Russian Federation: Real Estate Finance In Russia

Last Updated: 28 April 2009
Article by Yury Tuktarov

Article by Yury Tuktarov, Alexander Nadrnitov and Dmitry Sobolev


During the last decade, Russia has had great success at attracting investment into its domestic real estate market. It is estimated that in excess of us $11 billion has been invested in the Russian real estate sector from 2006 through to the end of HI, 2008. Despite the global credit crisis witnessed in 2008 and continuing at the time of writing, investments into Russian real estate continue to grow with investments totalling around US $4.5 billion in HI, 2008, which represents a 246% increase compared to HI, 20071. However, the credit crisis has also impacted real estate financing in Russia (as it has done elsewhere across the globe) with lenders reducing their exposure to the real estate sector. As a result, it has become more difficult and expensive to attract real estate financing and the market participants have had to be more creative in raising required debt and funds. In addition, the credit crisis has facilitated the process of consolidation of real estate market players. Weak companies have been forced to sell either their equity stakes or their real estate holdings. Despite this development, some real estate companies are still managing to raise money by stock issuances2, and foreign investments real estate funds remain active in the Russian market3.

This Chapter will consider the typical issues and challenges connected with the financing and development of real estate in Russia, before considering real estate financing structures and investment funds active in the real estate lending and capital markets.


Real estate funding in Russia is usually split into stages. The most difficult part of a real estate financing is to attract initial funding for a project to buy a land plot, develop project documentation and arrange for the connection of utilities lines. After obtaining a permit for construction, it is much easier to attract money from potential investors. Banks typically provide loans of up to 70% of the cost of a project. The rest is usually provided by way of equity (or loans from companies affiliated with the developer) or by sales of stakes in projects or holding companies.

Real estate title

Since 1998, rights to real estate in Russia have been subject to registration in the Unified State Register of Rights to Immovable Property and Transactions Therewith (the 'Register'). The Register is maintained by a state authority - the RF Federal Registration Service (the 'Registration Service'), Following the sale of real estate, title passes to the purchaser upon (i) the conclusion of a sale agreement; (ii) the signing of the conveyance deed by.the seller and the purchaser; and (iii) registration of the title conveyance with the Register. Under Russian law, title conveyance must be registered within one month from the day of filing documents with the Registration Service although registration, in certain cases, may be postponed for up to three additional months.

Following the conclusion of the sale agreement and acquisition of the real estate, a buyer is faced with several risks. Such risks include the risk that the seller may refuse to proceed with the conveyance procedure (eg signing the conveyance deed and/or forwarding the application for title registration) or that the seller may make a sale agreement with another party, who takes priority if it succeeds in filing the application for title registration with the Register prior to the buyer. Thus, there is an 'uncertain' period from the conclusion of the relevant sale agreement up to filing the application for title registration.

Comfort to a lender

When acquiring real estate, the core issue for a lender is whether evidence can be provided that the owner has title to the property. At first, the Register provides any person, upon application, information identifying the real estate in an extract. Such Register extract will contain information about all encumbrances on the real estate (including any mortgages) and a lender can generally rely on such extract.

Furthermore, although Russian law does not provide for mandatory state registration of ongoing or pending real estate litigation, such information may be submitted to the Registration Service by any related party and registered in the Register. However, whilst state registration is the only; evidence of the existence of a registered right, it does not itself constitute title to immovable property and may be challenged in court. Any successful challenge will result in adverse consequences to the borrower's title to sum asset. Consequently, it is common to instruct lawyers to conduct legal due diligence to check the title in addition to relying on an extract from the Register.


1 Profitable Russia, Vedomosti newspaper, No 132 of 18 July 2008.

2 As an illustration, Open Investments sold circa US $500 million shares in June 2008, though most of the shares were reportedly sold amongst its existing shareholders.

3 German fund KanAtn Grund purchased from Otkryrie-Real Estate the office part of the unfinished Paveletskaya complex for US $900 million in March 2008. British fund RP Capital Group purchased the Silver City business centre for US $350 million in April 2008.

Click here to read the article in full.

Originally published as the Russian chapter of a publication by LexisNexis with support of K&L Gates LLP

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions