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From promise to turnkey: SCHEME that guarantees the completion of new construction!

2025-09-20 08:17:35Aktualitet SHKRUAR NGA REDAKSIA VOX

From promise to turnkey: SCHEME that guarantees the completion of new

Proposal for a scheme that links funding to the real progress of the works and guarantees turnkey projects, not just promises.

When the buyer pays, he should receive, not just promises, but square meters.

The Guaranteed Completion Scheme (GCP) imposes financial discipline on the construction industry: separate project account ( escrow ), payment only according to verified stages, completion guarantee and the right to intervene ( step-in ) when something goes wrong.

The result: on-time delivery, low risk for the buyer, and financial reliability for the construction industry.

Albanian cities, especially Tirana and other urban centers, still bear as open wounds dozens of concrete structures left in the construction phase, with no prospect of completion.

They damage the urban landscape and the sense of public safety, but above all they represent financial drama for families who paid for a house they never received.

According to ALUIZNI data, years ago, over 1,200 unfinished constructions were identified nationwide, with thousands of families affected.

At the root of this phenomenon lies a pronounced regulatory-financial gap.

Our legislation does not effectively protect buyers' funds during construction.

The developer can sell before construction has even begun (off-plan) and collect a significant portion of the price in advance, without any legal obligation for these funds to be deposited and used only in a separate account, dedicated to the project.

There is no mandatory payment scheme in installments linked to the progress of construction works; everything is left to the developer's standard contract, which usually places most of the risk on the buyer.

In cases where sales slow down, costs increase, or alternative financing is lacking, the project stalls, even though buyers may have paid up to 60–80% of the value.

Our construction legislation provides for the issuance of a certificate of occupancy upon successful completion of works on the facility, as well as administrative sanctions in the event of non-compliance (e.g. suspension/revocation of permit).

But it does not provide a preventive financial mechanism to link funding to the progress of works and avoid stagnation.

Revocation or suspension of the permit merely states the failure, without creating a path to bring the facility to completion. Against this backdrop, sporadic attempts at “confiscation” or emergency measures address the symptom, not the cause.

Meanwhile, after cycles of bad loans in construction, banks have become conservative and many projects rely mainly on down payments from buyers, a model that works in boom times but shows its fragility in a crisis.

Therefore, a new regulatory-financial architecture becomes a necessary condition for confidence in the housing market, for financial stability and for sustainable urban development. In this context, international experience offers proven models that can be adapted to the Albanian reality.

To end this systemic risk, one solution is the Guaranteed Completion Scheme (GCS).

The essence of this architecture is simple: a separate project account ( escrow ) in the bank, separate from the developer's other accounts, where all buyer payments and loans dedicated to the project are deposited; disbursement only according to verified phases; a completion guarantee that ensures the developer's binding financial commitment; and the right to step in to quickly replace the developer or the firm implementing the works, in case of their failure.

In practice, the funds are administered in a single, controlled channel: they enter the project's special account and are released only against verified and certified work, in a progressive manner. The final installment is released only after the certificate of use.

The bank acts as an escrow agent and, when necessary, as a lender, with clear separation of functions to avoid conflicts of interest.

If the project deviates significantly from the developer's deadlines or financial capacities, disbursements are suspended and step-in is activated: a special administrator is appointed who contracts a replacement team and brings the construction site to completion using the remaining funds and the guarantee.

The cycle is completed with a 10-year structural defects insurance, so that the protection is valid even after the keys are handed over. These four pillars turn the construction site into a completed project, safely and guaranteed.

Project account (escrow ) : how funds are protected

The project account is a separate bank account (escrow), opened exclusively for a specific object and separated from all other developer accounts.

All buyer payments are deposited there, along with dedicated bank loans and the developer's own contribution. Funds cannot be withdrawn unless the relevant phase of the works is verified by the works supervisor and confirmed by the bank (technical control + financial control).

In practice, this closes one of the main arteries of risk: the use of project money for other purposes. When every euro passes through a single, controlled channel, and comes out only against the work performed, the project is fed with pure liquidity .

A reasonable rule, proven internationally, is that at least 70–80% of all receipts should remain in the project account and be used only for construction costs (works, materials, contractors, related taxes), while the final installment (e.g. 20%) should be released only after the certificate of occupancy.

The latter gives real value to the apartment at the moment of delivery and creates financial incentive for the correct completion of all procedures.

Disbursement by stages: payment only for progress

The phases of construction works are defined and contracted at the start of the project, linked to the project implementation, schedule and estimate of the works: foundations, carabiners, masonry/facades, internal installations, refinishing.

Disbursement is made pro rata, based on partial and final statements, certified by the supervisor and financially verified by an independent auditor (licensed statutory auditor).

For each phase, indicative disbursement ceilings are foreseen (e.g. structure ~30%), which may only be exceeded due to changes in the project during the implementation of the works, approved by the supervisor, approved by the relevant structures and approved by the bank administering the account.

In case of budget overruns for each phase, the contingency fund (e.g. 5–10%) is initially used; overruns above this require budget reallocation, additional guarantees or personal contribution, so as not to compromise subsequent phases.

Disbursement is made only after a verification package: a status report approved by the supervisor, an independent auditor's report verifying costs and payments, and approval of the bank as account administrator.

