Feliks Blinov: “Under the circumstances the cost of project loans is not an issue. Developers should be more interested in how much money they can get that way and for how long.” - RWM Capital
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Feliks Blinov: “Under the circumstances the cost of project loans is not an issue. Developers should be more interested in how much money they can get that way and for how long.”

01.06.2018

Feliks Blinov, CEO of the RWM Capital Investment Group, participated in the panel discussion REFORM OF THE CONSTRUCTION, 218 FEDERAL LAW. INCREASE IN ACCESSIBILITY OF BORROWED FUNDS at the International Business Forum in Moscow. Naturally, the key theme of the discussion became searching for new possible ways of financing real estate development projects.

Since 1 July 2018, it will be impossible for real estate project developers to raise funds through shared construction participation agreements. By the Russian Government’s design, there will be nothing easier for developers, but to apply for bank project loans. However, it remains unclear for many what real estate developers, who, for some reason, cannot or has failed to acquire such a loan, should do.

Feliks Blinov drew the attention of the other members of the panel discussion to the fact that, perhaps, not the actual loan cost but its terms and conditions should be considered of greater importance at the moment.

“It is a popular opinion that before real estate developers had an advantage of raising money at no extra cost through shared construction participation agreements. The statement sounds dubious, because this system meant giving people ready to buy a piece of residential property at an early stage of its construction a considerable discount alongside expenses on brokers and advertising. In other words, they had the same 15-16 % in extra costs. That is why I suggest our discussing not the loan cost, but its terms and conditions.”

If the idea of a bank loan does not suit developers and builders, then there must be alternatives. There must be a way to draw private investment to real estate projects. Once again a REIT (Real Estate Investment Trust) takes the floor.

“Nowadays, REITs are not as scary as they appeared to be some years ago. Many businesses use them in their day-to-day operations. While a REIT has become acceptable by the Russian market, it has transferred from being a means of just fundraising to being a means of co-financing when private investors put their trust and their money into the hands of professional AM companies.”

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