After successful sales in 2023, developers in Russia have decided to invest in land. However, the plots that developers are acquiring will not be developed for at least 5-7 years.
According to a report by the consulting company IBC Real Estate, Russian developers invested 188 billion rubles in the purchase of land from January to July 2024. The report highlights that 80% of the funds were used for acquiring land for residential construction. This amount of investment is a record high, with developers spending 181.1 billion rubles on land during the same period last year, 112.5 billion the year before, and 98.7 billion in 2021.
Other consultants also confirm the record levels of investment from developers. Stanislav Bibik, a partner at NF Group, stated that more than 163.9 billion rubles were invested in development sites in the first half of the year, a 70% increase compared to the previous year. Peter Vinogradov, a partner at Ricci | M&A, provided even more impressive figures, mentioning that developers spent 194.1 billion rubles on land since the beginning of 2024, acquiring 1996 hectares of land.
Experts suggest that developers are aiming to purchase land in advance, despite the tightening of preferential programs and a decrease in sales.
Developers believe that new sites will be developed within 5-7 years. Olesia Tkachenko, the marketing director of „Mangazeya,“ believes that if developers do not expand their land portfolio now, they will face a crisis in 1.5-2 years.
Peter Barsukov, the deputy CEO for strategy and investments at „OM Development,“ adds that land and real estate are protective assets against inflation, explaining the developers‘ desire to increase their land bank.
Previously, developers noted that after successful sales in 2023, market participants would focus on forming a land bank for future projects. The shortage of available land in city centers is pushing developers towards renovating old residential buildings, with developers increasingly participating in urban renewal programs.
Experts have pointed out that real estate is directly linked to land, which is a limited resource. Valeria Kozlova, the president of the Ural Chamber of Real Estate, quoted Mark Twain, saying, „Buy land, they’re not making it anymore.“ This highlights the importance of land as a valuable asset in the real estate industry.