field, with artificial turf and supporting infrastructure, in Chertanovo district. The initial (maximum) contract price is RUB 259.1 million. Commissioning is scheduled for 2015.
Moscow authorities are also planning to build and commission in 2016 a sports and health center, with the initial (maximum) contract price of RUB 331.5 million, and a new sports complex for the youth Olympic reserve.
Between now and the end of 2016, 30 sports facilities will be built in Moscow at public expense.
Indoor ski resort to be built in Moscow
Authorities in the capital will allocate more than RUB 1.5 billion for the construction of a new ski slope in the Southern District of Moscow. The project will include a ski resort, with a children's ski school and all the necessary infrastructure. The complex will be able to be used all year round.
other major projects in the Russian Federation
AirCity to be built in Irkutsk
South Korean companies propose to build the AirCity complex on the site of the Irkutsk airport, and to build a high-tech residential area next to AirCity. According to the plan of the Korean developers of the concept, a consortium of Heerim and Samoo, the new airport will be a logistic center for Irkutsk, the region, and the East of Russia. The total area of AirCity will be more than 700 hectares, and total area of the terminal will be 179,000 sq.m. AirCity will include an air terminal, multifunctional entertainment facilities, and transport and logistics centers.
IST Group is the first investor in the Ust-Luga industrial zone development project
The first investor in the new expansion of the Ust-Luga industrial zone - the IST Group (Группа компаний ИСТ) - will launch the Baltic Carbamide Plant in 2018.
More than RUB 500 billion are planned to be invested in the development project for the port and industrial area Ust-Luga. Oil and gas chemical complexes will occupy an industrial area of 3,500 sq.m.
Ust-Luga was developed beginning in 1997, in part to avoid dry cargo shipments through the Baltic States. The 3,700-metre approach canal can accommodate ships of more than 150,000 tons. In May 2008, Ust-Luga was selected as the final point of the projected Second Baltic Pipeline, an oil transportation route bypassing Belarus. The Ust-Luga container terminal opened in December 2011.
recent legal and tax developments
Ministry of Construction to adopt a list of administrative procedures in housing construction
Following instructions from the president, the Russian Government has issued a decree that, by 1 June 2014, will establish a registry of characteristics of administrative procedures in housing construction. The register will include information about: the name of the procedure; the normative legal act that establishes the administrative procedure for developer; a list of documents that developer is obliged to provide for procedure; the deadline; and the cost of the procedure.
The intention is to limit the list to 80 administrative procedures. Then the authorities intend to reduce the number of bureaucratic procedures for construction approval. This might also result in reducing real estate costs.
Ministry of Economic Development proposes to require foreign entities to obtain approval for real estate transactions
The Ministry of Economic Development has published a bill that introduces a special licensing procedure for foreign persons and entities that execute transactions with Russian real estate.
According to the explanatory memorandum, the opportunity to purchase property in Russia is uncontrolled and threatens national security. Therefore the Ministry proposes to restrict the right of foreign persons and entities to engage in real estate transactions, and to require special permission by a regulatory body.
These rules would be binding on foreign nationals and on companies with a controlling interest owned by foreigners. Moreover, according to the proposed legislation, such permission would be necessary to purchase real estate, to sell it, and even to rent. Unauthorized transactions would be void.
The legislation is under the initial stage of development, and is expected to come into force in the first quarter of 2015.
Title owners might lose the right of judicial review of cadastral value
Under proposed changes to the law, the authority to change the cadastral value of property will be limited to regulatory authorities. Title owners would not be able to ask a court to order a change in the cadastral value of their property. The proposed changes would mainly affect owners and tenants of land. Land tax, as well as the rental payment for state or municipal lands, are usually calculated based on the cadastral value of the land.
Public land may be granted for gratuitous use
Effective 22 January 2014, persons and legal entities now may receive free of charge land owned by state and with properties erected on it. The decision about whether to grant land is required to be taken by public authorities within two months from the date of application.
Moscow increases the cadastral value of land by 10% for 2014
Office lands increased the most, by 13%. Other increases were less, such as a 3% increase for land used for recreational purposes. The Moscow authorities explain the increase by referring to the 10% to 11% growth of commercial real estate.
Experts, however, do not share this view. They believe that the growth of cadastral value will reduce revenues for owners of real estate, because the tax base will grow. Owners will have to either cover these additional costs or to shift some of them to tenants, such as by raising rents.
Leningrad Region Government to reduce rent payment for investors in industrial parks
Aiming to encourage the development of industrial parks in the Leningrad region, the regional government intends to provide investors benefits on rent for one or more land plots owned by the region or the state. The reductions will extend for six years: 30% reductions in the first and second calendar years; 60% reductions in the third and fourth years; and 90% reductions in the fifth and sixth years.