Russia may face a housing shortage due to a steep decline in new residential construction, according to a forecast by the state-owned finance company Dom.RF as by pro-government outlet Vedomosti on April 13.
In the first quarter of 2025, developers reportedly launched just 8.1 million square meters (around 87.19 million square feet) of new housing projects — down 24% from the same period last year.
Dom.RF warned the decline would likely continue through the end of 2025 amid the Central Bank's high key interest rate, which currently stands at 21%, its highest since the early 2000s.
Even if rates fall to 7.5–8.5% by 2027, developers would not be able to ramp up construction quickly enough to cover the shortfall. Home sales have also dropped sharply, with 569,000 apartments sold in 2024 — a 26% decrease compared to 2023.
Dom.RF proposed subsidizing loans for developers launching new projects in 2025–2026 to increase the housing supply. It also emphasized the need for macroeconomic stabilization and lower borrowing costs to revive both construction and demand.
Russia's Central Bank has raised its key rate aggressively over the past year to counter inflation driven by war-related spending.
The tightening cycle began in July 2023 when rates stood at 8.5% and has since climbed to 21%. The policy, led by Central Bank head Elvira Nabiullina, has drawn criticism from Russian defense contractors and state-linked firms facing rising credit costs.
Russian President Vladimir Putin acknowledged the dilemma on Dec. 19, 2024, saying some experts believe the Central Bank should consider using tools other than rate hikes to fight inflation.
With inflation still rising and the economy heavily burdened by military expenditures, Russia's leadership faces mounting pressure to balance financial stability and industrial growth.
Tim Zadorozhnyy
(Updated: )
