It is proposed to expand the use of special accounts in housing construction

The Ministry of Construction has prepared a draft law on raising funds from citizens in the construction of individual houses outside cottage settlements through escrow accounts. This mechanism can be used only for standard projects and house kits. The bill regulates in detail the relationship between citizens and contractors when using escrow accounts – from describing the terms of the contract to establishing a minimum three-year warranty period for the built house. Experts believe that the innovation will allow the development of the individual housing construction (IZHS) market, both by increasing its transparency and by improving the quality of development.

The Ministry of Construction has developed a bill extending the mechanism of escrow accounts to individual houses that are built by order of citizens under a construction contract outside cottage complexes. Recall that initially this mechanism was introduced to pay for apartments during the construction of apartment buildings – as an attempt to solve the problem of deceived equity holders. Buyers’ money goes to special escrow accounts in the bank, the developer gets access to them only after the completion of the project, and the construction is carried out at the expense of borrowed funds. In 2022, the use of escrow accounts was also introduced for the construction of individual houses within low-rise residential complexes (see Kommersant dated November 24, 2021).

The bill of the Ministry of Construction refers to the voluntary use of this method of financing. As previously emphasized in the department, the use of escrow accounts is necessary for preferential mortgage programs without collateral and guarantees. According to the project, contractors, both legal entities and individual entrepreneurs, will be able to raise funds from citizens for the construction of individual houses outside cottage settlements using escrow accounts, subject to several conditions. In particular, the contractor must disclose information about himself and the project, and standard documentation or a house kit must be used during construction.

The project regulates in some detail the relations of the parties within the framework of the construction contract. Including the terms of the contract, including the obligation to connect the constructed house to the engineering and technical support networks, and in the absence of centralized networks in the settlement, to provide the house with autonomous engineering systems. The procedure for the transfer of an object and the resolution of disagreements is regulated, a minimum warranty period for built houses is set – three years.

It should be noted that the expansion of the project financing mechanism for individual houses has been discussed for several years already – such plans, along with the standardization of individual housing construction projects, in particular, are provided for by the “Strategy for the Development of Housing Construction and Housing and Communal Services until 2030” as a way to solve the problem of low liquidity of such houses and reluctant issuance by banks housing mortgages in this segment. Now, taking into account all support measures, including preferential loans, individual housing construction accounts for 10% of all mortgage loans, while this segment provides half of the annual housing commissioning.

It should be noted that in practice the mechanism of escrow accounts for houses outside the complexes is already being used in a pilot mode. In particular, DOM.RF Bank began accepting mortgage applications for individual housing construction contracts using escrow accounts and launched a product for financing contractors working under this scheme.

According to the president of NOSTROY Anton Glushkov, the construction market has been waiting for such an opportunity for a long time – due to the demand for individual housing construction. According to him, the innovations will increase the transparency of this segment and improve the quality of suburban development by attracting professional developers and standardization. Andrey Bakhmutov, vice-president of DOM.RF Bank, agrees with this – the innovation will ensure “the availability of construction of private houses and the security of payments, as well as improve the quality of development by transferring it to a civilized track.”

“Any regulation is a balance that limits the stronger side and protects the weaker one,” says Elena Nikolaeva, head of the National Agency for Low-Rise and Cottage Construction. According to her, if this mechanism is backed up, for example, with concessional bank financing, then for contractors, in addition to restrictions, there will also be incentives to use it. “As a result, the market will become more stable and attractive for investors,” Elena Nikolaeva believes.

According to Andrei Bakhmutov, the initiative of the Ministry of Construction will give contractors the opportunity to expand their business – in particular, it can attract those buyers who were afraid of the advance payment scheme. However, adds Anton Glushkov, there are no consolidated support measures in individual housing construction, as is the case with apartment buildings. In his opinion, it is worth creating a data bank with sites suitable for individual housing construction, which would simplify the “client path” for a citizen and facilitate the situation with assessing liquidity for banks. Anton Glushkov adds that the problem of the underdevelopment of mortgages under individual housing construction lies in the complex system of collateral for individual land plots.

Evgenia Kryuchkova