By Olga Popova
MOSCOW, April 28 (Reuters) - Private investment house Fleming Family & Partners is raising an initial $500 million for a new Russia real estate fund set to focus on housing construction as building costs fall, its managers said.
"Now, at a time when all the construction companies have problems, prices have fallen and construction is genuinely cheap, we can go against the market," the manager of the new fund, Nikita Ivanov, told Reuters in an interview.
"We will have a minimum of competition."
With a 15-year time horizon, the fund will focus on construction of mass market housing with a total area of 160 hectares, mostly in regions outside the wealthy cities of Moscow and St Petersburg.
In Russia's regions, housing prices are lower than in the major cities but construction is also far less expensive. Fleming said a total of $1 billion would ultimately be required, based on cost per metre of 15,000 roubles ($449.2) to 20,000 roubles.
In Moscow, by comparison, the city government estimates the cost of construction at around 25,000 roubles per square metre to build a mass-market housing block, with the total cost rising to 45,000-50,000 roubles once infrastructure is built and utilities and telephone connections are built.
Fleming has partnered with a Russian investor, the owner of a land bank estimated at $21 million, whom Ivanov declined to name. Fleming will be the operator of the project, he said.
Fleming Family & Partners, which launched its first Russian mutual fund at the end of 2008, plans to open the fund to the Russian public, making it one of the few of its kind available to retail investors.
"We want this project to be transparent," Ivanov said.
"I think for the next year and a half or two years, it won't be a public project with retail investors. When it becomes clear that we are out of the risk zone, when around 10-15 percent of the space has been completed, we will expand our circle of investors."
The Scottish Fleming family launched Fleming Family & Partners and its Russian unit after selling its investment bank, Robert Fleming & Co, active in Russia since 1992. (Additional reporting by Yuliya Komleva; writing by Melissa Akin; Editing by Rupert Winchester)