Starting March 1, 2025, new regulations governing the use of escrow accounts for individual residential construction (ИЖС) will take effect, marking a significant shift aimed at protecting consumer rights and enhancing transparency within the building industry.
According to reports from regional news outlets such as Бизнес журнал and Кировские новости, the new legislative framework requires contractors to access funds from escrow accounts only after the registration of ownership for the completed home. This change ensures buyers will have greater security during the construction process, as any unfulfilled obligations by contractors could lead to the return of their money.
The regulations stipulate the following key points: escrow accounts can only be established with banks possessing adequate credit ratings, and funds will be insured up to 10 million rubles. If a buyer decides to withdraw from the construction contract, they will need to reimburse the contractor for any materials used and work completed to recover their funds.
These escrow accounts will also be necessary for accessing favorable terms under the 'Family Mortgage' program, which is intended to support families seeking to construct their own homes. The Central Bank of Russia expects this mechanism to be attractive not only to individual citizens but also to builders, as it will open up additional financing options.
Contractors will be required to disclose important information on the unified housing construction information system, which includes data about the legal entity, specific housing projects planned, their prospective costs, timelines, and the authorized bank where the escrow account will be held. This move aims to provide buyers with more information to make informed decisions and reduce the likelihood of fraudulent practices.
Vice Premier Marat Khusnullin recently emphasized the need for increased housing construction, particularly after 2024, which saw record construction output of 62 million square meters. Although officials remain optimistic about the escrow mechanism boosting individual residential construction, concerns remain about the practicalities of implementing these new regulations effectively.
Despite the promising protections of these escrow accounts, some experts predict the new laws might not significantly increase the popularity of individual residential construction. The high cost of project financing and the unpredictability of client demands pose considerable challenges for contractors. Dmitry Novoseltsev, head of the First Academy of Real Estate, noted, "Until clients sign documents, contractors won't receive funds from escrow accounts, opening the door to potential delays and additional consumer demands."
Alexey Barinov, who oversees country house projects at the FACT company, believes the escrow scheme will take time to gain traction, especially if the regulatory environment does not change to alleviate financial burdens on developers. He suggested the process could accelerate if there were reductions in key lending rates, representing hopes for more growth in this area.
Another major component of the new laws is the outlined timeline for construction. Starting March 1, home builders must complete construction within three years of obtaining land ownership rights. If no construction occurs during this time, property can be labeled as unutilized, resulting in penalties.
The legislation introduces fines based on property value, ranging from 1% to 1.5% for individuals, with minimum penalties of 20,000 rubles, and even higher rates for companies and organizations. This is part of Federal Law 307-ФЗ, which takes effect simultaneously and aims to combat the growing issue of neglected land parcels.
With these comprehensive changes, the 487-ФЗ law mandates not only the responsible use of escrow accounts but also the submission of documents for land registration to be treated as mandatory rather than voluntary. Transactions involving land without established boundaries will be prohibited, tightening regulations to prevent misuse of land ownership.
On the broader market level, the new legislation parallels the existing escrow practices established for multi-family housing projects, granting individual residential developers similar protections. Following significant restrictions aiming to protect buyers, construction must begin within two years of receiving the building rights on land.
For citizens considering building their own homes, the benefit of knowing their funds are secure until completion and ownership transfer cannot be overstated. Each escrow account is differentiated by the contractor's compliance and the bank’s creditworthiness, creating layers of security not previously available to individual homebuilders.
Constructors now bear the responsibility to register residential properties immediately upon completion, enhancing the urgency of formalizing ownership and assuring compliance with tax regulations. Under the new regulations, construction can only proceed once projects are officially registered, addressing concerns about potential delays.
Overall, these new escrow account regulations represent a significant advancement toward securing consumer rights within the Russian residential construction industry. By mandatorily linking escrow provisions to financing for home construction, the government appears committed to ensuring stronger consumer protections and fostering transparency.