Citizens will come ready

With the abolition of shared construction, the purchase of an apartment at the level of a foundation pit will become the lot of professional investors

Vladimir Putin instructed the government to develop a plan for phasing out shared construction, which has long turned into a serious political problem for the state due to the phenomenon of deceived equity holders: the number of citizens who have lost their money due to bankruptcy of developers reaches 150-200 thousand people.

While the details of the reform are unknown, but experts fear that the government's plan may be too radical. The fact is that today in Russia almost all new buildings, with the exception of municipal housing, are being built with the involvement of funds from equity holders. The introduction of project financing in such a situation will mean a fundamental change in the scheme of work in the market, says Level Group CEO Kirill Ignakhin, since it will deprive developers of a key financing channel: “Developers will be forced to use bank loans for the entire construction period, the cost of which is about 15-16% ".

The need to attract expensive bank loans instead of practically free money from equity holders will inevitably cause a rise in real estate prices. In addition, the market will be dominated by ready-made housing, and it is 10-30% more expensive than its counterparts under construction, says managing partner of Metrium Group Maria Litinetskaya. If now in the mass segment the cost of housing on a foundation pit is about 10-20% lower than in a finished new building, then the supply of the primary market will rise in price to about the same extent, Roman Sychev, CEO of Tekta Group, believes. The price tag will also be affected by the fact that most of the new buildings will no longer have to be sold on "vacant lots", but in areas with well-maintained entrances and playgrounds, roads and parking lots.

“Solving the problem of deceived equity holders, this initiative at the same time deprives those people who can afford to buy it only at starting prices,” Ignakhin notes.

The President's order looks somewhat unexpected for one more reason. In recent years, the law "On Shared Construction" has changed markedly in the direction of strengthening control over developers: in particular, a clause on banking intermediation has appeared and a Fund for the Protection of Shareholders' Rights has been created. However, many of the new consumer protection mechanisms have not yet entered into force. “Against this background, the statement about the transition to project financing and the rejection of equity construction looks like a 180-degree turn. Now, apparently, the industry will have to prepare for completely different working conditions,” says Ignakhin.

Of course, there is a huge plus in the abolition of the share mechanism: all economic risks will be shifted to banks and developers, and the problem of long-term construction will be resolved.

There is nothing wrong with the fact that the profitability of developers will decrease slightly, says Yulia Lurie, director of the Mayak agency in the capital: when building ordinary high-rise new buildings, developers already receive an average of 300% of the profit. “Perhaps raising prices for consumers is not very good, but in return they will receive apartments of a different quality and much less risk.” Until now, there has not been a single construction site in Moscow that would have been commissioned exactly on time - the delay is at least six months, and most often a year and a half, the expert says.

One of the possible scenarios for the future reform is that shared construction will still remain on the Russian market, but in a very limited form. Even in Europe, today there is still the opportunity to purchase an apartment under construction, however, it is mainly used by professional investors. “Such purchases are possible in the UK, Germany, Austria, Spain, France and other countries. Banks or trustees can act as guarantors, who accept money from buyers and transfer it to developers only after certain stages of construction have been completed, ”explains Litinetskaya.

It remains to be hoped that the government's plan will not be too populist and will be able to take into account the interests of various groups of the population and business.