the construction industry in Russia 1 First response 1 Getting - - PowerPoint PPT Presentation

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Impact of COVID-19 on the construction industry in Russia

2

First response 1 2 3

Getting hold of the situation and how it might escalate Prioritizing projects, stages

• f construction and delivery

Developing a plan for the industry

TOTAL HOUSING VOLUME DYNAMICS IN RUSSIA IN JANUARY-JUNE 2020

2,3 5,2 8 9,5 11,5 14,3 2,7 4,7 7,4 9 10,7 13,7 5 9,9 15,4 18,6 22,2 28

5 10 15 20 25 30

june may mar jan apr feb

Growth rate, 20/19 yy, % хх IHC MDU

Total

million m²

2,3 2,9 2,8 1,5 1,9 2,9 2,7 2 2,7 1,7 1,7 2,9 5 4,9 5,5 3,2 3,6 5,8

1 2 3 4 5 6 7

Covid-19

million m²

Covid-19

june may mar jan apr feb

Growth rate, 20/19 yy, % хх IHC MDU

Total

On a cumulative basis monthly + 19,3 + 7,5 + 3,9

• 5,2
• 8,1
• 7,1
• 2,8
• 20,5
• 33,4

+ 19,3

• 2,2
• 2,2

Planned total of 98 mln m² in 2020 28,5% of planned total annual volume of housing IHC -Individual Housing Construction, MDU - Multiple Dwelling Unit

TOTAL HOUSING VOLUME DYNAMICS IN RUSSIA IN JANUARY-JUNE 2020

Names of regions Total volume of housing delivery % to 01.07.19 Moscow region 2 570,1

• 28,4

Moscow 2 205,4

• 1,8

Krasnodar Krai 1 908,4 +5,6 Republic of Tatarstan 1 353,4

• 5,2

Bashkortostan Republic 1 065,8 +8,0 Rostov region 976,0

• 18,1

Leningrad Region 910,2

• 30,8

Sverdlovsk oblast 751,7 +6,8 St.-Petersburg 724,9 +21,8 Nizhniy Novgorod region 705,2 +8,5

10 regions with the largest volume of housing delivery

Dynamics

0%-18% growth

• 58%-0% decline

+18%-156% growth

Transition to project financing

The developer enters into a shared construction participation agreement with a shared construction participant

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The shared construction participant transfers money to the developer's account opened in authorized bank All of the shared construction participants’ money is spent by the developer to the construction of the facility at his own disposal

Procedure before 01.07.2019

₽

Past

2 3 4

Construction is financed by money received from shared construction participants placed on the developer's account opened in authorized bank

Transition to project financing

The developer enters into a shared construction participation agreement with a shared construction participant, who opens an escrow account in a bank The shared construction participant transfers money to the escrow account after the shared construction participation agreement is registered in the Federal Service of State Registration, Land Register and Mapping. The Bank finances all expenses under the agreed project budget, except for the developer's own money Money can be transferred from the escrow account

• To the shared construction

participant— in case of termination of the shared construction participation agreement or in case of refusal

• f the contract obligation

fulfillment

• To the developer —

after construction and title registration

1 2 3 4

Impact of COVID-19 on the construction industry in Russia

Requirements for the construction industry for the restriction period

 Work areas and common areas disinfection 2 times a day  Cleaning of surfaces every 2 hours  Providing a distance of 2 meters when workers are transported in office vehicles to the construction site and back  Use of individual masks and gloves on the construction site  Suspension of construction workers were in contact with an infected co-worker

This increased expenditure

 Providing a distance of 2 meters when performing any type of work

1,8 mln rub per dining room per each of the 6 construction site areas 1,900 rub per test

Expenditure

Workspace disinfection Meals 30 rub for м2 150-270 rub per person a day 75 % decrease in transportation capacity Individual masks, gloves, weekly testing

• f 10% of construction

workers, extra medical personnel on site Additional transport rental Other expenses Trailers for the shift workers Modular dining room Minimum ~60 thousand rub per trailer (for 5 persons) Covid-19 testing

One-time expenses

Mobile health unit

Impact of COVID-19 on the construction industry in Russia

Daily expenses

Measures taken regarding the spread of coronavirus infection

Consequences

• Lower economic activity
• Reduction of demand for house

purchase

• Decline in income
• Unemployment
• Prohibition on entry for foreign

nationals

People

• A 6,5% mortgage rate for new construction purchase
• Subsidies in the amount of 450 thousand rub for families

where the third and subsequent children is born

• All

foreign citizens residing in Russia will have their documents term extended automatically

• Changing

the terms

• f

loan agreements providing suspension of the borrower's obligations With the spread of Covid-19, the state's economy has experienced a crisis related to restrictions, including restrictions on moving workforce, services and construction materials across the country.

Measures taken to minimize negative consequences

Measures taken regarding the spread of coronavirus infection

• Reduced revenue, rising

prices for materials and equipment and difficulties with cross-border deliveries

• Slowdown in construction

and facility delivery and risks of COVID-19 on construction sites

Ministry of Construction, Housing and Utilities of the Russian Federation and Russian Agency for Health and Consumer Rights have developed recommendations for the prevention of COVID-19 among construction workers.

Government support measures taken:

• Extending the validity of documents in the construction

sector

• Freezing

financial sanctions

• n

equity participation agreement

• Reduction of supervisory burden
• Reduction of interest rates on loans to developers
• Protection of system-forming organizations from bankruptcy

Developers Consequences

Creating a standard will allow us to systematize and

• ptimize requirements for the construction industry:

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МИНСТРОЙ РОССИИ

Common requirements for the industry Requirements based on the actual epidemiological situation (variables) Epidemiological risks at all stages of the employee's activity Optimization of expenditure:

• Direct cost reduction by ~30%
• Reduced indirect costs by ~75%

Development of the industry standard is done in cooperation with construction organizations (including the professional Association

• f

builders), expert

• rganizations,

and the experience of combating COVID-19 in such countries as:

Great Britain Singapore Canada Austria USA Netherlands Australia

Realizing the possible risk of the second and subsequent waves of Covid-19, a single industry standard

• f

safety measures will be developed

Supporting the construction industry by stimulating demand

77 817 108 436 122 412 90 526 85 474 116 420

jan feb mar apr may june

2020

• 1,2%

+4,6% +20%

• 16,9%
• 0,4%

Covid-19

+20,9%

Issuance of mortgage loans in

Issuance of mortgage loans in may 2020

Thousands

• f loans

Bln rub Total 85,5 198,7

Including: «Family mortgage» 4,9 12,3 «Far Eastern mortgage» 0,4 1,2 6,5% preferential mortgage 20,2 50,6 Other loans for new construction 3,9 15,8 Secondary housing market loans 56,1 118,8

What’s next?

Planning in advance and stabilizing the industry Develop projects more adapt to disruptions Work closely with other industries and

• ther countries

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THANK YOU FOR YOUR ATTENTION