Russia May Turn to Soviet-Era Solution for Housing Problem

Processed with VSCO with wwf preset

Housing cooperatives, a remnant from the Soviet-era, could become a solution to Russia’s housing problem, writes.  

In the years after the dissolution of the Soviet Union, housing cooperatives had fallen out of fashion and Russia’s governments put an emphasis on mortgages instead. In the second half of the 2000s, and in the 2010s legislative norms were adopted, which made it possible to create housing cooperatives in new market conditions, the report says.

А new law covering fundraising for construction projects came into force on January 1st. Last spring the government considered allowing crowdfunding to be leveraged as an alternative tool for financing construction projects. In the final version of the law, stakeholders have barred the possibility of crowdfunding.

“In addition, there is a lack of amendments to the law on shared construction for investors who do not need an apartment in return. Developers are not against crowdfunding in the future, and experts remind that such practice is widespread abroad, where people can invest any amount, even the most modest sum,” writes.

The State Duma passed a federal law on attracting investments using investment platforms last summer. According to this, crowdfunding can be carried out through loans, securities or utilitarian digital rights.

“The application of the law on crowdfunding would allow the developer to use the equity holders’ funds until the actual completion of construction. It would also significantly limit their rights, including with regard to the enforcement of the developer’s obligations,” says Leyla Tagieva, a legal expert at law firm SSP-Consult.

In addition, the law allows individual investors to give only 600,000 rubles ($9,750) a year to crowdfunded housing projets. Alexei Bushuyev, sales director at Seven Suns Development says collective investments are unlikely to become a real instrument in the real estate market unless in the future the investment limits are increased by legislation. 

“The experience in Russia shows that all possible uses are limited to several thousand dollars. This is the cost of one apartment, and you need to build an entire building,” says the head of the St. Petersburg Builders Association Alexei Belousov.

Market participants draw attention to the weakness of the recently enacted law. Namely, the regulation of the procedure for the recovery of overdue debts. At the moment, investors are not protected from possible financial problems, industry actors told