In Russia, the amount of pension money in commercial realty is under 2%. So, unlike in many other countries, pension money cannot be found in commercial realty. And the market of professional investment in general is not developed. This is based on the position of the Central Bank, which regulates the market, as well as the position of the funds themselves. Our pension funds are much more conservative that western ones. By all means, it is also related to the fact that only now rating systems are being developed in Russia, and openness and public disclosure is not what different players, including borrowers and businessmen, are good at. Pension money can only be invested into securities (shares, bonds, notes etc.) with a relevant rating and liquidity (their traded value) at the stock exchange. Experts agree though, that if some pension funds could be allocated to realty, it would significantly increase the share of institutional capital in our market and the number of investors willing to buy a good quality product with a long-term possession strategy.
EY analysts believe that nothing else but pension money would become the key driver of investment increase in the world real estate market in the near future, which in its turn would open possibilities for further development of formats similar to REIT. As for Russia though, unless companies owning commercial real estate become more transparent, it would be difficult to raise pension funds. “On the one hand, we have pension funds with significant amounts of potential investments, while on the other, there is good quality realty, which can generate good profit for many decades to come. And this profit would be higher than the one on government stock. Yet these two ends cannot meet,” regrets Alexey Panfilov. He thinks that realty is a good tool for pension funds to invest into, which has been proved by western markets. Finally, more active participation of pension funds could become an additional driver to develop realty industry, but legal changes are necessary, together with work on transparency of all members of the market and development of investment tools as well.
Text by Ekaterina Sakharova