What are the prospects for “furniture mortgages” in Russia?

In Russia they often say that a spoon is precious for dinner. The importance of this approach becomes obvious when preparing government support measures. Thus, on April 2, the Ministry of Construction published draft amendments to Federal Law-214 on shared construction, providing for the possibility of including finishing elements, engineering support systems and built-in furniture in shared participation agreements in construction (DDU). The market quickly called the amendments a “furniture mortgage.” This is precisely what their essence boils down to: to give consumers the opportunity, when purchasing a new building on credit, to pay for the furniture with its help.

Business, as expected, took the news positively. The Association of Enterprises of the Furniture and Woodworking Industry of Russia (AMDPR) says that they expressed this initiative three years ago. True, during this time the situation has changed a lot. Thus, at the height of the pandemic in 2020, furniture sales decreased by 0.4%, to 539.6 billion rubles, and the share of Russian products accounted for 57.9%. But a sharp increase in demand for housing in certain periods of 2021–2023, and the departure of foreign retailers and manufacturers from the market changed the picture. In 2023, furniture production in Russia, according to AMDPR, increased by 25% year-on-year, to 444.9 billion rubles. Analysts did not provide the share of imported products due to the lack of Federal Customs Service data. But back in 2022, the volume of imports decreased to 106 billion rubles.

According to the association’s forecasts, “furniture mortgages” will lead to additional market growth of 5–10% this year. According to the Ministry of Construction, the innovation will allow new residents to save money. It sounds logical: the cost of the product can be fixed at the time of signing the agreement, distributed over the entire cost of the loan. But the “furniture mortgage” includes only products manufactured in Russia and the EAEU countries, and any additional demand in a limited market usually leads to higher prices. A good example here would be the same preferential mortgage for new buildings. In March 2021, the average cost of new buildings in cities with a population of over a million, according to CIAN.Analytics, was 92 thousand rubles. for 1 sq. m, now – 165.9 thousand rubles. Over three years, the figure increased by 80%. That is, the same consumers end up paying significantly more.

However, the impact of “furniture mortgages” on the market may well be contained by the developers themselves. In February, the total number of mortgage loans issued in the primary market of Russia, due to rising rates and tightening conditions for preferential programs, decreased by 12.4% year-on-year, according to CIAN.Analytics. And in conditions of restrained demand, introducing a preschool education system to the market with an increased cost due to the included conditions may not be the best idea. It is possible that “furniture mortgage” against this background will cause little enthusiasm.