Japanese wooden house construction company targets Russian market

21-09-2018
Iida,Japanese wooden house,Russian market,Kazan,suburb

Iida, a Japanese wooden house construction company, is targeting the Russian market. Setting it sight on Kazan, one of Russia's fastest growing cities due to its booming IT sector, the company is betting on its special structures to meet housing demands there, reports the NHK World-Japan.

In June this year, the company launched an open house for a new model home -- a Japanese-style wooden house -- for the Kazan residents, attracting young families to visit and experience Japanese-style housing for the first time.

Iida is a major Japanese homebuilder back home, building houses using a traditional Japanese technique of putting together meticulously processed wood. The country’s dwindling population and falling housing demand in the future has prompted Iida to start looking outside of Japan and into Russia.

Iida Vice President Masashi Kanei sees unlimited demand for detached houses in Russia.

"The opportunity here is boundless,” he said.

Young people demanding bigger homes

Soviet-era concrete apartment blocks are common in Russian cities. After having their first child last year, 31-year-old Mikhail Raletin and his wife is planning to move his family to the suburbs.

They currently live in a 50 m2 one-bedroom apartment with a kitchen and dining room – considered a norm for Russian families. Mikhail is hoping to move into a bigger house soon though.

The region's economic growth sees surging demand for more spacious houses among young people in Kazan. The model Japanese home has therefore attracted 120 families within 3 days of opening.

For the Russian visitors seeing the house for the first time, the idea of a wooden house invited many questions and concerns.

" Wouldn't it get really cold here in the winter?" says a visitor. Temperatures in the region drop to minus 30 degrees Celsius in winter.

Houses in Russian suburbs are usually built out of bricks. The thickness of walls is therefore a key consideration, as many believe only bricks or blocks over 50 centimetres thick can provide the much-needed insulation.

Tatsuya Okawa, director of Iidasangyo Rus, a subsidiary of Iida, explains that wood can actually provide better insulation than concrete, giving the house double insulation. "With heating, this house will be 1.5 times warmer than the average Russian brick house," he says.

A visitor remarked, " The insulation does seem adequate, Japan's building skills are wonderful."

Adjusting to the Russian market

The biggest hurdle for Iida is the costs and pricing of the house. If built by Japanese builders using materials shipped from Japan, the house will cost about US$126,000. This is almost twice the average Russian brick house, which sells for about US$54,000.

To reduce the cost, Iida sourced materials in Russia, procuring timber from local forests and commissioned a local firm to process the wood into building materials.

Iida also demands very precise specifications,  requiring a margin of error of 0.5 millimetres or less. Russian firms working with Iida are expected to pay strict attention to measurements as wood of precise measurements are needed to build the airtight Japanese-style houses.

"Requests for such excellence inspired us to do better," Sergei Mamaev, the owner of a local timber-processing firm. "We are now working to achieve the same quality levels for our other products."

After the adjustments in sourcing and manufacturing, Iida is now able to put houses on the market for about US$90,000.

The entire package – reasonable pricing and good design -  is probably why the Raletin family ends up placing an order for a Japanese wooden house. Mikhail said that the space -- about 140 square metres -- and warmth sold him. "The house is well-designed and fits our lifestyle.”

Financing support

Financing a house in Russia is no easy task. With interest rates reaching almost 10 per cent, people rarely take out mortgages. Iida has been working with a Russian bank to cut the high interest rates for home buyers.

After talks with a local bank, it was agreed that new mortgage products will be created. SBERBANK Deputy Manager Ruslan Akhatov said, "We learned that its products are high quality. We are looking forward to doing business together."

In response, the state will provide subsidies for home purchases and other assistance.

Okawa says, "There are plenty of forests in Russia, but wooden houses are not so common. We hope to change this. We'd like the people of Russia to know how great wooden houses are."

Iida launched its subsidiary in Russia 2 years ago.

The Japanese builder now faces fierce competition from European rivals. Taking advantage of its unique skill set, it is in good form to carve out a niche in the tough Russian market.