Conditional settlement: installments from developers may disappear
Installments from developers may disappear when mortgage rates fall to the level of 12-14%, as they are unprofitable for developers, said the head of the analytical center DOM.RF Mikhail Goldberg during the online discussion ERZ. They can be used by developers as a last resort when market mortgage rates are high, mainly in projects with low sales. What volume of sales take installments, how much approximately percent they increase the cost of housing and whether we should expect their disappearance this year, "Izvestia" examined.
Limits of appreciation
Installments from developers are an alternative tool for financing the purchase of housing, especially relevant at high mortgage rates, says Valery Tumin, director of markets in Russia and the CIS fam Properties.
There is no exact data on the share of installment payments in the total volume of housing sales, as developers rarely disclose such information. However, taking into account that installment payments are used mainly in projects with low sales and high mortgage rates, we can assume that their share in the total sales volume is relatively small.
- Providing installments usually leads to an increase in the cost of housing, as developers compensate for their financial risks and costs associated with delayed payments. The size of this increase in price may be comparable to the current mortgage rates, that is, within 21-24%, - said "Izvestia" expert.
Reduction of mortgage rates to the level of 12-14%, according to him, may make installments less attractive for developers, as they violate the filling of escrow accounts and increase the cost of project financing.
Depending on the developer, installment payments may account for up to 20% of total sales, the analytical center of DOM.RF told Izvestia.
The possibility of disappearance
According to various estimates, the share of installments in the real estate market may be about 20-40%, Dmitry Puchkarev, stock market expert at BKS Investment World, told Izvestia. The instrument became more in demand after the abolition of preferential mortgages, allowing to maintain demand.
- We should not expect the instrument to disappear in 2025. On the contrary, the volume of installments may reach record levels, reflecting the continued low availability of mortgages. The market situation may change if interest rates in the economy fall - in such a situation, mortgages will become more affordable for the population, and the need for installments will decrease.
In 2023, the share of installments was about 5% of total sales, Anton Trenin, an expert of the corporate ratings group of ACRA, told Izvestia. In the first half of 2024, this share increased to 10-20%. However, in the second half of 2024, after the abolition of preferential mortgages and several increases in the key rate, the percentage of transactions in installments increased sharply and reached 30-40%.
It should be noted that the situation with installments varies depending on the class of projects and their degree of readiness. In projects with closer completion dates the share of installments remains at the level of 20-30%, while in new projects up to 50% of transactions can be carried out through installments.
- Developers offer installments both without and with an increase in the cost per square meter, which averages 10-15% depending on the developer. The terms of installments usually vary from one to two years depending on the date of delivery of the object, but can be longer. At the same time, the larger the down payment, the more favorable terms developers can offer. In most cases, the minimum down payment is 20-30%, and the best conditions are available with a contribution of 50% of the cost of the object.
The popularity of installment payments may reach its peak in 2025, due to the very high level of market rates, which now reach 28-29%, the limited number of borrowers eligible for targeted preferential programs, and the reduction of other sales schemes for developers after the introduction of the mortgage standard at the beginning of the year.
Forced measure
Installments are a forced and temporary measure against the background of a significant rise in the cost of mortgage borrowings in the past year, agreed Roman Andreev, Director of Corporate Ratings at Expert RA Agency. Installments should not always lead to an increase in the price of an apartment, developers decide to index the price of the sold lot based on the current needs to fulfill the sales plan and fill escrow accounts.
- The share of sales taking into account installments varies from developer to developer; a few years ago this product did not exist at all, but now its share can reach 30-35% in some developers. Significant drop in the key rate this year, apparently, we should not expect, which means that the mortgage at market rates will not return quickly and installments will be with us this year, - said "Izvestia" expert.
Sale in installments - an extreme measure, developers go for it, to as if to fix the sale of the apartment, added in conversation with "Izvestia" expert of the Presidential Academy Ksenia Balandina. In most cases, installments are given for objects that are in the initial or middle stage of realization, when the lowest level of sales is observed. As a rule, if the installment is granted before the date of commissioning of the object, the purchase price does not increase.
- If the installment is extended to the period after the commissioning of the house - it is already a special financial product. Here we can talk about the increase in cost and additional measures to insure the transaction, because, having commissioned the house, according to the law, the developer is obliged to give the keys and the apartment to the shareholder, and if it is not fully paid for, it is a risk that is difficult to regulate from the legal point of view, - she said. - Until the house is put into operation, a participant in shared construction can pay in installments, and when there is a small period left, he can sign a mortgage loan agreement with a bank and hope that during the year the mortgage rate will somehow decrease. The problem is that mortgages are very expensive right now. It is out of reach for most borrowers.
Marketing tricks
The housing market is a self-organizing system and adapts to new conditions rather quickly, said Natalia Kazantseva, associate professor of the Department of Economic Policy and Economic Measurements at the State University of Management. And the conditions after the abolition of preferential mortgages and a sharp increase in the key rate were not easy for both consumers and developers.
- Developers, who had accumulated a sufficient fund of ready housing, in the prevailing conditions took on the functions of a kind of lenders and offered various discounts and bonuses, thereby somewhat energizing the market. These were not necessarily monetary preferences, sometimes the benefits were in the form of individual works or services," the expert told Izvestia.
But still, in these, in fact, marketing tricks for the uninitiated consumer always lurked the danger of buying an apartment at an inflated price, she noted.
- Appeared systems of sale with cashback, installments, buying an apartment for one ruble, trench mortgage and others were not quite profitable for developers, unless we were talking about housing in areas with bad location, with poor infrastructure, structural imperfection of buildings and other factors, - she stressed. - After all, most developers work on the system of project financing with the use of escrow accounts. And when applying, for example, installment payments, their filling will be slower.
Therefore, the Central Bank does not approve of these schemes and urges consumers to take a conscious approach when buying an apartment with such conditions. For some time this small segment of quasi-mortgage schemes will exist on the market, but with the gradual reduction of the key rate will be nullified. And the purchase of housing on credit will be carried out and considered by all parties to the transaction as a normal market instrument.
