Developers have warned of a 20% rise in housing prices due to changes in construction laws

The profile committee of the State Duma adopted amendments to the law on shared construction, which provide for the transfer of all projects of Russian new buildings from July 1, 2019 to the financing scheme through escrow accounts, which, by law, should replace equity participation agreements. Contrary to the expectations of developers, the transfer to the new scheme will affect not only new projects, but also those that have been or will be launched before July 1, 2019. This is a drastic change that will lead to "price spikes" of up to 20%, warn . developers

What are escrow accounts? The system of escrow accounts is one of the tools for the transition from shared construction to project financing. It assumes that the buyer of an apartment does not pay money directly to the developer, but transfers the funds to a special insured bank account, which gives them to the developer only after the building is put into operation. The mechanism will become mandatory from July 1, 2019. Before its entry into force, developers massively issued permits for the construction of new facilities according to the old scheme: maintaining escrow accounts is much more expensive and more difficult.

What does the State Duma propose? The Duma Committee on Natural Resources, Property and Land Relations has updated amendments to the law on shared construction, they will be considered during the second reading on December 18, the head of the committee, Nikolai Nikolaev, told Kommersant. “It is assumed that from July 1, 2019, absolutely all developers must will switch to financing the construction and sale of housing through escrow accounts,” he said. However, in another version of the bill, the transition to the new rules is provided only for those projects that enter the market after July 1, 2019.

Nevertheless, Nikolaev, the author of the key amendment, believes that the mass issuance of building permits under the old scheme is “an attempt to circumvent the law”, and therefore escrow accounts should be used from July 1 even in construction projects that have already begun.

Developer position. “If from July 1, 2019, it will be possible to sell housing only if escrow accounts are used, apartment prices will rise abruptly, since developers will not have a certain amount of apartments in stock that can be sold at old prices, gradually increasing the cost of housing for buyers,” said Andrey Tsvet, Development Director of Granel Group of Companies. According to him, prices for apartments in projects that have not yet been put on sale at the time this amendment enters into force will increase by 20%, and for those projects that have already begun to be sold under the current scheme, the increase will be 5-20%.

Both banks and developers are not ready for such radical changes, Olga Tumaikina, commercial director of FGC Leader, is sure: “In addition to the fact that this moment was not provided for in the economic model of current projects, developers are unlikely to physically all projects." At the beginning of December, only 277 escrow accounts were opened in Russia in four banks, while at the same time, about 50 thousand equity participation agreements in housing construction are concluded in the country every month, notes . RBC

“If the entire market is immediately transferred to escrow accounts, 1.5 trillion rubles will be needed at a time,” says Nikolay Alekseenko, general director of the Construction Industry Rating Agency, emphasizing that such a transition is similar to a stress test without predictive modeling.

Artem Gubenko