Russia\u2019s housing developers are struggling to meet sales targets after tighter rules for subsidized mortgages undermined demand, adding to concerns over a broader slowdown in one of the country\u2019s key economic sectors.<\/p>\n
Nearly three-quarters of residential developers (73%) failed to meet sales targets in the first quarter, according to a survey<\/a> by state housing agency Dom.RF, pollster VTsIOM and the Institute for Housing Construction Development. The result marked the weakest performance in two years.<\/p>\n The findings add to mounting signs of strain in Russia\u2019s construction sector after authorities tightened conditions for state-backed mortgages, long a key driver of housing demand. Developers and officials have increasingly warned that weaker sales, combined with high borrowing costs and growing financing pressures, could weigh on the sector for years.<\/p>\n Analysts at Dom.RF attributed the poor performance partly to inflated expectations following a record fourth quarter of 2025 and a sharp decline in subsidized mortgage issuance. By comparison, 87% of developers met or exceeded sales targets in the previous quarter.<\/p>\n Much of the boom-and-bust pattern stemmed from changes to Russia\u2019s flagship \u201cfamily mortgage\u201d program, which offers home loans at a subsidized rate of 6%.<\/p>\n Beginning in February, the Finance Ministry reduced compensation payments to banks for issuing such loans and introduced a rule limiting households to a single subsidized mortgage. Previously, both spouses in a family could separately access the program.<\/p>\n The changes triggered a rush among buyers seeking to secure loans before the new restrictions took effect. Mortgage issuance surged in December and January before collapsing in the following months.<\/p>\n Russia issued<\/a> 811 billion rubles ($11.35 billion) in mortgages in December, the third-highest monthly figure on record.<\/p>\n January issuance reached 425 billion rubles ($5.95 billion), a record for that month, before slowing to 290 billion rubles ($4.06 billion) in February and 330 billion rubles ($4.62 billion) in March.<\/p>\n Despite weaker sales, developers have largely maintained construction activity. Some 88% met current construction targets in the first quarter, while 57% remained on track in launching new projects.<\/p>\n That strategy could create further problems if supply continues to outpace demand, analysts warned.<\/p>\n In the first four months of the year, developers launched around 14 million square meters of new housing projects, up 18% from a year earlier, while sales of new apartments rose only 7.5% to 7.4 million square meters.<\/p>\n \u201cThe market is entering a phase of demand testing,\u201d Dom.RF analysts said<\/a>, warning that mistakes in pricing, location or project design had become increasingly costly for developers.<\/p>\n The imbalance has already started affecting prices. New-build housing prices rose<\/a> an average of 2.2% in the first quarter, below inflation of 3% over January-March, implying a 0.7% decline in real terms.<\/p>\n Financial conditions for developers are also becoming more difficult.<\/p>\n Deputy Prime Minister Marat Khusnullin recently said<\/a> the sector had exhausted the financial buffer accumulated before mid-2024, when Russia still offered broad-based subsidized mortgages at rates as low as 8%.<\/p>\n Anton Glushkov, head of the National Association of Builders (NOSTROY), has warned<\/a> that one in five developers risks failing to repay loans because of insufficient funds held in escrow accounts.<\/p>\n Developers have increasingly reported difficulties accessing project financing for both existing and new projects, according to the survey.<\/p>\n Although a majority still reported access to bank funding \u2014 80% for existing projects and 71% for new developments \u2014 those figures fell by 14 and 11 percentage points, respectively, from the previous quarter.<\/p>\n Russia\u2019s central bank said project financing limits and lending volumes continued to rise, with the total project finance portfolio reaching<\/a> 11.5 trillion rubles ($161 billion) as of April 1.<\/p>\n However, Alexander Danilov, head of banking regulation and analytics at the Central Bank, warned<\/a> that lenders could be underestimating risks in loans to developers.<\/p>\n The survey also showed developers bracing for tougher conditions ahead. More than half expected profitability to decline and the industry outlook to worsen over the next year.<\/p>\n The share of companies expecting their construction portfolios to shrink rose to 37% from 33% in the previous quarter.<\/p>\n CMASF, an analytical center close to the government, has warned<\/a> that construction risks entering a prolonged crisis that could last two to three years.<\/p>\n