Column by Alexandra Mertsalova about a new temptation for home buyers

A crisis, as is commonly believed, requires non-standard solutions, but in reality, market participants are often guided by the principle “everything new is well forgotten old.” Housing developers have taken this path, bringing back an instrument that disappeared several years ago—installment plans. According to consultants’ calculations cited by RIA Novosti, interest-free installment plans appeared in 53 projects in “old” Moscow, and paid installments with rates ranging from 1% to 15% appeared in 58 projects.

This mechanism was widely used in the 2010s, but was almost forgotten with the transition to project financing in 2019. The instrument was not banned, but the meaning in it disappeared. The cost of unpaid equity participation agreements is not taken into account in the amount of funds that the developer can receive from the bank. But now developers have a new motivation – commodity surplus.

According to Nash.Dom.RF, in Moscow in November 41% of housing under construction remained unsold compared to 42% a year earlier, although in square meters, taking into account the growth in construction volume, there is even a slight increase. In the Moscow region, the share of unsold supply over the year increased from 38% to 47%. The trend is explained not only by fluctuations in demand, but also by the increased activity of developers. Developers often have lots left at a high stage of readiness, and buyer interest is focused on properties in the initial stages.

And the chances of selling out such lots are disappearing before our eyes. The volume of the mortgage market, according to Frank RG forecasts, will decrease by 22% in 2024, to 6.2 trillion rubles, due to rising rates and tightening conditions for preferential loans. And with mortgages, according to NDV Real Estate Supermarket, almost 80% of transactions are now concluded in the primary market of Moscow. And after brisk sales, as in August-October, a decline usually follows.

In itself, the return of installment plans can hardly be called an unambiguous benefit for the consumer.

According to Daniil Sinitsyn, partner of the company “Poverenny”, firstly, the developer can terminate the contract in case of two late payments, and the buyer in this case may not receive housing, secondly, the rights under such agreements cannot be transferred by assignment, thirdly , the obligations will have to be borne to the end even in the event of bankruptcy of the developer.

You shouldn’t expect excessive conscientiousness from real estate buyers themselves. In the past, there were practices on the market such as the sale of apartments under preliminary agreements or through the sale of shares in individual houses, which often did not lead to the acquisition of housing. This means that the authorities’ desire to cool the overheated mortgage market may well create a new problem. This time – with failed homeowners with installment agreements.