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COALCO Supports Establishment of State Compensation Fund

"The State Compensation Fund will become a major factor of reliability of investments in housing development"

On March 16, 2017, within the framework of the 19th RRFF Russian Forum of Real Estate Market Leaders – "Living with New Federal Law No. 214. The Rights of Equity Holders and Developers’ Capacities" a round table attended by representatives of the Ministry of Construction of the Moscow Region, developers’ companies (the Coalco Group of Companies, MR Group and FSK Leader) and building associations (NOSTROI, NOZA and the Association of Developers of the Moscow Region) was held.

The new statutory wording of the law was positively assessed by Yuri Kovalev, Head of the Department of Supervision of Participation in Shared Construction of the Ministry of Construction of the Moscow Region. Yuri Kovalev stressed that the mechanism of insurance and the deposit refund system failed to protect construction equity holders, while in new conditions the government official put his hope on formation of the state compensation fund. Yuri Kovalev noted that it was premature to speak about any results and it would be clear only by the end of 2017 what adjustments should be made. "The best is the enemy of the good", said Yuri Kovalev.

A detailed report was delivered by Mikhail Viktorov, First Deputy General Director of the Coalco Group of Companies and RANEPA professor, who vividly demonstrated the results of ten years of work on existing Federal Law No. 214. The new statutory wording states in detail the expanded requirements to the developer’s project declaration. The complete information openness will permit customers to evaluate their own risks when entering into the agreement on participation in shared construction (APSC). Also, state registration of APSC with Rosreestr (APSC registration is banned without confirmation of funds transferred to the compensation fund under each new APSC concluded) is an important novelty, too.

Participants attached a particular interest to the approach how the compensation fund should be formed. Mikhail Viktorov carried out the analysis and assumed that by 2019 the volume of total deductions (1% of the APSC value) might amount to about RUR 50bn, while possible liabilities, to RUR 40bn. The speaker proposed to preserve a "flat" scale (1%) of deductions during the first year and spoke of the need to adopt later a differentiated approach in accordance with specially approved methods, but not to permit a substantial increase in deductions, while in some cases a decrease to 0.75% could be allowed. However, in the existing situation there is an issue of assigning ratings to developers (reliable /unreliable|) which remains outstanding so far.

"With work properly adjusted, the state compensation fund will become a major factor ensuring reliability and stability of investments in housing development, including by means of the agreement on individuals’ participation in shared construction", summed up M. Viktorov.



COALCO Supports Establishment of State Compensation Fund