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Middle East provides foundations for a sprawling new Russian city

The Times

 
Outside Moscow and close to an airport, plans are unveiled for the latest investment by an Emirate flush with bllions of petrodollars

In Britain, Stevenage was the trendsetter, the first of a slew of postwar developments that became known as the new towns. Harlow, Cumbernauld, Milton Keynes — purpose-built, modern, concrete and eerily similar, they were templates for a better way of life. They were, perhaps, more successful as symbols of 20th-century living.

Now, outside Moscow, comes Great Domodedovo, a symbol of life in 21st-century Russia. Funded by Middle Eastern petrodollars, developed by the Emirate that made residential island complexes so big that they could be seen from space, it is a city, not a mere town.

Phase One will put 450,000 people into more than 3,000 hectares of development at a cost of $11 billion (£5.6 billion). Initial development will involve the construction of 150,000 apartments and houses and 600,000 square metres of retail space, as well as schools, a university, sports facilities and hospitals.

 
Yet ultimately Great Domodedovo, on land close to Domodedovo airport outside the Russian capital, could cover 18,000 hectares, six times the size of Phase One. Stevenage it is not.

For Vladimir Pinaev, the managing director at Jones Lang LaSalle, the real estate broker: “The magnitude of the project would be amazing, if it is completed. It’s easily the biggest single real estate project so far in Russia.”

Capital for the project is being provided by Limitless, the foreign investment arm of Dubai World, a real estate holding company owned by the Dubai Government. Its Dubai Ports World was forced to sell its investments in six American ports by the US Government this year. The local partner is Coalco, an experienced Russian developer with rights to 18,000 hectares.

 

The project underlines the massive amounts of capital at the disposal of Middle Eastern state and private investors, and their increasing inclination to invest it in foreign markets. Oilproducing Gulf states have amassed about $1,500 billion in export revenues over the past four years, and the percentage of this that they have put into foreign assets has grown by more than 50 per cent during the past year, according to Morgan Stanley.

Serhan Cevik, an analyst at the bank, says: “What’s different about this oil boom to the one in the 1970s is that, back then, Middle Eastern countries tended to put their oil revenues in international banks and into gilts and treasuries. This time around, they are putting them into more diverse assets abroad.”

Foreign assets are particularly attractive because of the poor recent performance of Middle Eastern stock markets — Dubai’s stock exchange is down 60 per cent this year. Notably, international real estate has increasingly attracted Middle Eastern capital. This week, Dubai is host to Cityscape, the biggest real estate conference in the world, where representatives from cities worldwide try to attract petrodollars to their development projects.

Russian cities, particularly Moscow and St Petersburg, are well-placed to attract this cash. Saaed Ahmed Saeed, the chief executive of Limitless, says that Russia has “the largest and fastest-growing real estate market in Europe”. Like the Middle East, it also has a rapidly growing middle class, who increasingly want to buy houses or flats in new suburban communities.

Russian investors, too, are sinking their own petrodollars into real estate. The investment company Nafta Moskva is putting $3 billion into a 600hectare private town outside Moscow, Rublyozo-Arkhangelskoye, which is said to be the second-biggest single real estate development in Russia. The project’s houses are aimed at high-net-worth families, earning the project the nickname the “millionaires’ town”.

 

 

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