Two Estonian construction giants - Merko Ehitus and EE Grupp - recently acquired equal shares in the Lahekalda land plot, laying the foundation for a huge residential development project first discussed almost a decade ago.
If contruction is to proceed, Lahekalda, a vacant plot of 17 hectares set on a hill between the city center and Lasnamae district that offers an excellent view of the Gulf of Finland, would be one of the many residential areas sprouting up across the country.
Although Merko Ehitus officials haven't commented on the final cost and dimensions of the project, the first houses will appear in Lahekalda in 2004.
The price the companies paid for the Lahekalda plot is being kept confidential.
The previous developer, Lahekalda Ltd., established in 1993 by several Estonian and U.S. firms, had planned to spend about 1 billion kroons (63.9 million euros) on the 1,000-apartment complex with a total of 100,000 square meters of residential space.
Merko Ehitus and EE Grupp bought the Lahekalda plot, together with an architectural blueprint, in the early 90s, and therefore cannot make major changes to the construction size.
According to Jaan Mae, director of the building department of Merko Ehitus, there is a constant demand in Estonia for the so-called "all-included" residential areas that contain not only the houses but also shops, parking lots and playgrounds.
Skeptics see the Lahekalda project as a long shot. Part of the apartment complex will face Lasnamae, the largest residential district of the capital, built in 1980's and consisting of identical concrete houses.
"That does not really sell," Hindrek Leppsalu, managing director of Ober-Haus real estate company, told the Aripaev daily, adding that sizable outlays in utilities infrastructure as an additional risk factor.
For these and other reasons Hansapank, Hoiupank and Forekspank refused to finance the Lahekalda project back in 1998, deeming it too risky.
Ain Kivisaar, an analyst with Uus Maa, a real estate agency, said the residential segment of Tallinn's property market has been growing rapidly in the last 12 months. "We can presume the overall pace in residential area construction will continue because of the high demand for new apartments and houses," he said.
Originally the price for building the apartments was between 11,500 kroons and 13,500 kroons per square meter, according to Lahekalda Ltd.
Now, said Kivisar, "The real price for a new apartment is around 12,500 kroons (per square meter). But taking into account that some of the Lahekalda apartments would have a beautiful view of the sea, the price could go up to 16,000 kroons per square meter."
But Kivisar added that in order to quickly fill the Lahekalda complex, prices will have to be slightly lower.
In general, the Lahekalda project is being revived just in time, according to Kivisaar. "People's ability to pay is on the rise. The market has lots of offers for people whose income is above average, but what the market really needs is a certain amount of cheaper apartments," he said.