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Views/ To Bloom but Not Boom / Real Estate Spring in Serbia
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Ana LukovićAdvokat / Senior Associateana.lukovic@karanovicpartners.com
25/02/2016
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Over the past two years, various media outlets have been reporting on increased investor interest for the Serbian real estate market, with a particular focus on Belgrade. Goran Vesić, the city manager, recently substantiated these reports by claiming that Belgrade's Public Land Development Agency made a total of 772 business deals with investors over the course of last year alone. Vesić further elaborated that the city's central municipalities have been shown to present a hotspot for residential properties, while claiming that more than 80% of total commercial properties are being built in the Palilula, Borča and New Belgrade municipalities. At the same time, most of the properties intended for industrial production facilities are being built in suburban areas such as Mladenovac, Grocka and Obrenovac. He attributed this progress in construction to, among other things, last year's regulatory changes that made it possible for land development investors to choose between getting a 30% discount on property fees when paying them all at once, or paying the full amount in 30 monthly instalments. Vesić called upon the aforementioned examples in concluding that Belgrade and the rest of Serbia will continue to progress in bringing both domestic and foreign, as well as both big and small investors to the country's real estate scene.

The recently held Property Management Conference at Hotel Metropol, an event that included Karanović & Nikolić's Ana Luković as one of the presenters, contained some viewpoints that were in accordance with Vesić's statements, but also some that were against. One of the supportive arguments was based on the regulatory change to the Law on Planning and Construction entailing that as soon as an investor fulfills the legal requirements of being recognised as such, a facilitated process of acquiring the building permit commences. This process includes the formation of an investor tailored work group that then becomes a so-called ' one stop shop' for the investor, with a clearly outlined list of required documents and the order of their submission. Finally, this regulation also stipulates that the investor is notified of a precise deadline by which the building permit will be issued.

On the other hand, Luković presented something of a countering point of view regarding the still prevailing set of legal difficulties awaiting a potential investor – i.e. in the case of buying state-owned land. These difficulties mainly pertain to how the process of buying such a piece of land runs into jurisdictional obstacles (not knowing who's in charge of certain approvals) that take a long time to sort out, in turn increasing the investor's expenses, while at the same time testing their patience and reducing their interest. On top of that, she also highlighted the issue of zoning regulation since, in practice, the planning documents of certain properties have happened to not include all of the required property components. This issue then needs to be resolved by asking for additional support from the governing bodies, again prolonging the entire process of finally acquiring full ownership over the piece of land in question and diminishing the investors' interest in return.

Furthermore, another interesting point of view on the topic of Serbia's allure for foreign investments was made during the same conference by Stewart Peirson, the managing director of Jones Lang LaSalle's SEE & Romania division. Peirson confirmed that Serbia's real estate market is currently enjoying a surge in foreign investor interest, highlighting the recent sale of the Delta City shopping center as proof of that. However, he has also pointed out an imbalance between the acknowledged growth of demand and the lack of quality property supply in Serbia, advising the local decision makers and builders to focus on constructing good quality 'products' in order to capitalise on the investors' interest. In doing so, he also offered a cautionary tale from neighboring Bulgaria, where the local authorities – after realising the investors' hunger for their market – ordered the construction of a large number of properties without paying special attention to their relevance and purpose, i.e. building too many shopping centres in a single city – Sofia (some even having office towers built on top of them), thus heavily over-saturating the market in question.

In the end, if we were to summarise all of the above mentioned factors, we can conclude that the real estate market in Serbia indeed enjoys significant potential in the eyes of investors, and that efforts are being made to keep it that way. Nonetheless, as with any other large-scale process of its kind, more time and work is needed to properly gauge the areas in which further improvements are needed, before implementing them across the board – starting from the legal framework and moving onto its practical applications in the outside world.

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