When these documents are in order, the corresponding installment is released. If the phase has not reached 100%, partial disbursement may be given pro rata,  only for the volume of work actually completed.

In this way, the disbursement of funds follows the pace of construction. The final installment is released only after the certificate of occupancy and the completion of all technical and legal obligations.

This regime is also particularly beneficial for buyers with mortgage loans: their bank can  synchronize disbursements with the project phases ( tranche-on-tranche ), reducing the risk that the client will repay installments for square meters that do not yet “exist”.

In practice, this creates a chain of discipline: the developer plans liquidity on a progress basis, the contractor is paid for verified work, while the buyer only finances what exists.

The role of the bank: fund manager and financier

The bank maintains two distinct functions.

First, as administrator of the project's special account (escrow): releases funds only when the technical-financial package is complete; refuses any payment that is not directly related to the project; and periodically reports financial progress.

Secondly, as a lender when the project requires capital replenishment.

To avoid conflicts of interest, these functions are kept separate. The project account management team operates independently from the loan team, with clear compliance policies and separate authorizations.

This avoids conflict of interest: document control is not influenced by the objectives of selling loans. The goal is shared, but operational independence preserves the integrity of the mechanism.

At the beginning, a completion guarantee is also set up — e.g. 10–20% of the construction cost as cash in an account or an unconditional bank guarantee. This constitutes a binding financial commitment by the developer and creates a safety cushion in case of a setback.

Currently, such a guarantee is not required by law for private projects, but it would ensure the developer's financial commitment.

“Step-in”: the intervention that keeps the project on track

Sometimes, despite the rules, the project deviates significantly. The right to step-in is activated not only when the contractor abandons the works, but also when the developer shows problems, opens bankruptcy/reorganization proceedings, seriously breaches the contract, has its permit suspended/revoked, serious safety risks or environmental violations arise, or there are unjustified overruns of deadlines.

In these cases, the bank, in coordination with law enforcement authorities, freezes disbursements, announces “non-performance”, grants an extension of the deadline for correction (e.g. 15–30 days) and, in the absence of a solution, appoints a special administrator.

This has a clear mandate: to call the completion guarantee, use the remaining funds in the project account, re-allocate contracts (or transfer them to a replacement contractor/developer), rebalance the budget and deadlines, and, if necessary, draw down a special credit line for closure.

Contracts with buyers remain in force; any recalibration of terms is only permitted according to pre-established rules (e.g. with the approval of their majority).

Thus, a potential crisis turns into a manageable process, where the completion of the object always takes priority and the project does not remain hostage to the fate of a single entity.

10-year insurance: protection after delivery

The mechanism does not end with the final inspection. Albanian law now requires a 10-year insurance policy for structural defects, closing the cycle of trust: even after delivery, the buyer is not left unprotected if serious structural problems arise.

This promotes higher quality design and implementation, reduces post-delivery conflicts, and stabilizes the reputation of the construction industry.

This measure is now mandatory by law for new construction, but it must be strictly enforced and buyers made aware of its existence.

Indeed, this architecture has additional costs: bank fees for administering the special project account (escrow), audit costs by the independent auditor (statutory auditor), the price of the completion guarantee and 10-year insurance, plus a greater need for working capital.

But the real cost of uncertainty is much higher: long delays, lawsuits, broken relationships, a decline in trust, and a penalization of the entire housing market.

A clear banking mechanism increases predictability, reduces risk for buyers and, over time, reduces the cost of capital for well-performing developers. Institutional investors and the diaspora react positively when they have assurances that funds are released only after technical and financial verification of the phases of implementation works .

There is also a healthy side effect: qualitative consolidation .

Developers who rely solely on down payments without protective mechanisms  will find it harder to compete; while those who plan finances and manage risk will thrive.

In the medium term, this produces a market perhaps smaller in number of actors, but stronger in standards.

Effects on prices and competition

In the first year, perhaps even the second, housing prices may increase slightly beyond the baseline trend ,  and the launch of some projects may be postponed  until banking agreements are closed.

This is a transition effect that occurs whenever new risk management rules are imposed.

Then, as banks standardize processes and developers adapt , the cost  of the mechanism drops, while the stable value, the security of delivery, will remain.

For the public, this is a clear deal: you may pay a little more up front, but the risk of the work remaining unfinished becomes negligible .

On the competitive front, the mechanism increases financial discipline and favors actors that plan liquidity well; it may increase the initial burden for very small developers.

The typical result is a market with higher standards and with projects only entering the financing path when they are realistically prepared for completion.

Stability for a growing market

Construction is a chain of trust: from planning, project implementation, building permit, foundations, to turnkey. The less this chain relies on chance, the more serious capital and ordinary families will confidently enter the market.

The special project account (escrow), disbursement according to verified phases, completion guarantee and the right to intervene (step-in), summarized in the Guaranteed Completion Scheme (SPG), are internationally proven practices that increase financial discipline and increase the predictability of a project.

They need to adapt to the Albanian reality. The result will be obvious: less risk, less delay, more security for the buyer and more seriousness for the construction industry.

The message: For the housing construction sector to grow sustainably, simple and mandatory rules are needed: project accounts, phased disbursement, completion guarantees, and step-in.

With this discipline, the buyer has security, the bank has control, the developer has predictability, and the keys are delivered on time./ Monitor


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