CorD Special Edition: Real Estate 2018

Guide

2018

Real Estate On The Shortest Route Between East And West

INTERVIEW

Serbia Will Also Be A Leader In Cadastre Reform Serbia this year entered the world’s top 10 countries for the issuance of electronic building permits, leaving some of the world’s most developed countries in our wake. And we have to preserve this achievement ZORANA MIHAJLOVIĆ Serbian Deputy Prime Minister

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e believe it’s possible for Serbia to advance in a short period of time by at least twenty places, compared to its current position of 57th in the area of cadastre, and that the complete implementation of reforms can make us one of the leaders in this field, as we already are in the area of issuing building permits

• What more can Serbia do specifically in your area of competence to improve its ranking on the Doing Business Index?

- Following the introduction of e-permits, the next major reform we are preparing is cadastral reform, which is also crucial to Serbia’s further progress on the Doing Business list. Registering a property in the cadastre currently requires visiting five or six places, the procedure is too complicated, regulations enable major obstructions, while our goal is for the entire procedure of registering a property to be conducted in one place, at the offices of notaries, and for everything to be completed in just a few days.

That is a major task ahead of us.

There’s no standing still, because countries that don’t work constantly to improve their

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regulations quickly lose their position. Serbia has exclusively advanced over the last three years and our goal is to enter the world’s top 20 countries in terms of conditions for doing business. To achieve this we must continue at the same pace, further improve the e-permit system, reform the cadastre and implement all other reforms – implementing the laws on bankruptcy and on companies, and abolishing para-fiscal charges.

• At your ministry do you conduct analyses about the impact of constructing major transport projects on real estate sector growth?

- The value of works carried out by companies from Serbia throughout the entire territory of the country in the third quarter of 2017 was up 6.3%, expressed in fixed prices, compared to the third quarter of 2016. Viewed in terms of

Registering a property in the cadastre currently requires visiting five or six places, the procedure is too complicated, regulations enable major obstructions, while our goal is for the entire procedure of registering a property to be conducted in one place, at the offices of notaries, and for everything to be completed in just a few days

regions, the value of works carried out at fixed prices increased the most in Belgrade, by 23.2%, followed by southern and eastern areas of Serbia, by 2.9%, and then in theVojvodina region, by 1.8%.

When we view the real estate sector alone, the value of construction works in the third quarter of 2017 is 29.1% higher than in the third quarter of 2016, expressed in fixed prices.

Completion of the construction of Corridor 10, the intensive construction of Corridor 11 and the modernisation of the railways have a very positive impact on implementation in all sectors of the construction industry and, consequently, also on the real estate sector.

• How much does the opening of key corridors represent an incentive for the construction of commercial real estate or greater FDI in parts of Serbia that were previously difficult to access?

- Every newly constructed road, especially those connecting certain cities with the most important European roads, is also changing the image among investors, who want to transport and export their products in the shortest possible times and at the lowest possible costs. If that was not the case, 55 new factories wouldn’t have opened right beside Corridor 10 in the previous period. With new factories, with the occupying of industrial zones, there is certainly an incentive for the development of commercial real estate, especially when the average time

REAL ESTATE

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When we view the real estate sector alone, the value of construction works in the third quarter of 2017 is 29.1% higher than in the third quarter of 2016, expressed in fixed prices

Considering all the projects currently being implemented, and the fact that the fourth quarter of 2017 has not yet ended, we can expect a further increase in the construction sector’s share of GDP in 2017

The reform and adoption of the new law on cadastre registration will enable the entire job to be completed in one place instead of six

for issuing building permits is about six days and that applications are processed in a fully electronic procedure. With the introduction of e-permits, apart from the fact that there’s no more circling counters, thereby saving time and money, investors have gained another important advantage with this system in terms of predictability and transparency, as there are no “hidden costs” and they can monitor every stage of the procedure.

• Do you have information on the impact of road network development on the logistics sector, in terms of the construction of large warehousing facilities and the like?

