Russian economy meltdown as housing developers face ‘bankruptcy’ | World | News

Russia’s economy is slowing sharply with nearly 20% of Russian property developers at risk of bankruptcy thanks to plunging sales driven by high mortgage interest rates. With the highest interest rates in two decades driving up debt levels the Russian economy continues to struggle under sanctions.

Deputy Prime Minister Marat Khusnullin, who oversees housing and infrastructure in the government, warned that soon over 30% of Russian property developers could be pushed to the brink if financial conditions do not improve in the next six months. “By my estimate, about 20% of developers face serious risks,” he told the Vedomosti business daily. He noted that while every fifth construction company has postponed project completion by at least six months, this alone is not a reliable indicator of impending bankruptcy.

Mr Khusnullin continued: “But if the [Central Bank’s] high key rate continues, if money doesn’t flow into the sector, if citizens stop investing in real estate and if there’s no mortgage support, the share could exceed 30%.”

To counter inflation driven by intensive military expenditure, the Central Bank of Russia maintained high interest rates, which reached a 20-year high of 21% in October 2024 before being reduced to 16% by late 2025.

The full-scale war in Ukraine has been the primary driver of its difficulties.

Conventional housing loans have “almost ceased to exist as a class” since the state-subsidized program ended in July 2024, Khusnullin added.

The imbalance in mortgage lending has added to the strain. Around 80% of mortgages are now issued under targeted government programs — such as those for families with children — with only 20% granted on market terms, Khusnullin said.

The downturn has already forced some companies out of the market. In Yekaterinburg, StroyProekt Group — a former general contractor for PIK Group — is on the verge of collapse, while DonStroy Construction Company has been declared bankrupt in Rostov-on-Don.

The broader slowdown is reflected in sales figures. Developers sold 10.4 million square meters of new housing between January and June, down 26% year-on-year. In value terms, sales fell by 2.1 trillion rubles ($26.25 billion), a nominal decline of 16%.

According to consulting firm Macon, citing data from the state housing agency Dom.RF, nine of the country’s 20 largest residential developers recorded sharp revenue declines in the first half of 2025.

Last November Mikhail Matovnikov, head of the analytical department at state-owned Sberbank, admitted that home affordability hit “absolute rock bottom” in Russia.