The Kremlin moves to tackle Russia’s ‘defrauded coinvestor’ problem sooner than planned

To fight the spread of “defrauded coinvestors,” Russian officials are considering a complete ban on the sale of unfinished housing. Sources told the newspaper Vedomosti that the new policy could take effect by 2020, with the imposition of some new restrictions as soon as the end of this year.

New regulations on shared-equity construction in Russia are due to enter force on July 1, 2019, whereby people buying homes in unfinished apartment complexes will transfer the money to escrow accounts with banks. Developers will only be able to collect this money after delivering the home to the buyer.

Market experts say unfinished apartments can be 30 to 40 percent cheaper, and only state companies currently have the resources and credit access to build housing complexes entirely on their own.

For years, the Russian government has been trying to solve the problem of “defrauded coinvestors”: people who paid money for new apartments, but were never able to move in because construction on these homes never finished. According to various estimates, there are somewhere between 40,000 and more than 100,000 “defrauded co-investors” in the country today. In November 2017, Vladimir Putin ordered the government to develop a plan that would enable the country to abandon shared-equity construction projects entirely within three years.