New financial instrument to improve housing conditions
Individuals will be able to conclude a housing savings agreement with banks. This new financial instrument will enable people to save funds in a deposit and then use them to improve their housing conditions, including to make a mortgage down payment. The relevant law has been adopted by the State Duma of the Russian Federation. The law becomes effective on 1 January 2027.
The deposit under a housing savings agreement will be opened for at least three years and allow top-ups at any time. A long period of savings will enable credit institutions to assess borrowers’ solvency more accurately.
A bank is obliged to open such a deposit and pay interest thereon (the interest rate is to be stipulated by the agreement). Based on the depositor’s order, the funds accumulated, including interest accrued, will be used to purchase housing or finance the depositor’s participation in shared or single-family home construction.
After the expiry of the housing savings agreement, the depositor, provided that he/she meets the bank’s eligibility criteria as of that date, will be able to receive a loan for improving housing conditions in an amount equal to the shortfall required to buy the real estate.
Furthermore, the depositor will be entitled to transfer the savings to another bank as a mortgage down payment or repayments on his/her outstanding debt.
The depositor will be allowed to cancel such an agreement without losing interest accrued but no earlier than 18 months from the commencement date. Additionally, the depositor will be able to receive the funds, including interest accrued, if he/she cancels the agreement before its expiry but no earlier than 12 months from the commencement date and uses the savings to improve his/her housing conditions as well as if the bank refuses to issue a loan upon expiry of the savings agreement. In all other cases, if the depositor cancels the agreement before the expiry but does not use the funds for improving his/her housing conditions, interest on the deposit will be paid at an interest rate set for demand deposits (unless a higher interest rate is stipulated by the agreement).
Funds in such accounts will be protected by the deposit insurance system in an amount of up to ₽10 million in each bank.