1. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008, Istanbul Residential Real Estate in Russia : overview of the affordable housing market in progress Russian Investors Requirements to other Markets preferable directions, types of properties, attraction of CEREAN countries Tatiana Rodionova, “Bulletin of Real Estate” St Petersburg

2. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008, Istanbul March, 1992: free market of Real Estate as a private property appeared in Russia, when the Privatization Law has been accepted. According to that law every Russian tenant got the right to privatize his rented from the State residential real estate – free of charge. The right to privatize real estate may be used by a Russian citizen of legal age (after 18) only once in a lifetime – and only till 2010

3. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008, Istanbul

4. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008, Istanbul 1992 – hyperinflation and economic crisis made hard currency extremely expensive and purchasing capacity extremely low and so since people got their real estate free of charge – the property appeared to be extremely unvalued. The hard currency property market formed in Russia

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6. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008, Istanbul The price of 1 square meter of residential real estate in the beginning of 1992 found to be only $150-200 in main cities of Russia This sum of money was enough to satisfy all the basic needs of a standard family during 3-4 month

7. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008, Istanbul Progress and current situation in the Russian real estate market. So what are the main characteristic features of the development of the affordable real estate market in Russia? Progress of -housing construction -Russian economy in general -Government housing policy - Mortgage mechanism - Legislation, devoted to property market - Role of the professional organizations

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9. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008, Istanbul HG

10. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul

11. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul In 2005 the Government of the Russian Federation proposed the priority national project “Affordable and comfortable housing for the citizens of Russia”. The results of this project should become visible by 2011. The President of Russian Federation has defined 4 main priorities for the period of 2006-2008. 1. Further expansion of mortgage crediting 2.The growth of housing affordability factor through the government support of the young families in buying apartments & building houses 3.Growth in housing construction industry and modernization of communal infrastructure 4. The obligations of the state in providing housing for eligible citizens

12. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul

13. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul The number of the deals with mortgages – as compared to the total volume

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15. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul Citizens, eligible for the state support: 1.Young families. 2.Public service employees (dependant on the state budget) 3.Families,requiring the improvement of the living condition (with dwelling space less than 9 square meters per person) 4.Families living in slum & emergency houses 5.Families living in communal apartments And thanks to this program a lot of additional budget money come to the market!!!!

16. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul And now some words about

17. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul

18. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul So, today the middle price of 1 square meter of residential real estate is 2000-4000 EURO in main cities of Russia This sum of money is enough to satisfy ONLY the basic needs of the standard family during 3-4 month What changed during 15 years? A lot, but not this proportion!!!

19. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul Main questions of the potential investor: If the prices are growing quickly – Is there the bubble? And can it burst?

20. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul

21. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul Arguments against it. Stable economic growth & political situation. The growth of average incomes of the citizens Existing deficit of housing space Satisfactory rate of growth in housing construction. Migration of the population to urban areas. Seasonal labor migration from abroad. Reasonable prices for realty in comparison to main cities of Europe. Comparably small volume of the mortgages in purchasing properties (not more than 15-20% during 2008 in main cities. Less- in the regions). Allocation of state funds into the market.

22. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul What happens today- when the financial crisis started all over the world? What we are waiting for tomorrow? So, we are waiting for some “soft landing” and stagnation – analytics proclaim the possible slow decrease of the prices for residential property market - but not more than 10-15% during 2009. The prices were still growing till September – for today there is fluctuation +- 0,5 -0,7% each week on the secondary market, +-0,3-0,5% on the housing construction market (www.bn.ru)

23. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul Are there some difficulties in the purchasing procedure in Russia? No, it is absolutely clear: You need not register a company You need not buy shares of the joint-stock company or look for assistance of any trust funds – any foreigner can buy any number and kind of property –the rules are the same as for Russian citizen you just sign an agreement (better – in Notary office) with the seller & register the Title in the official structure

24. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul Are there some specific aspects of the deals on Russian market? Yes, a lot of: -Payment in cash is traditional and preferable, if you deal with physical persons (currency is negotiating in each deal) -The price in the agreement can be symbolic and it can bring you some troubles in future - No legal mechanism to study title in details - 85% of deals include relocating of the tenants to another flat (so, few deals are to be combined – “chains”) - A lot of “wild” agents & uncontrolled agencies, who can provide unqualified service

25. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul So, if you are looking to buy some property in Russia & your Russian colleague says: “I have an agent – she is a nice girl!” – it means only, that he knows some nice girl with SOME KIND of experience at property market – and nothing else!!! Realtors activity IS NOT regulated by the state since 2002 – so you are to deal with a company, but not with a person

26. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul Is it possible to overcome the mentioned problems? Sure- if you deal with companies according to the recommendations of Russian guild of Realtors (RGR) - the unique Nationwide Association of Real Estate professionals in Russia, founded in 1993

27. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul The members of RGR are the companies – members of the local Associations, working on the market according to some specific rules & conditions: Code of Ethics Standards of professional activities System of professional education System of public control over the activities of its members Insurance of the professional responsibility, etc. You can find them at www.rgr.ru

28. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul But, in any case, Russian people are creditable enough to buy properties abroad – priority of foreign markets permit them, by the way (and also in case of “crisis” prices), to exchange their property in Russia to a lot of variants on different markets all over the world. Are they ready to do that?

29. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008, Istanbul Russian Investors Requirements to other Markets preferable directions, types of properties, attraction of CEREAN countries

30. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul The number of Russians, who invest into International property market, grows quickly during last 2-3 years. The purposes for the purchasing property abroad are presented at the next picture – there are 4 comparably equal groups – 1)profitable investment, 2)season vacation (second home), 3) immigration (for some period – mostly), 4) mixed ones (now – 1 or 2, later (in old ages) – 3) - Survey of 2008, March at www.prian.ru (English version – www.prian.eu)www.prian.ruwww.prian.eu

31. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008, Istanbul Main purposes of potential Russian customers to purchase properties abroad (groups of needs)

32. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul The results of another survey show the price categories of the properties, which potential Russian customers are interested to purchase abroad: 77,3% are looking for economy-class of affordable market – properties with price less than 150.000 Euro Properties with price 300.000 – 1.000.000 Euro are the “dead zone” for Russian customers And there is a still existing strong interest for properties with price more that 1.000.000 Euro – and the practice proves that So, for today we have a great army of Russians with comparably small money, but they can buy a lot – and this demand needs good supply

33. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008, Istanbul

34. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008 Istanbul The list of the most popular countries between Russian customers was formed according to the number of the visits on the pages with information about property markets & purchasing procedures in different countries, presented at www.prian.ru – the main International Web- site for Russians, looking for properties abroad with daily audience more than 5000 original visitors (summary data for September,2008)www.prian.ru We show the Top10 countries – congratulations to Bulgaria – the absolute leader of the International property market in Russia! Another diagrams show the demand to concrete searched objects – Top10 countries for different types of objects

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36. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008, Istanbul

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38. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008, Istanbul

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41. Residential Real Estate in Russia: Overview CEREAN Congress 2008, Istanbul Demand for the CEREAN countries info and properties - As compared to Bulgaria (100%) Demand for the CEREAN countries info and properties - As compared to Bulgaria (100%)

42. Residential Real Estate in Russia: Overview CEREAN Annual Conference 2008, Istanbul Supply of the International market – CEREAN countries – at www.prian.eu Number of the offered properties

43. Residential Real Estate in Russia: Overview Conclusions: 1.Foreign buyers (investors) are welcome at Russian property market for profitable business 2.Russian buyers (investors) are interested and creditable enough to purchase abroad 3. Great deficite of the supply from Romania, Georgia, Poland and Lithuania – where are you, dear friends?!!!! 4. Let’s do good business together, dear CEREAN colleagues !

44. Residential Real Estate in Russia: Overview Thank you for the attention, if any questions – you are welcome! Sincerely yours Tatiana Rodionova, General director of the International property agency “Planet Property” Ltd. Coordinating director and the Head of International Projects department of the Group of Companies “Bulletin of Real Estate”, FIABCI-Russia – the member of the Board, Russian Guild of Realtors – the member of Coordinating & National Councils, etc. realty@mailbn.com +7 921 992 92 88 Scype: planet_property CEREAN Annual Conference 2008, Istanbul