Everyone get out of the shadows: can the registry of realtors whitewash the real estate market

The State Duma Committee on Construction and Housing and Communal Services of the Russian Federation, together with the Union of Employers of the Real Estate Market, have developed a bill designed to regulate the activities of realtors. The document was included in the second package of measures proposed by the Ministry of Finance aimed at combating cyber and telephone fraud, but the government left a negative review about the bill and sent it for revision. Read more about the pros and cons of the proposed measures and how they can affect the real estate services market in the Izvestia article.

How they want to regulate

In an explanatory note to the bill, the authors, including Svetlana Razvorotneva, deputy head of the Duma Committee on Construction and Housing, note that currently the uncontrolled market of real estate services poses threats to both citizens and the state. According to them, anyone can identify themselves as a realtor and begin to accompany transactions, but the level of their competence is unknown to the client. The authors also note that a significant part of the market is in a gray area, and many individuals who work as realtors do not pay taxes. The expected tax effect from the regulation of this market will amount to more than 10 billion rubles per year, the note says.

To solve this problem, it is proposed to create a unified register of realtors — only individuals and companies included in it will be able to accompany real estate transactions. Legal entities and sole proprietors will be able to enter the register: citizens registered as self-employed, but who have not concluded an employment contract or a GPH agreement with a real estate agency, should not engage in this activity.

In addition, a prerequisite for inclusion in the register is proposed to establish the absence of criminal convictions for serious crimes and regular assessment of professional training. In particular, realtors will have to take an appropriate exam every five years. The purpose of such regulation, as the authors themselves note, is to combat fraud, whitewash the real estate market and collect taxes.

What is it for?

According to the authors of the bill, the professional community itself declares the need for market regulation, which sees the vulnerability of realtors to fraudsters, unscrupulous clients and colleagues. This has led to the fact that those realtors who regularly increase their professional training and pay taxes find themselves in a losing position in relation to those who do not. And in conditions of legal uncertainty, a favorable environment is being created for fraudsters, from whose actions both bona fide realtors and ordinary citizens suffer, Svetlana Razvorotneva explains.

In this regard, the draft law proposes to prescribe the legal basis of real estate activity, its definition as such, as well as the powers of the government and the regions to regulate and control real estate transactions.

— There are several reasons why it makes sense to introduce regulation of real estate activity. The first is that currently the threshold for entry into the profession is zero, and almost anyone can become a realtor. The bill is necessary for agents who are specialists in the real estate market to have some kind of knowledge," Andrey Bannikov, president of the Guild of Realtors of Moscow, told Izvestia.

Does the market need to be whitewashed

According to a study by the Gaidar Institute "Real Estate activity in Russia: problems in judicial practice and their solutions based on evidence–based economics," in Russia, the level of customer satisfaction with realtor services is quite high - it is 3.6 out of 4 points. At the same time, nine out of ten clients would not change their decision to involve an agent in the transaction. This suggests that the problem of poor quality of real estate services is not fixed.

There are about 550,000 realtors on the market, of which 76% are in private practice (43% of them are self-employed) and 33% work in real estate agencies, and some combine these activities. The volume of the "white market" of agency services, in terms of taxes, reaches 80%. In 98% of cases, the relationship is fixed in the contract format in order to minimize the risks for the client when receiving the service, and for the realtor — the commission fee.

However, the explanatory note to the bill provides other figures. Although it says that currently about 30 thousand legal entities and from 200 to 400 thousand individual realtors (sole proprietors and self-employed) work in the real estate market, which roughly corresponds to the conclusions of the study, the draft law notes that the level of the gray area of taxation in the secondary market reaches 80%.

At the same time, Svetlana Razvorotneva herself in 2024, in response to a request to comment on the words of deputy Vladimir Koshelev about 70% of the real estate services market operating in the shadow zone, stated that she did not know where he got such statistics, "I do not have such statistics, I cannot even understand where it can be taken from."

A study by the Gaidar Institute showed that the proposed measures may be particularly sensitive for microenterprises (96% of the market), which will lead to a reduction in the white segment from 21 to 36%, depending on the set of proposed measures, which is equivalent to losses from 74 to 129 billion rubles, as well as an increase in the cost of real estate services. Because of this, some citizens, in an effort to save money, may refuse the services of an intermediary and act independently, which increases the risk of mistakes and controversial transactions.

— As can be seen from the modeling of the market based on the feedback of the realtors themselves, any mandatory mechanisms, accompanied by additional costs, lead to a compression of the market both in monetary terms and "in persons" — that is, the withdrawal of activity into the shadows. If we test similar mechanisms, but in a mild form, then the effect on the market economy becomes positive. Thus, a voluntary registry can stimulate market development by 12%," said Laura Nakoryakova, partner at the Center for Evidence—based Economics at the Gaidar Institute for Economic Policy.

Although some representatives of the professional community advocate the need for regulation, there are other opinions. Thus, Vladimir Kaplinsky, vice-president of the Russian Guild of Realtors, notes that the proposed measures will not save from fraudsters and other criminals.

— The idea that an industry law with mandatory registration of realtors in registries will protect citizens from fraudsters is nothing more than a myth. The criminal will not follow the rules. And even if it is registered, it does not guarantee good faith. On the contrary, the presence of an entry in the registry can lull the vigilance of citizens, creating a false sense of security," he said.

The expert added that the existence of registries in such areas as medicine, law and construction does not prevent the commission of crimes.

There is also a growing fear among realtors that due to the additional costs (for inclusion in the register, preparation for exams, insurance), the consequences of the proposed measures will fall on the shoulders of clients and lead to an increase in housing prices.

The government also saw the need to finalize the bill and left a negative review about it. In addition, the Cabinet of Ministers noted that the realtor's activities are regulated in sufficient detail by the norms of civil legislation.