Invest in Russia — invest in Russian regions!
All analytics

Indicative study into the impact of transition to the mechanism of construction financing through escrow accounts on a typical housing project and a housing development project

18 September 2019
Индикативный анализ влияния перехода на механизм эскроу-счетов для типового жилого проекта и проекта комплексной жилой застройки
Release date
Open PDF

An escrow account is a special type of bank account held with a bank called an escrow agent. The mechanism of construction financing using an escrow account works in such a way that the money from buyers goes through an escrow account instead of coming directly to the developer. When making a shared construction participation agreement, the homebuyer pays a sum of money into a special account where the money remains deposited up to the moment the apartment is commissioned and property rights are registered. This mechanism reduces the homebuyers’ risks associated with construction freeze or developer bankruptcy.

While the mortgage rate without an escrow account is fixed (10-12%), with escrow accounts the rate is adjustable and is defined at a given moment using the following formula: (4-6% (min) * share of loan collateralized with the money in the escrow account) + (10-12% (max) * share of loan not collateralized with the money in the escrow account).
As a result of the transition to the mechanism of using escrow accounts when selling housing property, the cost of construction will increase by 3.8% compared to the base scenario.

Selling apartments using escrow accounts will minimize the risks for buyers. Consequently, in the new conditions, developers will be able to lower the discount on apartments purchased at early stages of construction relative to the final prices of completed apartments. This will offset the decrease in profitability caused by the rise in construction costs. The publication provides indicative calculations of prices for apartments at different construction stages with the early-stage discount lowered to 10%. Importantly, the final post-completion price of apartments remains unchanged.

Anlytics on the topic

All analytics
11 September 2020
Digital management of commercial property

In this publication, Redmadrobot studies the current state of the commercial property market, analyzes main trends, and reviews technologies in the sector. The work can help adjust property management models and adapt business processes for present-day consumer needs.

16 July 2020
Prospects for Russian urban habitat development and its adaptation to COVID-19 consequences

The RANEPA analytical note assesses short-term and possible long-term consequences of the pandemic impact on spatial development trends, changes in citizens’ demands and requirements for the urban habitat, as well as recommendations for public policy improving in the field of urban development, taking into account COVID-19 lessons.

11 September 2020
Digitalization of residential real estate

Redmadrobot presents a review of digital technologies used in residential real estate. The publication studies the current state of the market for smart home systems and identifies barriers to this technology.

22 July 2019
National Infrastructure Projects Pipeline
The InfraONE analytical review National Infrastructure Projects Pipeline, prepared exclusively for XXIII St. Petersburg International Economic Forum (SPIEF’2019), analyzes federal and regional authorities’ plans of infrastructure facilities construction in the coming years, estimates the potential of projects’ launches and defines major obstacles for their implementation.