22/02/2016

The rise of the domestic real estate market - Can the Serbian legal reforms attract new foreign investment?

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After a period of stagnation in the real estate in Serbia, development cycle is initiated, and the next three to five years will be crucial for the construction of new projects, said Roman Klott, Managing Director of Atrium Consulting d.o.o., professional Property and Facility management provider in Central and Southeastern Europe main sponsor of the event.

At “1st Serbian Property Development Conference” he pointed out that Serbia has recorded an intense trend of construction of office and retail space. As he stated, greater demand by tenants and Government efforts in supporting investors through handling problems such as complex administration and legal regulations have contributed to the rise of the real estate market.

According to Aleksandra Damjanovic, State Secretary of the Ministry of Construction, Transport and Infrastructure, in order to attract foreign investment, Serbia conducted a comprehensive reform of legal regulations. Among the key innovations are the new Law on Planning and Construction, Law on Conversion of the Right of Use into the Ownership Rights on Construction Land for a Fee and the Law on Legalization.

There are over 1,600,000 illegal properties on the territory of the Republic of Serbia. The aim of the new law is to return to the legal channels, which will enable their energy recovery - said Damjanovic.

As she stated, one of the most important reforms is the system of issuing electronic building permits, which reduced deadline for obtaining permits to less than 30 working days. Damnjanović outlined that the goal of the reform is to start the construction industry of Serbia and encourage new employment. State Secretary illustrated that in December 2015, 1,051 building permits were issued, which is by 56.4% more than in the same month of 2014.

In 2016, our plan is to upgrade the software for electronic issuing of building permits, as well as to continue investing in transport infrastructure. During this year, section of the highway Ljilg-Preljina on Corridor 11 will be completed, and followed by restructuring of PE "Roads of Serbia". We will invest in water transport, in the construction of ports and harbors, and in the regulation of riverbeds - said Damjanovic.

Belgrade has the biggest role in the development of the construction industry. As explained by Pedja Petronijević, general manager of the company "GTC Serbia", the only foreign investment outside the capital are investments in factories and retail parks. Petronijević believes diversification of investment to other cities in Serbia is essential, since, according to him, other cities have also a demand for modern office space.

He emphasized, however, that Belgrade continues to be an attractive market for investment in real estate.

In the region, Belgrade competes with Budapest and Bucharest. When it comes to Class A office space, Belgrade has about 400,000 m2, which is about ten times less than in Budapest - explained Petronijević.

Construction of high-quality office space in New Belgrade continued in 2016. This Belgrade municipality has attracted investors such as "GTC Serbia" Complex "FortyOne", "MPC Properties" with the "Navigator Business Center" project, "Afi Europe" with business park "Airport City", and the Erste Group, which is building the business center "Sirius Offices".

According to Roman Klott, a year and a half ago, the rate of availability of office space in New Belgrade was about 30%, and is currently around 5%. Increased number of tenants is the result of the arrival of new companies in Serbia, with a higher demand and prices which increased rents in this part of town. Despite the large number of projects, development of real estate market continued to delay due to certain factors, most notably-legislation.

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