It is not just major cities like Moscow and St Petersburg that are feeling the pinch. Expanding regional cities, once regarded as the future of Russia, are suffering more from the severe clampdown in finance.
One example is Samara, one of the largest cities in Russia and a leading industrial centre, where it is estimated that up to 70% of developments are now expected to be delayed, according to real estate consultancy Marks Group.
Indest Development has cancelled plans for the construction of 30 to 40 shopping and business centers. Its general director Mikhail Nenashev said it is going to concentrate its resources on projects that are near completion, including two business centres and a bank and office complex.
X5 Retail Group, the country's largest food retailer, has frozen the construction of what was to be Samara's biggest shopping mall, a $180 million project due for completion in 2010. Director Vladimir Rizhkov said it was a direct result of the economic downturn.
According to Ivan Salnikov, head of the real estate research department at Marks Group, over 35 shopping centres with a total area of 750,000 square feet were scheduled to open in the city in 2009, but many are now unlikely to complete on deadline.
In Ulyanovsk, a city on the Volga River 893 kilometres east of Moscow and famous as the birth place of Lenin, developer Grifon Group has shelved a $70 million dollar shopping center construction project because of the global credit crisis. 'Credit is pretty expensive at the moment. We would rather hold off,' said Igor Orlov, the company's general director.
There is also doubt about Pushkaryovskoye Koltso, a $40 million shopping centre. Builder Maksima-X said the project will be halted. Another of the region's developers, Dars Development, is to freeze the construction of the $165 million Akvamoll shopping mall.
Cost have simply become too much for developers across the country according to Alexander Osin, head economist at Finam Management. 'Interest rates offered by banks to developers have risen to 30% a year, up from 15% to 20% at the beginning of September,' he said. 'They simply can't go on with the burden of high interest rates and have no choice put to stop work,' he explained.
