Developer Bankruptcy Risk: Nearly 20% of Developers Are at the Brink of Financial Ruin (said Marat Husnullin)
Russian Deputy Prime Minister Marat Khusnullin has identified high mortgage interest rates as a significant risk for property developers, with nearly 20% of developers currently at risk of bankruptcy [1][2]. This risk could rise to over 30% within six months if unfavourable financial conditions persist, Khusnullin warned [1][2][4][5].
The high mortgage rates, coupled with reduced availability of conventional loans and declining buyer investment, are squeezing developers financially, leading to stalled projects and increasing risks for construction companies across Russia [1][2][4][5]. Every fifth construction company has delayed project completions by six months or more, though delays do not necessarily mean bankruptcy yet [1][2].
Conventional housing loans have almost ceased to exist since the end of a broad state-subsidized mortgage program in July 2024, with 80% of current mortgages issued only under targeted government schemes, such as those for families with children, and just 20% on market terms [1]. This shift has impacted housing construction negatively, with several large developers experiencing significant revenue drops in early 2025, and some firms exiting the market or declaring bankruptcy, as seen in Yekaterinburg and Rostov-on-Don [1][2].
In an attempt to address this issue, Marat Khusnullin has instructed governors to oversee the completion of buildings in each region [6]. He also highlighted that housing construction in 2027 is expected to be either non-existent or significantly reduced due to the stalled projects [6].
Vitaly Mutko, the CEO of "Dom.RF", discussed the risk of a reduction in housing volume in 2027-2028 and an increase in real estate prices in a meeting with Russian President Vladimir Putin in April 2024 [6]. Both Khusnullin and Mutko are involved in discussions about this potential crisis and are closely monitoring each developer for shifts in deadlines and their causes [6].
The halt of new projects in the construction sector is described as a "serious, negative trend" by Marat Khusnullin [6]. In some cases, governors are asked to intervene "manually" to resolve issues. The "serious, negative trend" in the construction sector is a potential cause for the reduction in housing volume in 2027-2028 [6].
Notably, the leaders in key construction indicators are Saratov Oblast, Perm Krai, Penza Oblast, Adygea, Buryatia, and Tatarstan [3]. However, no new projects are currently being initiated in the construction sector, according to the information provided.
In conclusion, the high mortgage rates, reduced availability of conventional loans, and declining buyer investment are posing a significant threat to the Russian housing market, leading to stalled projects and increasing risks for construction companies. The potential reduction in housing volume in 2027-2028 and the increase in real estate prices are concerns that both Khusnullin and Mutko have raised with President Putin. Efforts are being made to address these issues, but the outlook remains uncertain.
References: 1. https://www.rbc.ru/business/21/03/2025/5e8063b69a794726b8f14b90 2. https://www.gazeta.ru/business/2025/03/21/11056707.shtml 3. https://www.tass.ru/ekonomica/8684370 4. https://www.vestifinance.ru/articles/658361/ 5. https://www.vz.ru/politics/2025/3/21/1071041.html 6. https://www.government.ru/news/9505/
Businesses in the construction industry are facing significant financial risks due to high mortgage rates, with nearly 20% of developers currently at risk of bankruptcy. This could worsen if unfavorable financial conditions persist, as warned by Russian Deputy Prime Minister Marat Khusnullin.
The high mortgage rates, coupled with reduced availability of conventional loans and declining buyer investment, are not only squeezing developers financially but also causing stalled projects and increasing risks for construction companies across Russia.
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