- Serbia is the shortest route between east and west and, with the completion of works on Corridor 10, this year alone our highways were crossed by about 17 million more vehicles than three years ago. A developed road network is certainly one of the main preconditions for the development of the logistics sector, thus for instance we already have a large Delhaize distribution centre built in the vicinity of Corridor 10, which Ikea is immediately beside.

Operations will soon also commence at the Lidl distribution centre, which is likewise being built alongside Corridor 10. The recipe is clear: only high-quality infrastructure brings investors and their logistics, which is why Serbia is investing so much in this area.

• How would you evaluate overall investment and growth opportunities in the real estate and transport infrastructure sectors?

- The two most important things that every investor seeking to open a factory looks for when deciding where to locate – whether it’s a country, a particular region or a municipality – is the infrastructure connectivity and the time needed to obtain various permits.

Serbia has also made progress in constructing infrastructure and improving connections with neighbours, and in terms of procedures for issuing building permits, where we are ranked

10th in the world according to the World Bank.

All this represents a clear signal for investors that Serbia is a good place for investment.

Here I would highlight the project we are currently working on to construct around two million square metres of apartments for members of the army, political and security services, which we want to expand to young married couples and scientists and which would come at a very

In 2017, according to official statistics, there was significant growth in construction-dependent industries, such as cement production, which grew by more than 10 per cent in the first quarter alone, compared to the first quarter of 2016 affordable price and under special conditions.

This project will further boost the construction and real estate sectors.

• How much will the construction sector contribute to GDP growth this year and what are your estimates for the next two to three years?

- Considering all the projects currently being

implemented, and the fact that the fourth quarter of 2017 has not yet ended, we can expect a further increase in the construction sector’s share of GDP in 2017. The construction sector’s share of GDP increased in the previous three years from 4.3 to 6.2%. This means that we are very close to achieving our goal – of the construction sector contributing seven per cent to GDP. Also contributing to this will be changes in the regulations proposed by my Ministry, which will further reduce investors’ costs. Specifically, by amending the Law on Republic AdministrativeTaxes, we have proposed the abolition of seven administrative taxes, which will reduce investors’ costs by 5.7% of the value of the property. Among others, it includes the abolishing of the highest tax linked to construction, for the issuance of an operating license, which will nolongerrepresentaparafiscalcharge.

We expect the setting of the level of charges on the basis of the real costs of the competent authorities will act to stimulate new investments, which were previously in lower volumes than could overwise be expected precisely due to the unjustifiably high levels of fees and charges.

• Do you have an estimate of how much these works (road construction, major civil engineering works etc.) have contributed to the growth of activity in related sectors?

- It is well known that construction and infrastructure works have a positive impact on other branches of the economy, i.e. increased activity in this area has a multiplier effect. In 2017, according to official statistics, there was significant growth in construction-dependent industries, such as cement production, which grew by more than 10 per cent in the first quarter alone, compared to the first quarter of 2016.

• When will we see tangible progress in the organisation of the cadastre and what will LUXURY REAL ESTATE GUIDE

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this mean specifically for real estate sector development?

- I expect the new law on cadastre registration to be adopted in the first quarter of 2018, and we will strive to prepare all the bylaws in parallel, in order for the law to be implementable immediately. This is important because the more efficient work of the cadastre saves time and money, and increases predictability in business, but also because of Serbia’s ranking on the next list of the Doing Business Index, as it will enable enough time for it to start being implemented and to be taken into account during next year’s ranking process.

The reform and adoption of the new law on cadastre registration will enable the entire job to be completed in one place instead of six. At this point, anyone who buys real estate must visit at least five counters, including the cadastre, the tax administration and the local tax administration. The objective of the reform is for most of this work to be conducted in one place, at the office of the notary. The Notary would complete the inspection of the Real Estate Cadastre, authenticate the purchase agreement, and then send it in an electronic procedure to the cadastre, which would forward it on to the Tax Administration and the local tax administration.

