Construction industry urges expansion of building materials manufacture in Russia

Recession-based oversupply expected to turn into housing shortage soon

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Finnish construction companies operating in St. Petersburg feel that Finnish building material manufacturers should invest in Russia now.
      “Three years ago it would have been too expensive, and soon it will be too late”, says Juuso Hietanen, director of NCC Real Estate in St. Petersburg.
      Land is available at a low price, and production facilities could be acquired or built from scratch at prices that the recession has pushed down.
     
Finnish builders would be interested in high-quality building materials - if they are manufactured in Russia.
      “Products manufactured in Finland are not competitive. The sharp devaluation of the rouble, and import tariffs mean that they are simply too expensive”, Hietanen adds.
      Taking the same view are the construction companies YIT and SRV. “Unfortunately many have been afraid and have tried to import goods from Finland”, says Kari Kauniskangas of the international construction services of YIT.
     Many international companies in the concrete, cement, and insulation businesses have already moved to Russia, notes Veli-Matti Kullas, head of Russian operations for SRV.
     
Also encouraging the establishment of companies in the construction trade in Russia are Finpro and the Finnish Funding Agency for Technology and Innovation (TEKES) , which promote the international expansion of Finnish companies.
      According to a study by TEKES, which is set to appear in a couple of week’s time, companies should utilise the hundreds of billions of euros in subsidies promised by the Russian state, which are now available mainly to Russian companies.
      TEKES also urges Finnish small and medium-sized companies to be more resilient in seeking good Russian partners.
      The Russian subsidies are mainly for public housing construction. Large Finnish construction companies mainly focus on building more expensive houses and apartments.
     
The construction material industry could also benefit from subsidies, says Virpi Herranen, head of Finpro’s export centre in St. Petersburg. “A construction boom like this cannot be without an effect”, she says.
     Russian Prime Minister Vladimir Putin has promised that the state will pay subsidies 30,000 roubles, or EUR 660 per square metre of public housing space. In large cities, the costs per square metre are much higher.
     “Historically these subsidy programmes have such stringent requirements that with our price levels, it is not worth our while to join them”, says Kari Kauniskangas of YIT.
     
In a couple of years Russia could face a shortage of housing. Because of the recession, an estimated half of construction projects are on hold, as most new construction came to a halt. “In a couple of years, housing construction could become a new market niche for us. The Russians are concentrating on subsidised mass construction, which is not our number one priority”, Hietanen points out.


Previously in HS International Edition:
  TEKES website

Links:
  Finpro website

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