Features of receiving a deduction when buying an apartment in installments

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Published: 12/19/2017

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Russian legislation allows the possibility of purchasing an apartment in installments from an individual. In this case, the property will be pledged until the debt to the seller is fully repaid.

• Buying an apartment in installments: definition and features Is installment profitable?

Often, buyers do not have enough money to purchase an apartment, and the seller does not want to waste time searching for another buyer. In this case, the seller may offer to conclude a purchase and sale agreement with installment payment.

Such transactions have not yet become widespread in the real estate market due to insufficient awareness of them. Many Russians mistakenly believe that only a bank issuing a mortgage loan can act as a lender.

Buying an apartment in installments: definition and features

The features of the purchase and sale of an apartment with installments are as follows:

1. The seller acts as a lender.
2. The buyer pays for the apartment not at once, but in installments.

For the buyer, this option of purchasing an apartment has many advantages: he does not need to take out a mortgage for the apartment and bear the costs associated with this procedure.

In particular, collect documents to confirm solvency, look for guarantors and additional security, and most importantly, overpay interest for the use of borrowed funds.

Not all buyers are able to obtain a mortgage loan even at higher rates.

Buyers may be attracted to an installment plan deal if they expect a large amount to arrive in the near future: for example, an annual bonus, proceeds from the sale of a car or a country house, etc. As part of such a deal, they do not have to wait until the entire amount is accumulated; they can deposit funds for real estate in stages, without fear that the apartment you like will be sold to someone else.

It is also becoming increasingly difficult for sellers to sell apartments due to declining demand. Therefore, offering a flexible payment scheme can attract buyers and sell real estate faster.

Sometimes sellers agree to pay in installments out of fear that the apartment may become cheaper in the near future.

Is installment beneficial?

We can say that such an installment deal is very beneficial for the buyer, while for the seller it has many risks. Therefore, the seller is primarily interested in the competent conduct of the transaction and the proper execution of the installment contract. Indeed, if the buyer fails to fulfill his obligations to make payments for the apartment, such an agreement will become an evidence base in court.

After concluding a deal with installments, the buyer has the right to live in the apartment he purchased.

At the same time, certain restrictions are established on the disposal of real estate: he will not be able to resell it until he has made all payments.

The apartment will be pledged to the seller until the debt is fully repaid, which creates certain guarantees for the former owner. In accordance with Russian law, such a transaction is called a mortgage transaction, although there will be no bank involved.

An apartment can be sold in installments on both the secondary and primary real estate markets. In the first case, the subjects of contractual relations are an individual, in the second - the developer and the buyer. But usually the installment plan is provided by the developer until the object is put into operation (for the construction period).

Therefore, in this case, an agreement for the purchase of an apartment in installments is not concluded (since the apartment itself does not legally exist yet), but an agreement for shared construction.

Which developers have such programs?

Not all construction companies are ready to offer installment payment options for their customers. This service is offered by the following developers:

• group "Etalon";
• Samolet Development;
• GC "PIK";
• APSIS GLOBE;
• Sezar Group;
• Optima Development;
• INGRAD;
• GC "Pioneer";
• "Troika Red"

Important to know: Construction companies may not offer installment plans for all new buildings, but only for certain residential complexes.

"Reference"

You can buy an apartment in installments in Moscow from the Etalon group without interest until the completion of construction of the residential complex.

Today, under this proposal, apartments are sold in the following residential complexes:

• "Silver Fountain";
• "Etalon City";
• "Normandy";
• "Summer garden";
• "Emerald Hills"

Procedure for registering an apartment in installments

Buying an apartment in installments is carried out as usual; there are no special differences from the standard transaction. It involves going through the following steps:

1. The parties will agree on the basic terms of the upcoming transaction.
2. A preliminary purchase and sale agreement is signed and an advance payment or deposit is made.
3. The seller begins to collect the documents necessary to conclude the transaction.
4. The parties sign the main purchase and sale agreement, which includes additional conditions.
5. The seller and buyer will re-register property rights through Rosreestr or through the MFC. At the same time, in the application for the alienation of property rights in favor of the buyer, an indication is made of the imposition of an encumbrance on the apartment in favor of the seller.
6. Submitted documents are verified by Rosreestr within 7 working days (9 days when submitted through the MFC).
7. On the appointed day, the buyer receives an extract from the Unified State Register of Real Estate, which has replaced the certificate of ownership since 2021. It states the encumbrance on the apartment in the form of collateral. This limits the buyer’s rights to dispose of the apartment: he does not have the right to sell or give it away without the consent of the mortgagee.
8. After the buyer makes the last payment, the seller contacts Rosreestr to remove the encumbrance from the apartment.