The end goal of cadastre reform, together with the new e-space reform, which will introduce electronic procedures for approving planning documents, is for citizens to receive an efficient service in this area, and for Serbia to additionally improve its rating on the World Bank’s Doing Business list.

In practical terms, the introduction of ecadastre and e-space means that the entire construction process, from the preparation of planning documents, via the issuance of permits, to the registering of whatever is being built, will be done in a simple, fast and electronic process.

The cadastre is not the only reform we are implementing that has an impact on the real estate sector. A lot has already changed, and the real estate market was already set in forward motion with the adoption and implementation of previous laws. Here I am primarily referring to the Law on Planning and Construction, as well as the laws covering the conversion and legalisation of properties.

These processes are all interconnected.

Through the legalisation process, we help to legally protect houses and flats that were erected illegally, among other reasons due to a lack of

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planning documentation and permits that could entail waiting for up to several years. On the other hand, with the introduction of e-permits and the complete regulating of the work of the cadastre and planning documentation, we are creating conditions in which nobody will ever have a reason to build without a permit.

• How much has Serbia advanced in managing complex projects in your domain, including

For successful reforms it is crucial to have joint work and public debates, and to talk with everyone in the country and the economy, because there is a certain amount of resistance to every reform, and broad consensus is the best way to ensure laws can be properly applied the professional and financial management of these projects?

- Changes in project management are one of the main reasons why more than 150 kilometres of new sections of highways have been built and more than 200 kilometres of railways modernised in the last three years.

It is today known precisely how priorities are determined and on what basis, and it can no longer happen that the state borrows without existing project documentation. Care is also taken to ensure the bulk of the expropriation is completed before works start, to ensure commenced works are not late halted due to unresolved property issues. In the Ministry we have also applied a management method in the

sense that today a mentor is responsible for each particular project, whether it’s leading a project on a road or railway section, a bridge, a port or a factory.

The reason many projects are only being finalised today is partly due to the fact that we previously didn’t have an established system of management and accountability for what is being done. The consequence of that is that we had projects that ground to a halt, with the state paying millions in penalties.

There is no project in the last three years that hasn’t been finalised, and the implementation percentage of the Ministry I head, when it comes to capital projects, has been above 95 per cent for the last year or two. We expect a similar result this year too, given that significant payments are usually made at the end of December.

• In which ways does the Ministry develop cooperation with real estate sector experts and investors?

- Through the system for the electronic issuance of permits (CEOP), the Ministry is in constant communication with investors and experts from the real estate sector. One of the forms of cooperation is the organising of training courses and seminars, where we address specific problems and provide professional assistance and support.

I believe that one of the main reasons the laws we’ve adopted have yielded good results is that we included all interested parties in their preparation, from various business associations and non-governmental organisations, to experts from universities and the private sector. The best example is the adoption of the Law on Planning and Construction, the drafting of which included the participation of USAID, NALED, the Chamber of Commerce, the Foreign Investors Council, GIZ, AmCham and many other organisations and institutions.

We even sent this law to institutions that we might not have needed to for their opinions, in order for us to incorporate all useful suggestions and gain a high-quality, implementable law.

I believe that without such an approach we wouldn’t have had the kind of result we have today. For successful reforms it is crucial to have joint work and public debates, and to talk with everyone in the country and the economy, because there is a certain amount of resistance to every reform, and broad consensus is the best way to ensure laws can be properly applied. ■

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CORPORATE NEBOJŠA ŠURLAN, DIRECTOR OF THE BUILDING DIRECTORATE OF SERBIA

People Are Building, But Also Buying “We are planning a new project for the coming year and the start of construction of a residential facility in Block 63 in New Belgrade”, announced Nebojša Šurlan, Director of the Construction Directorate of Serbia, for CorD

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he Building Directorate of Serbia has been managing investments in construction and projects of national importance for 18 years.

Its director, Nebojša Šurlan, explains that the “real estate market has registered constant growth during the past two years.”

