10,000 Canadian Homes Set to Invade Russia

Canadian construction companies and their local partners are hoping to lure 10,000 middle-class families out of city apartments and into new suburban town-house developments over the next few years, according to a Canadian Embassy official.

The draw will be Canadian-style, wood-frame town houses -- 10,000 of which are on track to go up on the outskirts of regional centers across Russia by 2005, said Valery Makarov, commercial officer at the Canadian Embassy.

Model homes in the Moscow region, Tver, Rostov-on-Don, Samara, Vladivostok, Yuzhno-Sakhalinsk, and Nakhodka are already generating orders, Makarov said.

The developments will typically be made up of two-story, 150-square-meter, semi-detached houses, which, unfinished, would cost about $60,000, excluding land and infrastructure costs. Costs can be kept low because Russia, like Canada, is rich in timber and local labor and materials are used, he added.

The average price of such a house would be $300 to $450 per square meter, which is close to the price of local high-rise brick apartments, but much more comfortable, Makarov said.

Cold Weather Friend

Makarov said Canadians already know how to build in Russia because they share a similar northern climate, unlike Canada's southern neighbor. "Americans live more to the south and they don't need insulation, heating and the structures to withstand the pressure of snow. That's why the Canadians and the Russians speak the same language in housing," he said.

"I expect that Canadian houses will be more and more popular in Russia. In 10 years, they might not even call them Canadian houses any more -- they will say that they are Russian houses," he added.

Canadian contractors have supplied luxury homes for LUKoil executives in Moscow, and shiploads of materials have been delivered to Anadyr, capital of Chukotka, in a $12 million order for three prefabricated schools, a skating rink, a fish factory and 20 houses, Makarov said.

But Chris King, director of business development for Colliers International, who hails from the U.S. state of New Hampshire, which has a climate similar to Moscow's, said the Canadians were not the only ones familiar with such climatic conditions that could build appropriate dwellings.

The local Social Initiatives Support Fund announced this year that it has reached an agreement with a U.S. investment group to finance the introduction of U.S. "quick house" technology.

Fund director Yury Maltsev said last week that it hoped to construct the first series of such houses next year at a yet-to-be-finished specialized factory in Pereslavl-Zalessky district in western Russia. The fund's program could eventually lead to the creation of 40 factories producing houses suitable for Russia, he added.

With government support, the program could provide housing for needy citizens, such as retired army officers, for about $100,000 per home, Maltsev said.

Canadian Pioneers

Makarov said the first Canadian construction company in Russia was Ferguson Simek Clark, which in the early 1990s built more than 1,000 homes in Yakutsk in Eastern Siberia in an $80 million deal.

In the mid-'90s, Canadian companies came to the city of Tver, 170 kilometers northwest of Moscow, to help re-train Russian officers returning from Eastern Europe or former Soviet states in a new profession and, at the same time, try to house them.

In 1995 the construction working group of the Canada-Russia Intergovernmental Economic Commission signed a memorandum of understanding with the State Construction Committee, or Gosstroi, that promoted Canadian housing technology and the transition to a market-based housing system in Russia, as well as training local managers and laborers.

The agreement, renewed and extended last year, also facilitated the harmonization of Canadian and Russian building codes that has led to the passing into law of Construction Norms and Regulations 31, which will come into force on Jan. 1. One of its targets is to build 10,000 homes.

The Canada Mortgage and Housing Corporation, Gosstroi and the Tver region administration have opened a quality center for Canadian light-frame technology in Tver.

In addition, the CMHC has been working with Gosstroi on the development of a mortgage system in Russia.

"Russia is building 40 million square meters of housing every year and the demand is predicted to continue at this level for the next 30 years," Makarov said. "The only thing we have to do to expand our client base is to develop mortgage finance."

Makarov suggested mortgages in Russia could soon be available with a 30 percent deposit and repayment over 10 to 15 years.

"In Canada, it is a 5 percent deposit, and in 10 to 20 years, Russia will be the same," he added.

Eye on the Middle Class

Real Senecal, general director of Moscow-based Kanadastroy, a Canadian-Russian joint-venture, said his company has built about 40 large elite houses in Russia since 1996.

"But the market for big houses is going down slightly, and if we want to get a good business going, we'll have to target the new middle class," he said in a telephone interview.

"The demand is there, and it is just a matter of convincing people that a wood-frame house is better than a cement type of building," Senecal said.

Martijn Kramer, head of real estate consulting with Andersen's Moscow office, said Russians were wary of wooden homes because they could burn down.

But Senecal said Russians must begin to consider wood-frame houses as an energy-efficient option. "Russians used to get electricity for free and gas for almost free. In a few years, this will change. When prices are the same as the world market and their homes are not energy-efficient, they are going to have a few problems," he said.

Senecal said Kanadastroy's turnkey, semi-detached or detached homes of 148 to 169 square meters cost from $91,500 with land and finished interiors.

"It's a highly energy-efficient house, ecologically friendly, and it can be modified. It has all new technology materials," he said.

Kanadastroy has a manufacturing plant in Lobnya in the Moscow region and is in the process of building a 175-home housing estate in Abakumovo, near Sheremetyevo Airport.

Building materials are Canada's second-largest export to Russia, last year accounting for 40.5 million Canadian dollars ($25.4 million) out of total exports of 190 million Canadian dollars, Makarov said.

Nikolai Demin, executive sales manager with American Construction Materials Ltd., the local partner of U.S.-Canadian Lindal Cedar Homes, said ACM will produce elite homes built of Canadian cedar costing at least three times the prices quoted by the Canadian Embassy's Makarov. The company began working in Russia only this year and is constructing its first model home.

Finnish log-home builder Honka has built about 400 homes and other buildings across Russia since 1995, but it also occupies the elite sector. However, a spokeswoman said Honka would be able to compete with the Canadian companies on price when it comes to homes for the middle class.

Colliers International's King said the pricing of the Canadian houses should suit regional centers.

"They must have put some thought and study into how much the average Russian living in those centers can afford," he said. "I think it will be a success in those areas if it is structured right financially."