“The rising cost of materials is a major threat to us”

In an interview with Vedomosti in June last year, Deputy Prime Minister Marat Khusnullin complained that the pandemic should delay travel to the regions. Since then, he has recovered from lost time and talks about personal meetings with governors and company executives, which allows him to know the situation in detail.

This year, the main problems in the two major areas of its competence are the construction of roads and housing, the rapid rise in prices of building materials and high inflation. But construction projects shouldn’t stop, and road builders and developers need to make money and make money. To this end, the government has made changes to the regulation, control and control, in addition to the division of powers between the regions and the federal center, along with the Federal Assembly.

– In August, the Association of Road Builders and Suppliers asked the government to index the value of contracts already made to 15% and to calculate the cost of building materials instead of projected inflation in line with actual inflation. Otherwise, construction work will have to be frozen due to near zero or even negative profitability. Is the government ready to make concessions to the industry?

– I talked to all the developers, then to all the general contractors, I know a lot of them personally – including from my work in Moscow. There are really questions. Many of them are systemic in nature, accumulating over the years. The main problem with construction is that we always see it as separate from other industries and regulations. And construction, especially housing, cannot be taken apart from other industries. Currently, the construction is subject to the Urban and Land Codes, the Energy and Airspace Act and the Airports Act. In addition, in construction work, due to contradictions in the legislation, it is influenced by various factors that the builders themselves cannot influence in any way.

For the last two years I have been trying to establish a relationship between all the construction participants. We were the only country in the world where the construction site was evaluated only on the basis of price criteria. No one in the world does that. If a company with no experience behind it today can’t build, say, a meter. And the law allowed him to do so. Different companies came, which were not entirely professional, started building, then abandoned, sued, there were price imbalances. We are sorting things out step by step in this area. In the last year and a half, more than 100 changes have been made to the law, making construction easier or linking construction to other industries.

A very important issue is network transfer. For example, we are building a road, we have received documentation, a work permit, and network removal work under completely different laws and under different conditions. You can start building a road, and the networks will only be transferred in three years, or may not be transferred in any way. We had a serious question with Gazprom in the Central Roundup. One billion cubic meters of gas are flowing from its pipes to Moscow. And Gazprom said it could not move them because of the restricted area. Then we had to change the energy legislation to make the road. While we were solving this fundamental problem at the construction site, the pandemic had very serious consequences that you have named.

The rising cost of materials today is our first threat. We are all in this risk zone, where if prices continue to rise by 15%, 20% or more, we will have to cut the construction programs that have already been put in place accordingly. Today, if we stop the abandoned construction projects due to the increase in the cost of materials, the consequences will be very bad. They are unpopular paths, unfinished social facilities, failed contractors. And we have 8.5 million people working directly in construction, and another 5 million in related industries. These are manufacturers of building materials, service providers. Our work generally accounts for 15-17% of the country’s GDP.

In China, housing construction is one of the five major drivers of the country’s economic development. That is why we are now focusing on this and trying to speed up the volume of housing construction. We are solving the problem of filling the market with housing, which is why we are accelerating the economy. And of course, for us, raising the cost of materials is a huge risk.

We tried to fight. In particular, products from the metals and metal-dependent industries have risen in price. For example, elevators have risen in price, everything related to supply has risen in price.

– Prefabricated steel structures?

– And them too. Especially in the construction industry, metal products have risen in price – 68%. In the construction of the M12 Moscow – Kazan itself, the rise in the cost of metal gives almost 30 billion rubles. price increase. And this is just metal and structures made of it.

Metallurgical companies are driven by world product prices. And here’s our choice: either we strictly regulate metal prices within the country, or — if we think we’re a market economy — we don’t regulate them, but we collect more taxes from metallurgy and spend them to offset the funds we receive. due to rising prices. Let me remind you that one of the most important decisions of the President in this regard was the decision to compensate for the rising cost of materials for all construction projects in the next three years. This is in response to a letter from these builders to the President.

– But they also asked us to consider the cost of materials based on real inflation, instead of what was planned, as is usual for us.

– This is the eternal question we are discussing now. The fact is that the construction site has always been counted according to the general inflation of the country. From my 34 years of experience in construction, I can say that in my memory the only time that construction inflation coincided with inflation across the country was 2018 and 2019. From 2017 onwards, perhaps our inflation, as approved by the Ministry of Economy, was in line with what was happening in the construction sector. In all other years, construction inflation was always higher. That’s one of the reasons builders have been breaking down over the years. Now the situation is even worse. For example, if the country’s current inflation rate is 8-9%, the cost of materials for certain objects has already risen to 20%. For example, we have now recalculated the cost of a school under construction in the region, which has risen by 26% due to the increase in the cost of materials and the increase in the price of labor resources. recently.

But metals and building materials have risen in price worldwide. By the way, analysts around the world believe that construction will take place between 2021-2022. the price will rise by 15% per year. Therefore, the cost of imported components will be pressed and it will hit our market in terms of price. And with the pandemic came the difficulties of supply.

It is also completely incomprehensible to me that the price of building sand has risen 2 times. It looks like a poster conspiracy. Either an attempt to monopolize the market, or someone’s desire to make money. Here, of course, you have to understand. Because the sand shouldn’t go up so much. The price could go up by 10-20%. There is a work block with the Federal Antitrust Service, you really need to identify these things. In addition, it is necessary to deal with law enforcement, especially in the career. I am very worried about this because there is no reason for the sand and gravel to grow.

– But you can’t get waste everywhere.

– We still have enough sand and gravel.

– Enough. But you have a long way to go.

– In fact, there are many nuances of logistical problems, purchasing problems – for example, whether it is possible to make advances in advance to buy crushed stone in winter. Another serious factor is work resources. However, the pandemic has actually reduced the flow of labor to the country. And we accelerated the pace of construction. That is, our input volumes have been higher, but there are fewer work resources. We can’t raise labor productivity so fast in a year. This requires a restructuring of design solutions, but more importantly, a restructuring of the brains of managers. This does not happen in a year. We believe that labor productivity can increase in two to three years.

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