The State Duma Committee on Construction and Housing and Utilities asked the Prosecutor General of the Russian Federation to investigate alleged fraud by developers involving escrow accounts, according to Izvestia.
A letter on this matter was sent to the Prosecutor General’s Office by State Duma deputy Alexander Yakubovsky, who leads the United Russia working group on protecting the rights of homeowners. The document claims that a developer sold some apartments to affiliated companies at a price below market value and then sold them to individuals at a higher price. In this scheme, the money paid by the affiliates remains tied up in escrow accounts while the developer retains the remaining funds. If the company later goes bankrupt, the consumer could receive less money than expected.
To curb fraud, Yakubovsky proposed that the prosecutor inspect the contractor if 10 percent of the apartments in a new building are being sold at least 20 percent below the market price. This threshold, he argued, could signal an artificial discount designed to shift funds toward controlled channels rather than true market transactions.
Experts point to a combination of factors behind rising housing prices in Russia, including the shift to escrow account financing as a contributing element. The escrow system was designed to protect buyers by holding their funds until construction is completed, while banks finance construction through loans.
Effective July 1, 2019, new rules for financing joint housing projects in Russia were introduced. These rules require that funds deposited for housing purchases be held in escrow accounts and released only after developers deliver completed housing to buyers. Banks are restricted to transferring funds from investors only when the developer has handed over the completed units. This framework aims to reduce the risk of misused funds and increase transparency for buyers.