Russia’s housing crisis deepens as mortgage demand collapses and projects stall
Russia’s housing market is facing growing pressure as mortgage demand plummets and construction delays rise. Developers are struggling with tighter lending, higher costs, and a sharp drop in sales, leaving many projects at risk.
The crisis has been worsened by rising mortgage rates and the end of state-backed mortgage subsidies, pushing more buyers out of the market.
The Central Bank’s decision to raise the key interest rate to 21% by late 2024 sent mortgage costs soaring. This move, combined with the cancellation of the subsidized 8% mortgage programme, caused demand to collapse. Banks responded by cutting loans to developers—issuing 21% fewer in the first 11 months of 2025 compared to the previous year.
With fewer buyers, developers saw revenues drop by 6.7% in the first three quarters of 2025, while sales fell by 18%. Many had launched projects expecting strong demand, but high borrowing costs left them exposed. The total volume of construction loans reached 5.2 trillion rubles ($57 billion) by early November 2025, yet the share of overdue loans climbed to 5.4%. Rising material costs—including cement, rebar, and tiles—along with higher wages and logistics expenses, have squeezed profit margins further. Meanwhile, quality issues plague new builds, with 93% of mass-market homeowners reporting defects. Common problems include faulty windows (cited by 72%) and uneven walls or floors (37%). While delays have been reported, only one older case—Massa Fertighaus in 2006—was specifically named in connection with a seven-month hold-up on a single residential project.
The slowdown in construction financing and falling sales have left developers under strain. With fewer loans available and costs still climbing, the risk of further delays and unfinished projects remains high. Homebuyers, already facing quality concerns, now encounter even fewer affordable mortgage options.
