Under the project implemented jointly with the Agency for Housing Mortgage Lending (AHML) and Vnesheconombank, the Federal Service for State Registration, Cadastre and Cartography of the Russian Federation has used blockchain technology for the first time to register shared ownership agreements for construction. The blockchain solution is used for communication between the Federal Service and the Fund for the Protection of Rights of Individuals Participating in Shared Construction. The Vnesheconombank’s Centre of blockchain competencies operated as the project’s technological partner. The transactions show how to use distributed ledger technology in one of the most complicated areas of the housing market.
“Introducing blockchain technology into the registration of shared ownership agreements makes it possible to keep records of all stages of the process, which enables the monitoring of compliance with the procedures and deadlines and eliminates the risk of unauthorised data modification. In other words, if the construction investment process becomes more transparent, this will provide protection against the most common fraud schemes,” Vladimir Demin, the Advisor to the Vnesheconombank’s Chairman, said.
The shared ownership agreements were registered under the action plan approved by First Deputy Prime Minister Igor Shuvalov to ensure communication between the Federal Service and the Fund in carrying out the pilot project to use blockchain technology for the registration of shared ownership agreements for construction.
The pilot project is under way in the Saint Petersburg region. The first developer to enter into agreements is TIN Group, part of Polis Group. Any contribution under the shared ownership agreements will be registered in the blockchain service and transferred into the Fund’s accumulation account for the protection of investor rights.
Under the current legislation, developers of new properties pay 1.2% of the price of each shared ownership agreement as a contribution to the Fund for the Protection of Rights of Individuals Participating in Shared Construction. To register shared ownership agreements, the Federal Service must be informed by the Fund that developers have paid such amounts.
The use of blockchain technology for communication between the Fund and the Federal Service for State Registration, Cadastre and Cartography provides the project participants with access to up-to-date information on the registration of every shared ownership agreement. Additionally, this prevents the information management systems of the Federal Service and the Fund from being desynchronised, enables local data processing if the Federal Service and the Fund lose communication with each other and eliminates the risk of unauthorised data modification in the information management systems.
“The Federal Service is testing several promising modern technologies to enhance information security in relation to properties and their owners. The use of blockchain technology for the registration of shared ownership agreements should ensure comprehensive information control and make transactions transparent. We expect to evaluate the viability of this technology in the registration process as precisely as possible on completion of the pilot project,” Viktoria Abramchenko, Head of the Federal Service for State Registration, Cadastre and Cartography, said.
“The Fund and the Federal Service have already completed more than 20,000 transactions. It is important that the process participants should have access to information on these transactions and, meanwhile, that such information should be secure. Blockchain technology enables us to do so,” AHML CEO Alexander Plutnik said.
Vnesheconombank is a national development bank and one of Russia’s largest financial institutions. Established in 1924, the Bank has operated under the special Federal Law “On Bank for Development” since 2007. The highest governing body is the Supervisory Board chaired by Russian Prime Minister Dmitry Medvedev. In accordance with the Development Strategy until 2021, Vnesheconombank will focus its activities on financing for high-technology industrial projects, infrastructure development, support for non-resource exports, support for innovations and projects of the National Technology Initiative. Vnesheconombank will reach a new level of quality: proactively searching for projects on the government’s list of priorities, working together with customers to thoroughly analyse business projects, attracting private coinvestors, using state-of-the-art technology to track the progress of projects.