Provisioning for loans issued for apartment construction projects: new approach to risk assessment
The Bank of Russia will change banks’ approach to creating provisions for loans issued for the construction of apartment buildings, making it more risk-sensitive. The new approach will apply to loans issued at any stage of project implementation – from acquiring rights to a land plot and approving housing development parameters to selling apartments in a finished building.
As part of risk assessment, banks will take into account the stages of a project’s life cycle, while focusing on compliance with the deadlines for approving urban planning and project documentation, construction, sales and debt repayment, as well as instalment plans provided by developers to shared construction participants.
Therefore, the new risk assessment system will enable a comprehensive consideration of the factors determining the success of a construction project and the repayment of a project loan.
The updated approach is scheduled to become effective on 1 October 2027 and will be mandatory with respect to loan tranches issued for projects whose construction has not yet begun as well as loans that will be issued after the related ordinance comes into force.