Deputies refund 20% VAT for developers when selling apartments

The State Duma, as promised, considered in the first reading a bill introducing a 20% VAT for developers on the sale of apartments. Such a tax existed 13 years ago. Developers expect this segment to predict a further decline in demand due to the inevitable rise in prices for such real estate. However, some market participants are confident that developers will continue to be interested in apartments, since construction of new residential buildings is prohibited on some sites, and it is unprofitable to build offices or shopping centers.

On June 20, the State Duma adopted in the first reading a bill returning VAT canceled in 2010 when developers sell apartments under equity participation agreements. With the adoption of this document, the tax rate will be 20%.

This measure may affect mainly the country’s largest real estate markets – the Krasnodar Territory, where, according to the unified information system “Nash.Dom.RF”, 344 apartment complexes are currently being built, Moscow (168), St. Petersburg (131), Moscow Region ( 47), Leningrad region (33). In general, 1.2 thousand objects of this format are under construction in Russia, or 11.1% of the total volume of residential and non-residential premises being built.

Developers implement projects of apartment complexes in areas where it is impossible to obtain a permit to build housing. At the same time, such areas are sold cheaper than apartments. The authorities are trying to minimize the volume of projects in this segment, since such projects do not provide for the creation of social infrastructure. But they do not have direct levers of pressure, so indirect ones are used. For example, apartments are not covered by preferential mortgage programs, which has led to a decrease in demand for them. According to Metrium, in January-March 2023, only 500 apartments were sold in the primary market of Moscow, which is 42% less compared to October-November 2022, while the volume of apartments sold in new buildings decreased by 2%, up to 16.1 thousand pieces. In addition, the mayor’s office, as Vice Mayor Andrei Bochkarev told RBC at the end of 2021, is reducing the issuance of permits for such construction.

The return of VAT is another indirect tool to reduce the volume of construction in the market of apart-complexes, which is gradually being phased out, says Andrey Nosov, Investment Director of the Granel Group of Companies. If the bill is approved, then developers will be forced to include VAT in the price of apartments, Ksenia Tsaplina, head of the department of analytics and sales planning at FGC Group of Companies, does not exclude. This, in turn, will lead to the disappearance of the competitive advantage of apartments over apartments. However, for large companies, a VAT refund is of little threat, since the total volume of apartments in their portfolio is much less than traditional apartments, the market participants interviewed by Kommersant are unanimous.

The difference between the cost of apartments and apartments is shrinking, agrees Anna Murmuridis, deputy director of the residential real estate department at Nikoliers. According to Metrium, in March 2023, the average prices for apartments in Moscow new buildings of the mass segment were 284 thousand rubles. for 1 sq. m, for apartments of the same class – 266 thousand rubles.

Vice-President of the GC “Strana Development” Alexander Gutorov admits that the apartment market is overheated. Nevertheless, the interest of developers in the construction of such facilities is unlikely to dry up. Now in Moscow there are a lot of sites where a ban on the construction of housing has been introduced, but apartments are possible, says Denis Konovalenko, managing partner of Prime Life Development. Building offices or retail facilities on such sites is now less attractive due to the long search for tenants or buyers of such premises, he adds.

Some locations in the center of Moscow still attract apartment complex developers, says Ruslan Syrtsov, Managing Director of Metrium. Also, in his opinion, the format of compact apartments, which are impossible in classic residential complexes, will remain popular.

Daria Andrianova