Big Russian housing developer Pik Group has been on a growth tear ever since it raised $1.9 billion in the biggest real-estate initial public offering of last year.

But Pik's stock has been volatile, buffeted by uncertainties about global property stocks as well as the economic climate in Russia. Earlier this month, the company's founders, Kirill Pisarev and Yuri Zhukov, who are both 39 years old, canceled a plan to sell $500 million of stock because they couldn't hit their minimum price.

"Markets are weak and institutional investors may not have half a billion ready for Russian real estate," says Tigran Hovhannisyan, senior analyst at Troika Dialog in Moscow.

Pik Group Pik Group is constructing this apartment building in Khimki, outside Moscow.

At the same time, Pik is gambling by expanding rapidly beyond its Moscow base. As it rolls out operations across the country, the company could face competition, difficulty dealing with local authorities or trouble managing far-flung projects, analysts say.

The company this month signed an agreement to buy land in Izhevsk, a city some 800 miles west of Moscow, where it plans to erect 1.5 million square meters of middle-class housing. It also bought its first plot of land in St. Petersburg, where it plans to build 1.3 million square meters of mostly business-class housing.

While many Western countries are suffering from gluts of new homes, Pik is poised to benefit from the country's undersupply of housing and its fast economic growth, analysts said. "Accessible, not expensive residential flats are in very strong demand at the moment," says Alexey Kryuchkov, an analyst at Alfa Bank.

Indeed, Russia is now growing so fast on the back of high oil prices and a rebound from the recession of the 1990s that its biggest risk is overheating, says Neil Shearing, emerging-Europe economist at Capital Economics, an independent research firm based in London. Russia's gross domestic product grew 8.1% last year, compared with 2.6% growth in the 15 countries that use the euro. Russia's economy is forecast to grow at least 7% this year.

At the same time, Russia suffers from a "chronic need of stock replacement" in the residential-property sector, according to a Morgan Stanley research report.

The Russian housing market is less vulnerable to the credit crunch because mortgage penetration in Russia is still low, with only 10% to 15% of Russian real estate bought with a bank loan, according to a report by Alfa Bank. Alfa Bank estimates that the $30 billion mortgage market will grow an additional $20 billion this year, although "the main risk to this market in the future is that real-estate prices will fall," the report says.

Pik, which specializes in prefabricated buildings, last year completed more than 23,000 apartments, which sell in Moscow for an average price of $210,000, but for as little as $90,000 on average in some regions of Russia. Pik reported last month that revenue increased by 75% last year to $2.7 billion and that net profit soared by 135% to $700 million.

Messrs. Pisarev and Zhukov, who together own 84% of Pik, started the company in 1994. Since its IPO last June, Pik's general depository receipts on the London Stock Exchange -- which represent half the company's listed stock -- have risen 16% from the offer price of $25 to trade at $28.90 Tuesday. The company's stock is off 15% from the intraday peak of $33.99 it reached May 20, after Pik announced its strong 2007 results.

Pik had been planning to reinvest half of the proceeds from the owners' stock sale into a new-share issuance, which would have funded the land acquisitions. Artem Eyramdzhants, first vice president of Pik, said the company will still buy the St. Petersburg and Izhevsk land using debt.

The biggest risk facing Pik would be a sharp downturn in demand. While Russia's housing market has been booming for several years, the rapid price growth recently has started to slow. According to real-estate consulting firm Knight Frank LLP, official Russian statistics show that prices for all dwellings in Russia in the first quarter were 19% higher than a year before, lower than the 54% growth recorded for the first quarter of last year.

Pik's advance sales of housing fell 27% last year, to about 12.37 billion rubles ($522.4 million), a drop Mr. Kryuchkov at Alfa Bank says is "not ideal."

Pik's director of investor relations, Viktor Szalkay, blames the decline on a strategic decision to sell apartments later in the process in order to obtain a higher price.

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