Escrow protection: the construction industry in Russia has passed to new rules

Эскроу-защита: строительная отрасль в России перешла на новые правила

Defrauded investors will be no more. The Russian construction industry switched to the new rules: now all companies are required to build facilities on their own or borrowed funds, and the money buyers will be kept in special accounts. More – in the material correspondent of “MIR 24” Sergei Polyakov.

Key changes in the Treaty. First comes the Bank – escrow agent.

An escrow account is like a cell in a Bank Depository. Money untouchable until that moment, until it is built, explains the financial Director of the developer. One of its projects the developer is already constructing the new scheme – “project financing”.

“The mechanism that was developed today, it better protects shareholders. Physically, the money of interest holders does not come at the expense of the Builder, to a special account opened at the Bank and disclosed with certain conditions,” – said financial Director of the developer Dmitry Sobolev.

A familiar contract of participation before concluded between investors and the developer. Now it’s a tripartite document. The Bank became a facilitator. The buyer opens an escrow account, puts money. The developer is building a house. As soon as the conditions of the transaction has been completed and the apartment building is ready, the Bank transfers the money to the construction company.

“In project Finance, the Bank exercises control, both physical and banking support of any deal: a penny may not go anywhere, except on construction”, – said Deputy Minister of construction and housing of Russia Nikita Stasyshyn.

“If before the developers could use the funds directly to shareholders – the funds were received, they were sent to the costs of construction paid to contractors, then the escrow funds are deposited. will be, some say frozen, to the moment of input of object in operation and, in fact, to registration of ownership”, – said the head of real estate financing Bank Svetlana Nazarova.

The new scheme of settlements on the market should finally solve the problem of defrauded co-investors, to reduce the risk of customers remain without shelter. The decision to “enhance” the protection of buyers were taken at the highest level.

“We have the responsibility from the shoulders of the citizens stand on the shoulders of financial institutions, supporting these financial institutions insurance mechanisms from the budget. First of all, from the Federal budget. Yes, it can lead and already leads to some reduction in the pace of construction. We have a peak was 85 million, it is now 80 million, It is inevitable. We must move to a new system of housing Finance, to make it modern and civilized”, – said Russian President Vladimir Putin.

There is a downside of the reform. The slowdown in construction is one of the negative factors. The other – the growth of cost of apartments. Now developers need to build houses on their own funds or take out a Bank loan. So – to pay interest.

“There is the objective situation for growth rates. The cost of projects is increasing due to the fact that fully involve borrowings and, accordingly, the price meter will rise. For the buyer will increase the budget”, – said the Director of the Department of real estate company Roman Rodiontsev.

With the transition to the escrow account of new buildings can rise in price, according to various estimates, from four to 15%. This price is the security of a large financial transaction.