Russian banking in the context of the construction industry

Debt financing is much more cost-effective than equity financing when implementing investment projects on the property market. It allows the company to maximise the total area of the project and to make it more attractive if any well-known partners take part in it. It is worthy of note that it is almost impossible to implement a high quality development project without debt financing. It is quite costly to finance all stages of the project with the use of equity funds only. The equity and debt financing rates must, therefore, be reasonable.
There are several pros and cons with regard to attracting debt financing. It is cheaper than equity financing and it allows the implementation of large scale projects and the maximisation of profit. Another substantial advantage of debt financing is the opportunity to invite well-known partners such as banks and investment funds to take part in the project, which can add more value to it. However, the debts must be repaid, and the profit from the project must be shared with the bank. The use of equity financing increases the financial rate of return of the project, and at the same time it increases the risks (for example, the diversion of funding from the core business) and additional project costs.

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