Rising Infrastructure Megaprojects to Boost Russia Construction Industry: Ken Research

Ken Research announced its latest publication on, “Russia 2016 Construction Outlook: Growing Market with USD 300 Billion of Infrastructure Mega-Projects Pipeline”, offer insights on the changing trends and key issues within the Infrastructure and Construction industry in Russia. The publication includes an insightful analysis of recent & strategic trends, project financing, project risks, leading players, opportunities and challenges within theInfrastructure and Construction industry in Russia. The analysis of the aforementioned trends has been done across main sectors: Real Estate; Transportation; Energy, Industrial & Utilities; and Social Infrastructure,within the industry with comprehensive overview of key sectors: Power sector, Railways sector and Real estate-Mixed Use sector.

Brief Overview of the Construction Industry in Russia

Construction industry is one of the most crucial industries for a country’s development and growth. Recognizing the importance of the industry for the long term growth of a country, Russian govt. has also placed it at the centre of their development policies. Unfortunately, the Russian Construction Industry is struggling over last few years and has witnessed declining construction activity, reason being, weak economic growth, declining fixed capital investments, reduced oil & gas investments, currency depreciation, international sanctions, and declining oil prices. As a result of this, Govt. has announced various socio-economic development projects aiming at the infrastructural renovation & development of the country.

These efforts have led to improvement in the global ranking of Russia to 74th position in 2015 from 101st in 2012. However, the industry still has to cover along way for a respectable global ranking. With decent power and railway networks, the country lacks efficient transport and telecommunication infrastructure. Govt. has primarily focussed on the development and strengthening of the power and railway sector infrastructure, through huge investments in related developments plans with a look towards 2030. Currently, Russia has a megaprojects pipeline worth USD 300 billion, and four key high speed rail projects. Compared to Greenfield projects, investment in Brownfield projects have gained popularity. Also, the project financing methods have been diversified by the govt. to reduce its burden during global crisis. Projects that were largely funded by the state now have PPP option along with increasing investment by private domestic and foreign companies. Even though vast growth opportunities have been created in the industry, its effect on growth is hampered by the challenges faced by the industry such as delays in finding investors, impacting the final cost and timely delivery of these projects.

Key Factors Driving Growth in Russia’s Construction Industry

Government efforts are playing a pivotal role in the growth of Construction industry in Russia. Whether the driving factors are demand-side or supply-side, majority of them are underpinned by Govt. actions. Some of the key factors driving growth in the industry include:

Recognition of Infrastructure construction as a major contributing factor to country’s long term growth. This has made the construction industry to the centre of the Russian Policy-makers’ agendas.
Announcement various socio-economic development plans such as ‘Energy Strategy 2030’ under which the govt. aims to double the electricity generation capacity by 2030and ‘Strategy for Developing Rail Transport in the Russian Federation to 2030’ for strengthening the railways and boost trade.
Rising disposable income has led to a boost in the residential as well as retail construction sector.
Fifa World Cup, 2018, which is to be hosted in 11 cities of Russia, is expected to be a major source of increase in construction activity in coming years. The event will lead to a surge in demand for stadia construction along with infrastructure construction in related areas especially transportation, accommodation and retail.
offering PPP options as well as lower interest rates on loans is, eventually incentivising the private market players to enter the industry and invest in megaprojects. This induces a major supply side factor for the growth of the industry.

Future of Russia’s Construction Industry

Although the performance of the Russian Construction Industry has been weak in the last few years, the industry is expected to gain growth momentum on account of expanding infrastructure construction in the country in coming years. However, before the momentum will be regained, a slight contraction of the industry in 2016 is expected.Worsening business environment and capital outflows due to Russia-Ukraine conflict are the major reasons behind this further contract. Also, Brownfield projects are expected to receive huge investments with the govt. aiming to reinforce its existing assets. Competition in the industry is expected to increase as the number of market players increase attracted by govt. incentives such as PPP options, low interest rates etc. Even though the industry has various potential growth opportunities, international sanctions and low oil prices will remain as big factors obstructing the industry growth to its full potential.

To know more on coverage, click on the link below:

https://www.kenresearch.com/manufacturing-and-construction/infrastructure/russia-construction-outlook/38143-97.html

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