Martin Sumichrast

Today in Russia, there are no developers, no mortgage lenders, no real estate brokers or title companies. In Moscow you won’t find associa­tions of homebuilders, mortgage bankers, property appraisers or construction firms.

Yet, conversations with dozens of Russian design and construction professionals as well as government officials suggest that some Russians would welcome an American-style real estate industry.

WHERE DO THEIR REAL ESTATE INTERESTS LIE?

According to Martin A Sumichrast, Russians talk increasingly about rediscover­ing and resurrecting their architectural and cultural heritage. The desire to preserve, restore, and recycle antique buildings has become a mini-movement in Russia, part of resurgent nationalism and renewed religious activity sanctioned by the government’s pol­icy of tolerance. Even the Russian Orthodox Church is becoming a developer. Much of Russia’s great architectural legacy resides in churches and monasteries in vari­ous states of disrepair and disuse. Thus Russians are now proposing joint ventures, including both the church and foreign investors, to restore these structures.

Because Russian monasteries are a major tourist attraction, both for Soviet and foreign visitors, development-minded Russians envision a future in which restored monasteries become the magnetic focal points of vaca­tion resort sites, sanctified spas complete with restaurants and recreational amenities.

Likewise, hundreds of pre-revolutionary buildings, and even entire neighborhoods, await revitalization. For example, designers are now preparing ambitious plans for com­pletely rebuilding an older section of Moscow near the Kremlin. Maintaining the 19th cen­tury fabric of streets and blocks, the plans preserve many buildings, call for a diverse mix of residential and commercial uses, pro­scribe high-rise or superblock buildings, and emphasize pedestrian rather than automobile circulation. They also envision restoration of a run-down monastery to anchor and give identity to the neighborhood.

RUSSIAN DILEMMA

But implementing such projects poses a thorny dilemma for the former Soviet block and for foreign participants. How can capital-intensive efforts be pursued without a real estate industry and all the legal and financial mechanisms that go with it?

How can new enterprises undertake pro­jects when basic concepts such as owner­ship, property titles, profit and competition are so alien to Soviet society? Who will furnish equity and debt financing when Russians save rubles in mattresses and cookie jars, not in banks? Without a supply of capital and a viable banking system, it’s hard to introduce capitalism.

However, that is exactly what the reform-minded government and many Russian citi­zens are trying to do.

Accomplishing this will be very difficult. Not only are they starting from scratch, they also must overcome firmly entrenched, anti-capi­talistic attitudes. Some of these attitudes derive from 70 years of relentless exposure to socialist dogma and centralized planning, but they also reflect centuries of conditioning by a pervasive and persistent Russian culture. Throughout Russian history, someone in charge - a czar, patriarch, nobleman or dic­tatorial government - not only owned everything, but also told citizens what to do, plus when and how to do it. Thus there is no tradition of private initiative, no work ethic comparable to that of Europe, Japan or the United States.

UNDERCURRENT OF SKEPTICISM

And profit is still a dirty word - “Russians are quick to count their neighbor’s money.” They still bridle at the notion that, in a mar­ket economy, some people get rich while others don’t. Even more unnerving is the potential for unemployment.  Underlying all of this is a sense of despair and pessimism. Despite the promise of future ventures, there is an undercurrent of skepticism, a disbeliefin a better tomorrow.  These attitudes are reinforced by worsening economic problems - chronic shortages of goods, falling currency value and outdated technologies. The desire to transform the former Soviet Union is there, but not the means, and perhaps not the patience or the willpower.

The Russian mentality, with its tendency to allow pessimism to triumph over optimism, will be the greatest impediment to “pere­stroika.” After all, only an optimist can venture into real estate.