Participation as a co-investor in shared construction for many Russian citizens is the only opportunity to purchase an apartment, since at the first stages of construction such apartments are relatively cheap. But everyone has heard of cases of defrauded real estate investors, many of whom were left without money and without apartments. The risks associated with buying an apartment in a new building persist today.
At the end of December 2004, the federal law “On participation in the shared construction of apartment buildings and other real estate objects …” was adopted, which made it possible to reduce the number of loopholes used by unscrupulous developers to withdraw money from the population. Now, between an investor wishing to purchase an apartment in a new building, and the developer must conclude an agreement on equity participation, which comes into force only after its state registration with the Rosreestr authorities. This excludes the possibility of selling the same apartment to several equity holders, as it was before, but developers are still finding new tricks.
Those citizens who are going to buy an apartment in a building under construction should be aware that only such a form of transaction as an equity participation agreement is subject to registration, but, for example, a sale and purchase agreement is not. Some developers are trying to conclude exactly sales and purchase agreements, in which, moreover, an 18% value-added tax is added to the cost of an apartment, and also the property tax of the developer organization is included. This form of contract significantly increases the price of housing and does not guarantee the rights of the shareholder.
Another danger that may lie in wait for a shareholder is the participation of third parties in the transaction, when there are intermediaries between the developer and the shareholder. Such a scheme is fraught with the fact that one of the parties to the transaction may violate their obligations and terminate the contract, while the money for housing has already been paid. You may be left without an apartment, since the developer did not have an agreement concluded with you, therefore, he does not have the obligation to transfer it to you.
It is also dangerous to succumb to the developer's persuasion and indicate in the contract an amount less than what was actually paid, ostensibly to reduce tax deductions. In this case, for example, 70% of the real cost of the apartment is indicated in the contract, and you pay the remaining 30% of it in the form of insurance premiums. Such a scheme, upon termination of the contract and proceedings in court, guarantees you a return of only 70% of the money that was actually paid, if the termination of the contract is not included in the list of insured events stipulated by the contract.
When concluding an equity participation agreement, please note that the object of the agreement - an apartment in a new building - is described in as much detail as possible. The description, which indicates the floor, entrance, area of the apartment, the number of residential and non-residential premises, allows you to uniquely identify it and exclude the sale of housing of a smaller area or worse quality.