RUSSIA: Reported cases of fraud in the sale of new property in the booming housing market

Record ID: 603478

  • Title: RUSSIA: Reported cases of fraud in the sale of new property in the booming housing market
  • Date: 9th June 2006
  • Summary: CONSTRUCTION WORKERS AT WORK
  • Embargoed: 24th June 2006 13:00
  • Keywords:
  • Topics: Crime / Law Enforcement
  • Reuters ID: LVA9EK8PS19YHY93HH5JNT0UPJON
  • Story Text: Russia and in particular the capital Moscow has seen a new housing boom in the last three years, with many companies involved in the construction of apartments.
    Much of this new development is sold in advance, before completion, as Russia's young middle class makes a move into property ownership.
    But there is no tight regulation of this lucrative property market, and in recent months there have been several reported cases of fraud in the sale of newly constructed housing.
    Irina Tarasenko owns an apartment in house No. 42 on Moscow's Bolshaya Ochakovskaya Street, but the nearest she can get to it is the children's playground 14 floors below.
    She paid 50,000 dollars for her one-room property when the building was still on the drawing board. It was finished last year, but no one could move in because it turned out that the developer had sold the same apartments to two or more buyers.
    "I still cannot believe it," said Tarasenko, standing next to the swings in the playground.
    A 34-year-old aid worker, she is due to give birth to her first child, and is now lodging with her sister.
    "I would like to have my own home," she said. "(But) the money I paid disappeared and the company I dealt with disappeared as well."
    "....I have been working since I am 21. To come to this point and what happened to me is unbelievable, amazing, I still can't believe it, actually."," added Tarasenko.
    Pressure groups say there are up to 100,000 people across Russia who have lost their money in similar schemes -- the developer either swindled them or went bankrupt before finishing the building.
    In a country where officials have a reputation for being corrupt, indifferent to people's problems or both, many victims blame the authorities as much as the developers.
    Last month several hundred people pitched tents on the lawn in front of the White House government headquarters.
    It was a short-lived protest -- riot police broke up the encampment after dark. But it was a rare example of civil disobedience and made the issue a political embarrassment for the Kremlin.
    Parliament, which is loyal to the Kremlin, hastily arranged meetings with the protesters and promised an investigation.
    Many people buy apartments "off-plan" because the conventional property market is out of their reach. In Moscow, the average price for a 30 square metre (323 sq ft) studio apartment in a completed building is about 85,000 dollars.
    Authorities in Moscow -- which has the highest concentration of fleeced investors -- say they are not at fault.
    "The only people to blame for all of this are the victims themselves. Like sheep, they handed over their money to who knows where, bought apartments at too low prices, which were not the market prices and did not even hire lawyers while singing deals. And when today we ask them why they did this, they reply that they didn't have enough money to hire lawyers. If you don't have money for lawyers then you should not buy expensive real estate in Moscow," said Alexander Milyavsky, who represents Moscow Mayor Yuri Luzhkov's United Russia party in the Moscow City Council.
    Although Luzhkov is under no legal obligation to help, said the councillor, he has set up a commission to make sure every family that paid money to developers will get an apartment.
    Victims' groups insist there is a case to answer.
    They accuse corrupt officials of knowingly selling city land to shady developers -- though no one has been charged for this -- and say a clumsy law passed this spring drove honest developers into bankruptcy.
    Many developers are behind bars, but in most cases the chaotic justice system has been unable to track down their assets on behalf of the victims.
    The people who pitched tents outside the White House were not poor pensioners or liberal intelligentsia, the groups that routinely protest against the Kremlin.
    Most of them were office workers or skilled blue collar workers, whose incomes have risen under President Vladimir Putin and who form the bedrock of his political support.
    Analysts say the protests highlight a wider problem: the Kremlin has given people prosperity but not access to decent, affordable housing.
    Millions still live in the cramped, crumbling apartment blocs built by the Soviet Union. New building is held back by factors such as high mortgage interest rates, the lack of a free market in land and muddled legislation.
    Putin last year named housing as one of four national priority projects. Officials are still drafting an action plan.
    A survey this year by pollster Levada Centre found at least 60 percent of people on middle incomes wanted to move to a better apartment but only half of them felt that they could.
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