If the buyer stops paying his obligations, the seller will have to go to court.

It is worth noting that judicial practice in such cases has not yet been developed: the courts may oblige the buyer to pay the debt for an unlimited time, which is unfavorable for the seller, or simply issue a decree on a one-time repayment of the debt, which the buyer will not be able to fulfill.

Registration of the contract

Therefore, a very important aspect in such transactions is the competent execution of the apartment purchase and sale agreement, which details the payment procedure. The purchase and sale agreement must comply with the requirements of the Civil Code.

In particular, Art. 454, which indicates that one party, as part of such a transaction, transfers property, and the second is obliged to pay a certain amount for it, agreed upon by the parties. Article 488 stipulates the buyer’s obligation to make payment within the period specified in the installment agreement. If it does not fulfill the specified condition:

• then must return the unpaid property;
• pay the cost of the property, as well as penalties accrued on the debt.

An agreement for the purchase and sale of an apartment in installments is drawn up according to general rules and must necessarily contain the following points:

• parties to the transaction: full names of the seller and buyer, their contacts and passport details;
• subject of the transaction: apartment, its area, floor, address, cadastral number;
• grounds for disposal of the apartment by the seller (details of title and title documents);
• transaction amount: contract price of the apartment;
• rights and obligations of the parties.

The features of this document are related to the specifics of the transaction.

The apartment will be held as collateral by the seller until the full amount is paid for it by the buyer with reference to Articles 488 and 489 of the Civil Code.

The agreement must contain a payment schedule, namely:

• total cost of the apartment;
• the amount of the first payment (down payment) in percentage and numerical terms;
• quantity and size of subsequent financial tranches with specific dates,
• procedure for making payments;
• deadlines for full repayment of debt;
• penalties for late payment (for example, 0.3% of the amount due for each day of delay);
• procedure for terminating a transaction if payments are not received (for example, going to court with the seller if money is not received for 30 days or more).

In order to protect the seller, it is worth including a clause stating that the seller removes the encumbrance from the apartment and the buyer becomes its full owner only after making the last payment.

If the above rules are observed, the purchase and sale agreement will be registered as a mortgage, which will remove some of the risks from the seller.

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Responsibility for late payments

The contract may provide for liability in the form of fines and penalties for the buyer in case of late payments. Based on Art. 332 of the Civil Code of the Russian Federation, the seller has the right to recover a legal penalty from the buyer, even if it is not specified in the contract - 1/300 of the refinancing rate of the Central Bank of the Russian Federation for each day of delay.

Based on clause 2 of Art. 489 of the Civil Code of the Russian Federation, in case of violation of obligations, the seller has the right to demand the return of real estate, refusing to execute the contract.

An exception is the situation when the buyer has already paid half the cost of the apartment: in this case it is not returned, but to resolve the issue you will have to go to court.

List of required documents for installment plan

A purchase and sale transaction involves the re-registration of ownership rights from the seller to the buyer in Rosreestr. To conclude a transaction, it is necessary to collect a certain set of documents, which includes:

1. Technical passport of the apartment. It is issued at the BTI within a month and is valid for a year. The cost of a passport is 1.5-2.3 thousand rubles.
2. An extract from the house register containing information about all registered/discharged persons. It can be done at the passport office at the location of the property. It is preferable that at the time of entering into a transaction there are no registered persons in the apartment.
3. A copy of the financial and personal account confirming the absence of debt for utility services. It must be obtained from the EIRC.
4. An extract from the Unified State Register of Real Estate confirming the legal status of the owner and the absence of encumbrances in the form of pledge and arrest.
5. Seller’s title documentation: previously concluded purchase and sale agreement, gift agreement, etc.
6. A document confirming the rights of the representative, certified by a notary (when selling an apartment by power of attorney).
7. Consent of the spouse to the transaction (if the apartment is jointly owned) or the guardianship authorities (if there is a minor among the owners).
8. Agreement for the sale and purchase of an apartment with payment in installments.
9. Application for re-registration of property rights from the parties (from the seller about the alienation of property rights, from the buyer about entry).
10. Receipt with paid state duty in the amount of 2000 rubles. It can be paid by the buyer or seller. Payment can be made after submitting documents for state registration within 5 days.

Thus, to conduct a transaction for the purchase and sale of an apartment by installments, a standard set of documents will be required.

Important points

Purchasing real estate is a very responsible transaction. Therefore, the purchase should be taken seriously. First of all, determine the main parameters:

• the amount of the down payment;
• term;
• acceptable monthly payment amount.

Help: Even if the developer does not provide installment plans for any project, he can meet the buyer halfway and present it on individual terms.