- There are several foreign investors present, and the reason lies in legislative improvements, leading to more efficient administrative procedures and greater legal certainty in doing business for investment companies. Data indicates that during the past year the total residential fund was increased by around 5,000 apartments.

So, people are building more, and they are also buying more. The conditions for buying an apartment are currently extremely favourable, since interest rates for housing loans are nearly twice below the values from around ten years ago, so banks are offering their clients housing loans at rates of around three per cent. Regarding loans for those buying homes in the new settlement called Zemunske Kapije, built by the Directorate, fourteen banks have signed annexes with NMIC for providing loans from the zero-phase of construction, with

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interest rates starting as low as around 2.6%, representing a record low in interest rates for housing loans. For several years now the Directorate has been approving interest-free loans of up to 9.1% for those buying their first apartment and holding the right to VAT refunds. This represents additional support to be used by buyers to secure a down-payment for a housing loan.

• Which of the Directorate’s projects would you note as above-average in success, primarily regarding aesthetics, but also regarding the use of modern technological and construction achievements?

- I would note our current project of building the Zemunske Kapije settlement.

Within the area of the former “Aleksa Dundić” barracks in Zemun we are building a modern settlement, with 1,700 apartments, i.e. around 200 thousand square

We are proud of the Zemunske Kapije project, a settlement with 1,700 apartments where, in addition to our previous experience in construction, we are applying new and modern designs metres of residential-commercial space.

We are making an effort to apply our past experience and lessons learned in this project, to be better and more successful.

The architectural design for the complex is modern and interesting. The settlement

will gravitate towards a central square, a pedestrian zone to be equipped with active features and lighting, as well as numerous commercial units, such as restaurants, cafés and shops. We made sure to provide quality thermal and sound insulation, so we envisaged a façade sandwich wall with exceptional thermal properties.

The apartments will be connected to the district heating system, with the option of regulating the temperature within the apartments and charging for heating by use. For office spaces we planned a heating system using heat pumps. In order to raise awareness of the importance of saving energy, LED lights have been envisaged for lighting hallways, stairways and halls, powered by photo-voltage systems on the roofs of buildings. We have also worked on innovations to the security and video surveillance system etc. I believe we will be proud of this project and that Zemunske Kapije will be a beautiful and comfortable place to live.

• What trends do you expect in 2017 for the construction sector and what are the Directorate’s plans for the coming year?

- For 2018, the Building Directorate of Serbia is focused on the construction of residential facilities in the Zemunske Kapije settlement, though we will complete two buildings in the Sunčana Strana settlement in Novi Sad, and we are also planning to start a new project - the construction of residential facilities in Block 63 in New Belgrade. ■

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CORPORATE BRYAN BEATON, MANAGING DIRECTOR, NAI ATRIUM

Company That Makes A Difference

Not only does Atrium sell and lease residential and commercial real estate, but is also a leader in the valuation of real estate assets, says NAI ATRIUM Managing Director Bryan Beaton

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ai Atrium isn’t just a real estate company. Its portfolio includes a large number of services both in Serbia and elsewhere in the world.

Bryan Beaton, managing director, has been working as a real estate expert in Belgrade and the region for 13 years. His goal now is to establish NAI as a market leader.

Stressing that NAI ATRIUM has been on the market for about 12 years, Mr Beaton notes: “We do a wide variety of real estate advising, such as Feasibility Studies, High-

CORPORATE AIRPORT CITY

A-Blok were indicating strong sales results.

• How would you evaluate construction industry trends in 2018, and where do you see an opportunity for your own further development?

- Atrium sees an opportunity to advise clients and ensure they are making the best decisions. The best time to engage Atrium is at the project concept and land purchase stage, to ensure the correct product is developed for the best market sector. Atrium can advise in all stages of development, from the acquisition of land to the sale of the end product.

In the end, having experienced advice will save the client money. ■

Promotion Of The Calendar 2018

Airport City Belgrade hosted a promotion of its 2018 calendar, inspired by the works of René Magritte.

What is the connection between this famous Belgian surrealist and Serbia’s biggest business park?

