Digitization of a square meter – Kommersant

The first digital financial assets (DFA) backed by residential real estate have appeared in Russia. The tool allows you to lower the entry threshold for investors. However, the diversification of investments is limited, and the spread of prices, on the contrary, is large. Therefore, experts say, it will be necessary to work out legal mechanisms to protect investors.

The first in Russia issue of “digital square meters” took place on the Atomize platform. Samolet Plus CFA LLC (part of the Samolet development group) became the issuer. One CFA is equivalent to 1 sq. m (estimated cost 233 thousand rubles) in the residential complex “Zapadny Quarter”. The issue volume is 10.4 CFA, they are addressed to a limited circle of qualified investors, determined by the issuer. The planned repayment of the issue with money from the sale of the apartment allocated for its security is provided for on December 31, 2025.

It is possible to buy and then sell “not only a whole “square”, but also a share in it,” emphasized Atomize. Samolet Plus CFA CEO Denis Kondrakhin said that retail investors are “an important pool, it is interesting to expand this community, which can be done through new instruments like CFAs and closed-end mutual funds.” According to him, the company plans to increase the amount of real estate under CFA.

Real estate remains attractive for investment, especially for the purpose of diversifying investments, market participants note. At the same time, Ekaterina Frolovicheva, the general director of Atomayza, explains, the high cost of housing and the “impossibility of crushing” limited entry to the classical market. The proposed tool solves this issue.

As Vyacheslav Blagirev, head of the directorate for the development and sales of digital financial instruments at SPCE, notes, about a third of homebuyers, including through mortgages, invest in order to resell the property. This approach has a number of disadvantages – real estate needs to be registered, there are expenses for housing and communal services and maintenance, etc. CFAs are devoid of these shortcomings, besides, “it is possible to establish a risk on the transaction itself and the developer,” the expert notes. At the same time, the developer’s assets are not burdened with project financing, and the CFA issue allows diversifying the portfolio of borrowed funds, Mr. Blagirev adds.

However, such investments also carry risks. In particular, DFAs are issued in relation to a specific apartment, and not to an apartment building as a whole. Such an approach, according to Andrey Tugarin, managing partner of GMT Legal, does not allow us to talk about risk diversification for investors, since their potential income will directly depend on the success of the sale of a particular apartment. At the same time, the issuer has the right to sell the apartment at a price that may be 15% lower than the price at which the apartment will actually be assessed by an independent appraiser from the list specified in the release decision. In addition, the issuer has the right to early repay the CFA from January 1, 2024 to January 29, 2025: “Such a right can become a basis for abuse by the issuer, since, as a rule, the main increase in the price of an apartment occurs after the delivery of the house, and not during its construction “.

In addition, the state of the real estate market in Russia “raises fears of a further decline,” Roman Nekrasov, co-founder of the ENCRY Foundation, emphasizes, and given the lack of well-developed legal mechanisms for protecting investors, DFAs for real estate “look like an unreliable tool.”

In general, the tokenization of real estate in Russia through the issuance of conventional DFAs is difficult for several reasons, says Mikhail Uspensky, a member of the expert council of the working group on cryptocurrencies of the State Duma. “Firstly, classic DFAs cannot be released for sale; for this, a hybrid-combined release with utilitarian digital rights will have to be made. Secondly, and more importantly, harmonization with the legislation on the transfer of rights to real estate is necessary, which is not expected even in the short term,” he explained.

Nevertheless, Atomize is planning other issues of DFA for real estate, including non-addressed ones, which will be available in the mobile application of the IP operator in the summer of 2023. Alfa-Bank is also considering issuing similar DFAs in the near future “to test interest among retail investors.” Plans for the release of CFA with reference to the cost per square meter were announced in MasterChain, without specifying the timing. Lighthouse reported that they do not plan to issue similar digital financial markets, including because “the issuer will not be able to provide appropriate legal guarantees and transparency to the investor in terms of determining the objective market price per square meter to which the issue is tied.”

Ksenia Kulikova, Daria Andrianova