Leasing or installment plans: what alternatives to a mortgage exist and what makes them appealing?

By the beginning of 2025, there will still be support measures for the housing market, such as installment plans, preferential loan programs, and subsidy programs that do not affect the price of the property. This was stated by Vadim Butin, head of the mortgage lending department at "Glavstroy".

— In my understanding, a convenient installment plan should have the following characteristics: an accessible entry threshold, 10–20% of the property price, and a comfortable payment schedule — twice a year at 5–10% of the cost during the construction period, — added Vadim Butin.

The remaining 50% can be paid by the buyer before the building is put into operation. This allows for additional earnings by investing personal funds in various financial instruments.

— Alternative mortgage offers, although they are difficult to call full-fledged mortgage products, represent a kind of installment plan provided by developers. Such programs are universal and suitable for all clients, including those who view property purchases as an investment, — said Dmitry Pavlov, commercial director of BM GROUP DEVELOPMENT.

Currently, installment plans with comparable down payment amounts are popular as a "replacement" for mortgages. There are options available on the market without price increases for the apartment or with minimal markup, requiring a small initial payment of around 20% and the remainder paid closer to or after project completion. These points were highlighted by Mikhail Gushchin, vice president of marketing and product at the RBI group.

According to him, for developers, installment plans are the main driver of sales, with such transactions making up an average of 40%. However, the picture differs across projects of various classes and readiness levels. In projects with closer completion dates, the share of installment plans remains at 20–30%, while for new launches, it is already over 50%.

Recently, alternatives to mortgages such as installment plans and leasing have been discussed more actively. However, several nuances need to be considered. These programs have their advantages over credit purchases, but they do not suit everyone.

Among the advantages of installment plans is typically the absence of interest. Among the disadvantages are high payments (installments are not granted, like mortgages, for 30 years; their term is usually until the end of construction, which is two to three years). These points were noted by Yana Glazunova, CEO of VSN Group.

— Generally, there are few properties that can be purchased with an installment plan from developers. A potential client needs to act quickly to secure them. If the installment plan is available for all properties, it is usually simply included in the price. Another aspect is the formalities. There are strict penalties for late payments, as there is no "guarantor," like a bank, in the payment chain between the developer and the client. These are risks, — explained Maxim Lazovsky, owner of the construction company "Dom Lazovskogo".

Installment programs are suitable for clients who sell their existing property to purchase an apartment in a new development. With the proceeds, they can pay off their debt in full or a significant portion of it, and take a small mortgage for the remaining amount. This was shared by Elina Khannanova, sales director at the GC "Granel".

According to her, installment plans are also a beneficial tool for couples planning to expand their family. Initially, they can acquire their desired apartment through this mechanism, and later, after the birth of a child, pay off the debt with a family mortgage at a preferential rate of 6%.

— When it comes to leasing, the advantages include not having to pay for both a mortgage and rent at the same time. The downsides include additional restrictions. For example, the property must be registered with Rosreestr as residential; if the property is on the primary market, it must be fully completed, the apartment must be suitable for living, it must not be under arrest or pledged, and it must not be in a building that requires major repairs. Additionally, the property must not have illegal renovations, — added Yana Glazunova.

Moreover, she noted that while a mortgage can be taken for up to 30 years, leasing is provided for a maximum of 10 years.

— Real estate leasing is used less frequently than installment plans. This is because developers aim to sell their properties before they are put into operation, — emphasized Elena Goryacheva, head of sales at the developer company "Evolution".

Leasing offers developers new opportunities to attract clients who cannot access mortgages. Meanwhile, the property remains the developer's ownership until the debt is fully repaid, allowing for additional income from leasing payments. These points were highlighted by Denis Astafiev, founder of the investment company SharesPro.

For buyers with unstable incomes or imperfect credit histories, leasing becomes an attractive option due to reduced down payment requirements and more flexible conditions compared to mortgages.

— However, this scheme carries certain risks. Developers face the necessity of having significant financial resources to implement such projects and risk encountering client insolvency, — explained Denis Astafiev.

He added that for buyers, the main risk is that until the payments are completed, they do not become owners of the property. If the terms of the contract are violated, they may lose the property. Additionally, the legislative framework governing housing leasing remains insufficiently developed.