Moscow Builders Got Good Numbers
According to the international agency Fitch Ratings, the three leading Moscow developers’ EBITDAR (earnings before interest, taxes, depreciation, amortization and rent) is 8-14 percent higher than that of the three top developers in Sao Paulo, Brazil, and Shanghai, China, although the Muscovites’ expenses are higher as well. For the Russian Mirax Group, that indicator was 43 percent, versus 35 percent for Shanghai Zendai and 28.7 percent for the Brazilian company Cyrela. Europeans can only envy those numbers though, since the average EBITDAR in London in 15 percent, and in Paris and Berlin, it is 10 percent. Those numbers are falling due to the mortgage crisis, while continuing demand for housing in the developing world keeps the numbers high.
Moscow healthy profit margin comes thanks to the rapid growth of housing prices. Apartments in Moscow increased in price by almost 500 percent between 2000 and 2007, to $4200 per sq. m. In Shanghai, they increased by 200 percent to $2800 per sq. m., and in Sao Paulo, they rose 100 percent to $1200.
Things are not all roses for Moscow developers, however. Fitch notes that they have higher expenses than developers in Shanghai and Sao Paulo. Local Brazilian developers pay 7 percent of their monthly turnover in federal taxes, whereas other companies pay 34 percent. Russian developers pay 15 percent in VAT property taxes and similar payments. Chinese developers receive tax breaks on the early stages of construction. In addition, Moscow is one of the few world capitals where the city receives a “take,” which Fitch describes as a hidden tax. Only then does a developer receive the right to build in Moscow. The city’s take my range from 10 to 20 percent of prime cost of a square meter, according to the agency. The developers themselves say the figure is 40 to 50 percent. Moscow developers, unlike those in Shanghai and Sao Paulo, also have to pay compensation for the development of the infrastructure on the territory they are building on. That payment may make up 20-30 percent of the cost of the project. Thus expenses can make up half of the 63,000-85,000 rubles per sq. m. it cost to build housing in Moscow.
www.kommersant.com
All the Article in Russian as of June 09, 2008
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