Escrow accounts as a means for stakeholders to protect their funds invested in housing construction projects

Abstract

Subject. Shared-equity investment in the primary housing sector is one of the most popular vehicles to finance housing construction projects. Objectives. We identify and analyze positive and negative aspects for co-investors of housing development projects in using escrow accounts. The article analyzed issues and possible solutions resulting from the innovative interaction of parties to housing construction projects in Russia. Methods. Studying the use of escrow accounts as a mean to make the finance of housing construction projects legally secure, we apply methods of logic, statistical and comparative analysis. Results. The article indicates positive and negative aspects of using escrow accounts and enlists risks associated with the purchase of housing when its construction is in progress. We describe how individual co-investors can protect their invested funds. We suggest the escrow account mechanism should be more thoroughly elaborated to secure the finance of housing construction projects. Conclusions and Relevance. The facility is novel for Russia. People are very wary of such innovations, especially in the housing segment. Would-be buyers should have clearer information about changes in the housing purchase procedure. Co-investors should be explained what requirements they need to meet when choosing a lending institutions and a developer, documentation on a shared-equity construction. It is crucial to communicate all details and technicalities about negative aspects of the financial facility.