The Central Bank of Russia is concerned about the increased share of installments from developers, said the head of the Bank of Russia Elvira Nabiullina during a press conference on Friday, February 14.
According to her, the share of installments from developers in sales transactions has increased from 20% to 40%.
“We are indeed concerned because the widespread use of these schemes creates risks for both buyers and developers. For buyers, what are these risks? A person signs an installment plan, which is typically very limited – on average, the installment plan currently runs for a year or two, from what we see. The installment plan is arranged under the promise that mortgage rates will decrease later and the person will be able to apply for a mortgage loan. Firstly, this mortgage loan has not been guaranteed to him yet, and it will be important for the person not to get into a difficult situation.
Secondly, from the perspective of the citizen’s debt burden: after all, an installment plan is also a debt, even if it is interest-free. But you will have to pay certain amounts later in time. This is debt. And information about this debt is not reported to credit bureaus. The person goes to the bank for a loan, and the data that he has a debt and whether he can further service this debt – the bank cannot draw conclusions. This could lead to excessive indebtedness of the citizen. In banks, we regulate risks of preventing excessive indebtedness through debt burden indicators. Here, this debt burden is hardly taken into account,” Nabiullina pointed out.
If we talk about apartment buyers. But difficulties may also arise for the developers themselves, the head of the Central Bank noted.
“If a person buys housing in installments, then the escrow accounts are not filled, and developers may lose the essentially preferential financing that they currently receive for projects. Because filling the escrow accounts leads to developers obtaining loans at fairly low rates. This poses a risk for developers,” she said.
According to the head of the Central Bank, it is important that “installments for buyers are very transparent, without hidden surcharges and fees, so that people understand the potential consequences. Therefore, we are concerned, and we will see what further steps to take.”