Application of the Distressed Asset Securitization Mechanism in the Implementation of Housing Construction Projects

Abstract

The construction industry of the Russian Federation faces a serious problem: the accumulation of a significant volume of construction in progress and illiquid distressed assets constrains investment activity and creates risks for equity holders, creditors, and budgets at all levels. Traditional restructuring methods, such as bankruptcy proceedings, asset substitution, or rehabilitation with investor involvement, do not fully restore the housing reproduction cycle and require large-scale budget injections. As an alternative, the securitization of distressed assets is proposed, enabling the transformation of pools of rights of claim under Equity Participation Agreements (EPA), collateral land plots, and project finance portfolios into liquid marketable securities. a structural model of securitization adapted to the specifics of the investment and construction cycle has been developed, including the stages of pool formation, creation of a Special Purpose Vehicle (SPV), tranching, credit enhancement, and servicing administration. The advantages of the mechanism are substantiated for developers (balance sheet relief, reduced funding costs), banks (improvement of capital adequacy ratios), institutional investors (a new class of high-quality assets), and regional budgets (reduction of expenditures for completing long-term construction projects). The scientific novelty lies in the integration of a cyclical approach to construction asset management with securitization tools, allowing the structure of issuance and payments to be synchronized with the phases of the facility life cycle. The practical significance consists in the possibility of applying the proposed model to reduce the volume of “dead capital” in the construction sector and to implement pilot transactions with the participation of development institutions (DOM.RF, Territorial Development Fund).