Banks to adopt risk-sensitive approaches in forming credit reserves for residential construction

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The Central Bank of Russia plans to revise its approach to forming loan loss provisions for loans issued for the construction of multi-apartment buildings, making it more sensitive to risks. The new methodology will cover the entire lifecycle of a development project – from land acquisition and approval of construction parameters to the sale of completed housing.

A key element will be a differentiated risk assessment depending on the project stage. Banks will be required to take into account compliance with deadlines for key stages – preparation of documentation, construction, sales rates, and debt servicing. Additionally, calculations will include the factor of installment plans that developers provide to participants in shared-equity housing (this is a common practice in Russia where buyers pay for their apartments in installments as the project progresses).

The new requirements are expected to come into force on October 1, 2027. They will apply to the financing of objects whose construction has not yet begun by that date, as well as to all loans issued after the updated rules are introduced.