Plans are underway in Russia to prohibit using cash for buying homes.
The proposal to ban cash payments for real estate transactions has gained support from the Prosecutor General`s Office. This is seen as a crucial endorsement for the initiative, spearheaded by Svetlana Razvorotneva, Deputy Chair of the State Duma Committee on Construction and Housing.
The measure is part of a broader bill designed to regulate real estate agents and enhance the safety of property buying and selling in Russia. However, real estate market experts observe that the proposed change presents both benefits and drawbacks.
«The bill prohibiting cash housing deals didn`t appear out of nowhere,» stated Svetlana Razvorotneva. «It`s one element in creating a comprehensive system to ensure the security of real estate transactions in Russia.» The deputy highlighted concerning statistics, noting that in 2022, the Prosecutor General`s Office identified over 6,000 crimes where citizens lost their apartments, with this figure exceeding 8,000 in 2023. Criminals have inflicted tens of billions of rubles in damages, and the sum continues to escalate.
Implementing mandatory non-cash payments for property transactions is expected to help counter this troubling trend. Real estate agents broadly support the idea; the Russian Union of Real Estate Market Participants acknowledged that the option for cash settlements in apartment deals frequently facilitates fraudulent schemes.
Despite support, Razvorotneva`s proposal faces opposition. For instance, the cash collection association «Rosinkas» has labeled the measure as potentially harmful and «fundamentally unconstitutional,» arguing that current law grants citizens the right to choose how they store and transact their money.
According to Dmitry Vladimirov, Managing Partner at IDI-Project, banning cash in real estate transactions will enhance financial transparency, aid in combating tax evasion, and significantly reduce the incidence of fraudulent property deals, thereby safeguarding consumers. Police data indicates that fraudsters were involved in approximately 765,000 real estate-related activities in 2024. When payments go through banks, state bodies gain the ability to track fund movements and detect suspicious transactions. Furthermore, non-cash payment methods provide documented proof of payment through bank confirmations. Each transaction is recorded, making it possible to verify the transfer of funds in case of disagreements, which is particularly vital in legal disputes, the expert pointed out.
It`s worth noting that the real estate market has already been shifting towards non-cash methods organically. «Currently, the proportion of real estate deals settled with cash is around 10-15%,» states Yulia Dymova, Director of the Secondary Real Estate Department at Est-a-Tet. However, this percentage includes hybrid payment forms, where a portion, like a deposit, is paid in cash, with the remainder transferred electronically. For example, in selling a 40 million ruble apartment, a buyer might provide 10 million in cash as a significant deposit if time is needed for documentation or other arrangements. The continued use of cash for deposits is partly due to specific banking procedures. Transfers exceeding 500,000 rubles are often temporarily held by banks for source-of-funds verification, which can cause delays.
Andrey Sado, Managing Partner at Penny Lane Realty, indicates that fully cash transactions are generally uncommon, accounting for no more than 1% of the total market volume. These cases typically involve unique circumstances, such as foreign buyers without bank accounts in Russia.
Among the advantages of the proposed initiative are enhanced security and currency verification when depositing cash via bank tellers. This minimizes the risk of receiving counterfeit money, particularly in large deals where manual checking is cumbersome. Moreover, transferring funds through bank accounts increases transaction transparency, allowing state authorities to monitor financial flows more effectively and mitigate risks of fraud and illicit income legalization.
However, the initiative also comes with downsides. One is an increased administrative burden on citizens. Ordinary individuals unfamiliar with financial operations might face requirements to explain the origin of their funds. This could complicate transactions and act as an impediment for legitimate market participants.
Another drawback is reduced payment flexibility. Previously, bank safe deposit boxes enabled swift transactions with minimal bureaucracy. Now, additional paperwork and bank interaction will be necessary, potentially slowing down the process, the expert cautioned.
