Daily Real Estate News  |  September 29, 2006

Russia: Construction Business Is Booming
All across Moscow, new office towers and apartment blocks are transforming Russia's capital.

This year, foreign investment funds are likely to sock as much as $1.5 billion into Russian real estate projects, nearly double last year s level, according to real estate consultant CB Richard Ellis Noble Gibbons.

"Russia is clearly a key market for us," says John Carrafiell, global co-head of Morgan Stanley Real Estate, which in July bought 10 percent of developer RosEuroDevelopment. The Russian group plans investments worth $3 billion over the next five years, including office towers and shopping malls in major regional cities, and a $500 million campus for high-tech firms in the Siberian city of Novosibirsk.

The attraction is booming business and rising personal wealth increasing demand for all sorts of property.

One big problem for investors is finding projects that meet Western standards. Until recently, foreign investment funds put money into completed buildings only, steering clear of the risks connected with poor-quality construction. Development is a murky business in Russia. Construction projects typically require more than 300 separate permits and licenses. It s a red-tape barrier that opens up big possibilities for corruption.

--BusinessWeek Online, Jason Bush (09/28/2006)