Page 9 - RusRPTJuly18

The political transition underway in Putin’s fourth term is also perceived by most of the elite as a zero-sum game, with any rise in status for one player meaning a setback for others. Siluanov’s ascendance will be seen as a “win” for the faction of liberal economists, such as Alexei Kudrin and Elvira Nabiullina, and a ‘loss’ for conservatives and statists.
Siluanov’s rising favour is therefore something of a mixed blessing. It will give him the authority to push through greater economic liberalisation, while also making him a target for intrigue. Equally, the blame for any political fallout from the policy, such as greater civil unrest, will be laid as his door. As former economic development minister Alexei Ulyukayev – currently serving an eight-year prison sentence – can attest, the stakes in Russian inter-elite fights can be exceedingly high.
2.3 Duma passes harset version of real estate law to protect consumers
The Russian Duma passed in the third and final reading amendments to the real estate laws (Federal Law 214) that imposes the strictest regime on real estate developers for the funding and sale of apartments to individuals.
From 1 July 2018, house builders will have to meet much tighter requirements to obtain attain construction permits. VTB Capital (VTBC) reports that the key changes include:
i)the requirement to establish a single legal entity for each project;
ii) the availability of a credit line for 40% of the future construction budget, or 10% of it covered by own funds;
iii) three years of experience;
iv) debt-free status;
v) no outstanding tax claims;
vi) one account for a single property that is used for payments between developers and sub constructors under the bank’s supervision; and
vii) a cap on SG&A costs at 10% of the construction budget (20% if IFRS accounts are prepared).
The law defines a developer’s beneficiary as an entity controlling more than 5% of voting rights and that bears joint responsibility for clients.
From 1 July 2019, the purchase of real estate is to be conducted via escrow accounts only, with clients depositing funds to a designated bank at no interest and the bank not allowed to charge a service fee. Developers will get the funds once the building has been commissioned to the state and the first client has registered ownership, VTBC reports.
“The introduction of escrow accounts and funds becoming available to developers only once a building has been completed imply significant changes in the funding schemes, and cash flow management, at developers. Currently, companies collect funds during the construction stage and allocate them for development purposes, thus financing the pipeline. The greater use of credit, or a company’s own funds, is likely to increase the cost of construction (at least the cost of funding it) while the terms of lending have yet to be announced. However, they could be favourable, given that there is to be no interest on escrow accounts,” VTBC said in a note.
“In our view, the version which has been passed is a harsh scenario that represents a further tightening after Urban Group recently failed to meet its
RUSSIA Country Report July 2018 www.intellinews.com