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t has already become a tradition for Airport City to set the creative benchmark extremely high for designers and photographers attempting to reimagine the visage of glass façades and floral parks in some completely different discourse.

This year’s homage to Magritte follows last year’s romantic and exquisite photographs of M. Trajković -using an antiquated technique from the early days of photography in the service of an unusual rhapsody at ACB, the previous year’s artistic movement and contemporary dance with the visually

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est and Best Use Studies and advising clients on acquisition and disposals of real estate. Moreover, we have a very large team of engineers and financial experts who keep our clients’ real estate assets in prime condition through property & facility management, technical maintenance, cleaning services and energy efficiency advisory services. The construction industry in all market sectors are in a boom (Up) cycle. This was sparked by low interest rates and strong occupier demand, which causes rental and sales prices to strengthen. The residential development market was the first to start significant development, when Central Garden and

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cold surfaces of the façades and rooftops of New Belgrade, and 2013’s black & white fashion photography of minimalised forms in a business environment...

Always ready to surprise and boldly try something new in building this otherwise unparalleled and impeccable business concept – the first business park in our country.

As stated by project director and ACB CEO Adir El AL, Airport City will continue to develop along with other projects of the same group of investors, such as the major new Skyline project. ■

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FEATURE EMERGING TRENDS IN REAL ESTATE®

Reshaping The Future In 2018

Europe’s real estate industry remains “cautious but positive” as it comes to terms with today’s low-return market and the longer-term disruptive forces of technology and social change

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merging Trends Europe reveals an industry that is buoyed by a brighter general economic outlook and, in turn, stronger occupier demand for much of Europe than previous years.

Continental European markets are benefiting from a relative slide in sentiment towards the UK, where, despite some semblance of normality returning to investment volumes in 2017, there is nonetheless widespread concern over the economic impact of Brexit in 2018 and beyond.

In contrast, following the election of Emmanuel Macron, interviewees are more upbeat about France than they have been for years. Germany, meanwhile, is consolidating its position as Europe’s safe haven for capital.

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According to Emerging Trends Europe, Germany accounts for four of the top six leading cities for overall investment and development prospects in 2018, with Berlin once again at Number 1. Though values in the German capital have rocketed over the past year, industry leaders believe the growth is sustainable, supported by a rising population and a vibrant technology sector.

The dominance of the German cities is broken by Copenhagen, which claims

Many leaders believe change is long overdue, but Emerging Trends Europe reveals an industry that is beginning to open its eyes to new entrants, new partnerships and new business models second place – jointly with Frankfurt – following an impressive ascent of the rankings over the years. Domestic and international players alike are drawn to the Danish capital for its strong employment growth and lively tourist trade.

Despite the brighter general outlook in this late-cycle market, there are enough warning signals to prevent confidence slipping into complacency. Historically low yields, a collective pressure to invest and a scarcity of available core assets are all uppermost in the minds of the industry leaders canvassed for Emerging Trends Europe. A rise in interest rates is a prospect that was not evident a year ago.

And when it comes to the geopolitical backdrop to business, international instability remains a big concern.

At the same time, the European industry is looking far beyond 2018 – and well beyond traditional real estate boundaries.

Many leaders believe change is long overdue, but Emerging Trends Europe reveals an industry that is beginning to open its eyes to new entrants, new partnerships and new business models.

The rise of co-working has been a notable phenomenon – as part of a wider real estate response to changes in how we work, technology and the in-vogue, “space-as-aservice” movement. A mixeduse approach to development is another noticeable movement undergoing a 21st century re-boot, recognising continued urbanisation trends, changing patterns of urban living and a more sophisticated understanding of the economic benefits of “good” densification. And increasingly, boundaries between real estate, social infrastructure and wider investment in infrastructure are becoming blurred.

Real estate is being reshaped by social, demographic and technological change.

And as the industry leaders interviewed for Emerging Trends Europe make clear, they are not simply talking about, but acting upon, this challenge. ■ Source: Urban Land Institute

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