The House Curtain: Russians are being lured into "cottage" pyramids
The individual housing construction market is currently experiencing a real boom in Russia. But while some are moving into their own homes, others are forced to pay loans for years for a bare foundation. Izvestia has found out how scammers turn the dream of their home into endless financial bondage.
A typical scheme
Police have detained members of a criminal group who stole more than 200 million rubles from 24 investors in the construction of cottages in Moscow. The alleged scammers used a scheme that became almost standard a few years ago.
"A respectable real estate developer with a portfolio in the form of a cottage settlement built by her did not arouse suspicion of dishonesty. However, investments in construction for many clients eventually resulted in the loss of borrowed funds," Irina Volk, an official representative of the Russian Interior Ministry, said on her channel.
According to her, the attackers created a commercial organization that specialized in the construction of cottage settlements.
"They actively advertised their business, attracting citizens both as buyers of real estate and as investors. Both were asked to take out loans. At the same time, customers were promised repayment on monthly payments, cashback for investments, profit after the sale of the built houses and the complete closure of the loan," the official representative of the Ministry of Internal Affairs emphasized.
However, after receiving the loan funds, the defendants did not fulfill their obligations, disposing of the money at their discretion.
"It also turned out that some of the sites proposed for residential housing are located in disputed territories and lands designated for road construction," the Interior Ministry said.
That is, it would have been impossible to build a house or even register it as a property initially.
The defendants in the case are residents of the capital region, and they face criminal liability under Part 4 of Article 159 of the Criminal Code of the Russian Federation ("Fraud on an especially large scale"). The police also noted that one of the alleged organizers of the criminal business was taken into custody, while the second was put on the wanted list.
Only by a court verdict
Unfortunately, investors in such ghost projects are not protected by legislation protecting the rights of participants in shared-equity construction.
"The law does not protect an investor from his own indiscretion,— lawyer Ekaterina Krasnova explained to Izvestia. — Money transferred under an agreement that is not secured by collateral, a bank guarantee, or an escrow account is a commercial risk.
She clarified that if a deal is invalidated due to forged documents or misuse of land, funds can only be returned through a criminal case, but if fraudsters do not have assets, the victim will often be left with nothing.
— Check the ownership of the site, the permitted use and the availability of a project declaration — otherwise the law is powerless, — urged Krasnova.
Siberian Dreamhouse turned into debts
The capital's adventurers could borrow the "business plan" from several predecessors. One of the first high-profile scandals involving investment in residential housing was the Dreamhouse case in Novosibirsk. According to investigators, the head of the organization, Roman Bobrov, collected tens of millions of rubles from some people, promising housing, and promising multimillion—dollar profits from investments from others.
In fact, it was a financial pyramid scheme — in the cottage village of Alaska, the construction of 65 houses was suspended due to the actions of the developer. The prosecutor of the Novosibirsk region, Alexander Buchman, commenting on the case, stressed that the victims, many of whom have taken out mortgages, are in an extremely difficult situation, and their disputes are, in fact, civil law, and the state cannot always help them.
City-Stroy and the billion dollar scam
An even bigger story unfolded in the Rostov region, where almost 300 people were injured by the actions of the City-Stroy construction company. According to the investigation, from July 2023 to November 2024, the company collected more than 1 billion rubles from residents of several regions under the pretext of building individual houses. The examination estimated the damage at 1.15 billion rubles, and about 80% of the houses remained at the foundation stage.
The criminal group was headed by a former bank employee. Three of the accused are currently in custody, and one is on the international wanted list. It is noteworthy that in this criminal case, which has hundreds of episodes, more and more victims continue to be identified — in January 2026 alone, their number increased by another 10 people.
Victims all over the country
The problem of fraud in the field of residential housing comes to the fore among the frauds in the purchase of housing and remains one of the most socially significant. As Izvestia previously reported, over the past five years, defrauded Russians have lost at least 30 billion rubles in this area. According to the Ministry of Construction, the number of victims of unscrupulous contractors is close to 11 thousand people. State Duma deputy Alexander Yakubovsky said at the St. Petersburg International Economic Forum that, according to his data, the number of deceived citizens in the field of residential housing has already exceeded 20 thousand.
To normalize the situation in the residential housing segment, it is necessary to introduce clearer legal regulation, Yakubovsky believes. In his opinion, the first thing to do is to legislate a standard contract in electronic form, where all the conditions will be spelled out in as much detail as possible. This approach, the parliamentarian is sure, will be able to minimize conflict situations between the contractor and the customer.
The second step, according to the deputy, should be the creation of a register of bona fide contractors in the field of residential housing. The third thing that is needed is the emergence of a self—regulatory organization (SRO) that will grant work permits and be responsible for the actions of contractors.
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