Recommendations on cooperation between banks and developers in project financing of equity housing construction prepared

Russia’s Ministry of Construction, the Bank of Russia and JSC DOM.RF issued recommendations to determine best practices in cooperation between authorised banks and developers in project financing of equity housing construction with the use of escrow accounts. The recommendations were prepared at the instruction of Russia’s President in the follow-up to the extended meeting of the RF State Council panel on 12 February 2019. The document is aimed at an effective transition to project financing.

As envisaged by the law effective from December 2018, starting from 1 July 2019, funds for equity construction of undelivered housing can only be raised via escrow accounts for settlements under equity construction contracts submitted for state registration after 1 July 2019. This will not apply to facilities meeting RF government-established criteria which determine the completion of such facilities and the number of equity construction contracts concluded.

Authorised banks should take the appropriate measures stipulated in the recommendations to prepare for a transition to project financing of developers.

The Bank of Russia is a participant in the Housing and Urban Environment National Project. It is aimed to deliver on Russia’s national development goal of improving housing conditions of five million families annually, and establish a new housing construction financing vehicle. The latter provides for a gradual replacement of personal funds raised to fund housing construction with bank loans and other financing tools, which will mitigate risks for the public.

The recommendations are posted on the official websites of the Bank of Russia, Russia’s Ministry of Construction, and JSC DOM.RF.