Energy Efficiency Tops the To-Do List for Russian Buildings

Galina Lednevskaya’s neighbors now praise their building, after much-needed repairs.© Center-Invest Bank

 

Sewage systems clog. Heaters break down. Windows shatter. Maintaining an apartment building requires continual influxes of cash—just ask Galina Lednevskaya. She’s the chair of the Rostov-on-Don homeowners’ association, responsible for the upkeep of a multifamily 15-year-old apartment building in Southern Russia. She knew what the needs were, but questioned how to come up with the money that maintenance demanded.

The answer came from Center-Invest Bank, an IFC advisory and investment client. Its special loans program was created as a result of IFC’s Russia Residential Energy Efficiency Project, which was set up especially to deal with the issues faced by many Russian residents of dated apartment buildings.

Out of a population of 140 million, almost 100 million Russians—many from low- and middle-income backgrounds—live in multi-family apartment buildings like Lednevskaya’s. The majority of these buildings urgently require capital and energy-efficiency repairs, which can be too expensive for many.

Some common needs are the replacement of old windows with modern plastic ones, which reduces heat loss; the use of energy-efficient lighting instead of traditional bulbs; and the repair of old water-supply systems, which reduces energy waste by eliminating hot water leakages.

 

Old Buildings, New Systems

Lednevskaya, who has chaired the association for more than 10 years, says her problems began when no bank seemed willing to loan the building money to update its sewage system. She asked peers for advice, and they recommended Center-Invest Bank’s loan program. Once she applied for the loan, “They processed everything very quickly and in just three months our sewage system was in perfect condition,” she says.

After that, the building’s water supply started to deteriorate—and relationships among tenants began to crumble, too. “Over the course of six months, we had several leakages, which meant wrangling between neighbors, investigations, independent assessments, unwanted renovations, even court cases,” says Lednevskaya.

So she returned to Center-Invest for support.  “We already had a good credit history and Center-Invest approved our second four-year loan very quickly. Today, our water supply system is new and operational, and our monthly dues easily cover bank payments.”

 

Finance and Advice

As the second largest user of energy after manufacturing, Russia’s residential housing sector has the greatest potential energy savings. The challenges are equally big: it will cost an estimated $25 billion to $50 billion for the sector to achieve its promise of energy efficiency.

That’s why IFC works with local financial institutions like Center-Invest. Our goal is to develop and market viable banking products, creating the right sort of environment to address key legal and regulatory issues while trying to increase awareness among government, banks, and homeowners.

To date, our Russia Residential Energy Efficiency Project has helped homeowners’ associations of 61 multifamily buildings finance renovations, with $2.5 million in loans provided by partner banks. It’s also helped address key legal and regulatory barriers by developing recommendations to directives. As a result, 11 regulations have been enacted, including key amendments to the Russian Housing Code establishing a new system for financing capital repairs in multifamily buildings.

To improve the capacity of homeowners and their associations to conduct housing renovation projects, IFC also conducted over 60 awareness-raising seminars and workshops in more than 20 regions across the country.

For Lednevskaya and her fellow Rostov-on-Don homeowners, the banks’ support for renovations that increase energy efficiency has improved their quality of life.  “No one paints on walls, litters in elevators, or breaks windows. Kids and adults treat the building like their own apartments,” Lednevskaya says. “In the past people would claim that something is not finished or does not work properly.Today… they spend all their time praising the beauty of our house.”

Stay connected: #6DecadesOfExperience

Published in October 2016

 

Learn more about Impact at IFC: