Russian President Vladimir Putin has instructed the national government to design new measures aimed at tightening control of the Russian real estate industry and to regulate the activities of real estate brokers, according to an official spokesman of the press service of the Kremlin.
The announcement was made by Putin during a recent media forum of The All-Russia People’s Front (a movement in Russia started by Putin to provide the government with new ideas, new suggestions and new faces), which took place in St. Petersburg.
Putin said that although he supports self-regulation for many industries, “In the case of real estate business, a lack of state control results in many violations. In this regard, state control for the activities of real estate brokers should be significantly strengthened.”
He said tightening control of the activities of real estate brokers may involve the return of state licensing, which was discontinued in 2002 and replaced by the practice of certification of companies and brokers. But this has resulted in an increase of the number of unscrupulous companies in the national market.
According to an official spokesman of the Russian Ministry of Industry and Trade, the government will start implementation of the Putin order in the near future. The planned reform may involve the use of foreign expertise in establishing and regulating real estate services.
In addition to licensing, the planned reform will involve the introduction of direct state guarantees in the industry. This means that the government will register each deal and take responsibility for its implementation, in accordance with the law.
An official representative of Denis Manturov, Russia’s Minister of Industry and Trade, says such a practice is actively used in many EU countries and there is a possibility that it may be adopted in Russia soon.
Another option may involve implementing insurance. To date, the practice of insuring deals has been uncommon for Russia. That means that a bona fide property buyer, which signed a deal with the help of a real estate company and with the use of a real estate broker, remained unprotected.
Putin says the real estate services industry in recent years has gained a significant importance for Russia, but the government is currently unhappy that a substantial part of its activities is carried out illegally.
The planned reforms follow a similar scenario that recently took place in the home building sector, where the government has introduced licensing after careful consideration and consultations with analysts and industry players.
Svetlana Birina, head of the department of urban property of NDV-estate, one of Russia’s leading real estate companies, says the industry is in acute need of reforms. One of its key problems is the growing number of non-professional and unscrupulous brokers, which negatively affect the reputation of real estate brokers in Russia, she says.
Birina says compulsory licensing will help to improve the current situation. But she says it’s not a panacea for all problems in the industry.
However, Maria Litinetskaya, CEO of Metrium Group, another of Russia’s leading real estate agencies, says licensing of real estate activities does not make any sense.
“In fact, licensing could be considered as just a set of intermediary services. The only problem is the presence of so-called ‘black Realtors’ (illegal brokers) in the market. In order to reduce the number of fraudulent agencies in the market there is a need to establish voluntary self-regulating organizations, as well as to introduce certain requirements for real estate companies,” she says.
Eugene Vorotnikov is a contributing writer for REM.