Project financing as a tool to enhance the role of commercial banks in the construction industry

Abstract

For implementing any construction project, considerable financial resources are required. The world practice of construction sector investment can be described as follows: two-thirds of resources go through the bank project financing system; one-third of resources are own funds of companies. In the Russian Federation, either the population invests in construction, participating in equity construction projects or building individual houses or the budget and state corporations fund construction projects. Businesses also invest in construction projects. Sources of finance for Russian construction activities are not diverse. The availability of many sources is declining during the past few years. The process of construction sector financing is not systemic; it develops spontaneously without taking into account the strategic objectives of the national development. In such conditions, project financing becomes a very promising form of lending. The popularity of project financing as a method of long-term financing of capital-intensive industries is determined by the processes of partial abolition of state control over enterprises serving the infrastructure (housing and communal services, transport, communications), and privatization of the public sector. The article determines the importance of project financing as a tool to enhance the role of commercial banks in the construction industry in modern economic conditions. The current trends of development of project financing in the Russian construction sector are analyzed. The most significant problems of development of the construction sector in the Russian regions are identified. The trends in the development of the construction sector are identified taking into account the latest economic trends.