LSR Group Completed its First Transaction Via Escrow Account
10 October 2019
LSR Group, one of the leading real estate developers and building materials producers in Russia, transitioned to a new financing scheme for its residential development projects—the company completed its first transaction via escrow account, by selling a two-room apartment with an area of 56 sq. m in a building under construction in the Rassvetnyy residential complex in Yekaterinburg.
"Most of the LSR Group’s projects are still sold under the equity participation agreement scheme familiar to buyers," said Vladimir Kritskiy, CEO of LSR. Real Estate – Ural. "However, our company does not stand still and is constantly expanding its product offering. In September, we launched sales of another building in the popular Rassvetnyy residential complex and here we began to use the new financing scheme. Naturally, there were difficulties, because this is a new area of work for banks and for us. Nevertheless, we are a systemically important, reliable company with vast experience in real esate development and thus can adapt to any legislative changes. We have already made a good start!"
It should be noted that this new financing scheme brings no fundamental changes for our clients. If the transaction is carried out without the client taking out a mortgage loan to purchase the property, the client can receive all the documents and submit them to the bank once the equity participation agreement is signed with the developer and registered with the Federal Service for State Registration, Cadaster, and Cartography (Rosreestr), the same way as before. However, the money is now transferred not to the LSR Group's current account, but to a special escrow account in an accredited bank, which guarantees the safety of funds. If the buyer purchases the property while taking out a mortgage loan, the bank that granted the mortgage loan opens a current account. An escrow account is then opened in the bank with which the developer cooperates on project financing. The loan agreement is then executed, the transaction is completed, and the registration is carried out. Finally, the lending bank transfers the funds to the escrow account using the details provided.
It should be noted that the legislative changes came into force on July 1 of this year. Their essance is in the logistics of financial flows: under the new scheme, the clients' funds become available to the developer only after the building has been completed. Simply stated, we can say that escrow accounts serve as safe deposit boxes for clients.
For more information please contact:
Director of Investor Relations
LSR Group Press Service