When concluding a contract, special attention should be paid to the clause on the accrual of penalties for late payment. If for some reason a person cannot repay the debt on a timely basis, then it is necessary to contact the construction company and ask to terminate the contract, returning the funds minus penalties. Or contact the bank to apply for a mortgage for the remaining amount.

Is there a demand for installment plans?

Well, in general, today installment plans are not particularly popular: this option is chosen by 3% to 10% of clients, depending on the project, and their share in the mass segment does not exceed 5%. About 50-60% of apartments are purchased with a mortgage, and in some projects their share exceeds 90%.

They say that in business and premium classes, installment plans are more popular: about 20% of transactions are concluded with its use. That is, every fifth apartment in this segment is sold in installments.

But developers note that with a decrease in mortgage rates, buyers’ interest in installment plans also decreases. Experts say that while the share of installment plans gradually increased to 20% over the past year, at the beginning of this year it fell to 10% as buyers prefer mortgages.

According to Vyacheslav Priymak, head of the development of mortgage programs at Igrad Group of Companies, buyers of apartments worth 2-7 million rubles choose a mortgage. But when the amount exceeds 7 million, clients increasingly prefer flexible installment mechanisms, the expert says.

Still, in expensive segments the share of transactions using installment plans is also small. For example, in Don-Stroy Invest last year only 9% of apartments were sold in installments. The most popular installment plan is in the elite and premium segment – ​​here it accounts for 14% of sales.

MIEL-Novostroika experts note that three categories of clients resort to installment plans. The largest category of “installment plan buyers” are those who already have 60-70% of the cost of housing. They plan to contribute the rest when they sell some property, receive a bonus, or simply earn money in the near future, since they have a fairly high level of income.

The next category is businessmen who cannot immediately withdraw a large amount of money from their business, or people who have a fairly large amount on deposit, the expiration date of which is coming to an end.

Another category consists of buyers who were denied a mortgage. These could be people with a bad credit history or with good earnings, but a low official salary.

Let's sum it up

It is worth noting that installment plans are just one of the tools for selling apartments, thanks to which the developer can expand the circle of potential buyers and increase sales, but at the same time his risks increase. Although not too much, since in case of non-payment of the debt, the apartment remains with the developer: the buyer can register the property (even in an already completed house) as his own only when he pays its full cost.

Despite the low demand, some buyers still use installments: for some clients it is more profitable than taking out a mortgage, for others it is the only possible option. At the same time, the risks of buyers of an apartment in an unfinished project when paying in installments are no higher than in the case of obtaining a mortgage or paying in full. Experts note that if the developer fails to fulfill its obligations, the buyer is protected by law 214-FZ.

What interest rates and installment terms do developers offer?

In recent years, developers have changed the conditions for providing installment plans quite a lot. As Natalya Shatalina recalls, in 2016, when mortgage rates began to decline, developers began to offer interest-free installments instead of interest, but increased the down payment from 30% to 50-60%, thus increasing their own guarantees. Often the size of the down payment depended on the cost of the apartment. For example, buyers in installments for “one-room apartments” were asked for 50% of its cost, “two-room apartments” – 40%, “three rubles” – 30%. That is, in absolute terms, the amount that buyers contributed was the same.

As already noted, today in most projects in the mass segment you can arrange interest-free installments, that is, in the end you will not overpay for the apartment.

Shatalina says that today there are only two options for interest-bearing installments. The first is a short-term installment plan at a low interest rate, about 2-3% per annum. Since rates are very low, it does not compete with mortgages. The second option is an installment plan at interest for up to a year or until the project is put into operation. In this case, you will have to pay interest as close as possible to the mortgage rate. Shatalina says that this gives the buyer a fairly favorable percentage, no commissions, and no need to collect documents, as is required when applying for a mortgage.

In almost all cases, developers are ready to provide interest-bearing or interest-free installments for a period not exceeding the signing of the apartment acceptance certificate. According to Capital Group experts, since this act confirms that the developer has fulfilled all obligations under the equity participation agreement, by the time it is signed, the buyer must pay the full cost of the property. Then the new owner can submit documents to Rosreestr to register ownership of the apartment. According to INCOM-Real Estate, when buying an apartment at the initial stage of construction, you can count on no more than 24-26 months of installments.

The period for providing installment plans in more expensive segments may be longer, both interest-bearing and interest-free. But until the full cost of the object is paid, it cannot be registered as ownership. Don-Stroy Invest explains that the buyer of an apartment in a business class project can receive an installment plan for up to 5 years with a fairly comfortable rate of 4%. In this segment, installment plans as a sales tool have shown their effectiveness, and today in some projects keys are being issued even before the end of the payment.