1

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

of 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

7,49

10,7

13,7

5

9,9

15,4

18,6

22,2

28

0

5

10

15

20

25

30

junemaymarjan aprfebGrowth rate, 20/19 yy, %хх IHC MDU Total

million m²

2,3

2,9

2,8

1,5 1,9

2,92,7

2

2,7

1,71,7

2,9

54,9

5,5

3,2

3,6

5,8

0

1

2

3

4

5

6

7

Covid-19

million m²

Covid-19

junemaymarjan aprfebGrowth 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 of98 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

% to01.07.19

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

1

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

of 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

of 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 of 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 on 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

optimize requirements for the construction industry:

11

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 of

builders), expert organizations, 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 of 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

Thousandsof 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

other countries

14

THANK YOU FOR YOUR

ATTENTION