Russia's construction industry is in crisis: every fourth developer is on the verge of bankruptcy

A wave of bankruptcies could hit the Russian construction industry, which has been facing a crisis due to the cancellation of mass mortgages, the high key rate of the Central Bank and a drop in demand. This was stated by Fedor Vylomov, CEO of the Rating Agency for the Construction Complex of the Russian Federation (RASK), to the Russian publication RIA Novosti.

"According to our estimates, about 20-25% of developers have high financial risks, which may well be realized if not this year, then next year. These are mostly small regional developers, there are no large ones among them," Vylomov noted.

According to him, creditors of some Russian companies are already preparing to file for bankruptcy.

In the first quarter of 2025, 24% fewer new projects were launched in Russia than a year ago. The sharpest decline was in Moscow and the Moscow region: the number of new projects there decreased by half.

Overall, across the country, from January to April, developers commissioned 13.8% less housing, The Moscow Times writes.

The industry's decline is due to a sharp increase in interest rates. The Central Bank of the Russian Federation raised the key rate to 21%, and banks raised the mortgage rate to 30%. In such conditions, mortgage issuance fell by 45% in the first four months of 2025.

Demand for new buildings has also decreased. From January to April, 7.1 million square meters of housing were sold in Russia – 10% less than last year.

At the same time, in monetary terms, sales increased by 7% – thanks to active sales of luxury housing in Moscow.

Another problem for Russian construction companies is debt. Developers have accumulated $58 billion (4.6 trillion rubles) in loans, mostly with floating interest rates that rise along with the key rate of the Central Bank of the Russian Federation.

Experts predict that a third of companies will become unprofitable by 2025.

In response, the Kremlin is preparing a program to temporarily subsidize interest rates on loans, especially for construction in small cities. It could cover projects with completion dates up to 2026.

• At the beginning of 2025, Bloomberg wrote that the relatively good period was over and this year would be a year of belt-tightening in Russia.
• The Economist wrote in December 2024 that for the first time since the start of the full-scale war , the Ukrainian economy is "healthier" than the Russian one.
• The head of the SWR predicted when the Russian economy would finally begin to collapse under the pressure of sanctions and military spending.