real estate serbia siepa

8/14/2019 Real Estate Serbia SIEPA

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Real Estate Industry in Serbia


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Contents

TriGranit in Serbia . 2Key In ormation on Serbia . 3Why Invest in the Real Estate Industry in Serbia . 4An Overview o the Real Estate Industry

Basic Industry Indicators . 6O ce Market Trends . 7Residential Market Trends . 8Retail Market Trends . 9FDI in the Real Estate Industry . 11

A rica-Israel Corporation/Tidhar Group in Serbia . 12Acquiring Construction Land

Land Classi cation . 14Leasing Municipality Land . 15Acquiring the Right to Use Land . 16

Conversion o Agricultural Land . 17GTC International in Serbia . 18A Construction Procedure

An Assessment o Urban Conditions . 19Acquiring Land 19Obtaining a Construction Approval . 19A Notice o the Start o Construction . 20Construction . 20 Technical Inspection . 21

Probation Occupancy . 21Obtaining an Occupancy Permit . 21Registration in the Cadastre 21Financing Options . 22

Real Estate Trans erReal Estate Taxes . 22

Relevant Contacts . 23SIEPA Services . 24


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Mr. George BobvosDirector,.Business.DevelopmentSerbia

Why did you decide to start a business in Serbia? TriGranit considers Serbia to be an important target market inSouth East Europe. Based on the international experience o the TriGranit Group, we recognize a great potential in develop-ing large-size real estate development projects primarily in re-tail but also in o ce/residential market segments. We believein the country and its people and are hope ul o developing

our Serbian business over the coming years.

What are your current and uture projects in the country? TriGranit is currently in the nal-stage negotiations with theSerbian Railways related to the completion o the Prokop Rail-way projectBelgrades uture main railway station seated inone o the most prestigious areas in the city. This investment,as well as another TriGranit project (128,000 sqm Belgrades

rst international shopping mall to be built above the ProkopRailway Station), would represent the largest in rastructureproject o this type in Serbia to date. Total development costsare estimated at around 170 million. Given the size o thisinvestment, we expect it to put Serbia in the limelight o re-gional developers community and eventually generate a largenumber o new jobs or local population.

As or other possible uture projects in Serbia, they are cur-rently under consideration.

How do you perceive the business climate in Serbia?

The investment climate is certainly becoming more inves-tor- riendly with signi cant room or urther developmentparticularly in the area o land and construction legislation. Interms o our uture expansion, we embrace the Governmentsinitiative to introduce private ownership o building land andimplement urther urban planning and construction re orms.

TriGranit in Serbia


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O cial Name Republic o Serbia

Form o State Democratic Republic

Political Structure President Unicameral assembly with 250 seats

Area 88,361 km 2

Population 7,440,769 (without Kosovo)

GeographicPosition

South East Europe, central part o the BalkanPeninsula, at the intersection o Pan EuropeanCorridors N o. 10 and N o. 7

Border

In the east, Serbia borders Bulgaria, in thenortheastRomania, in the northHungary, inthe westCroatia and Bosnia and Herzegovina,in the southwestMontenegro, and in thesouthAlbania and Macedonia

Climate Temperate continental, with monthly averagetemperatures ranging between 0.7C in January

and 17.5C in JulyO cial Language Serbian

Main Religion Christian Orthodox

Other Religions Roman Catholic, Islamic, Jewish, Protestant

Major Cities Belgrade: 1,576,000 Novi Sad: 298,000 Nis: 250,000

Currency Dinar (RSD)

GDP (2006) $31.630 bn

GDP pc (2006) $4,199

Time Zone Central European Time (GMT + 01:00)Internet Domain .rs (.yu valid until 2011)

K e y

I n f o r m

a t i o n o n

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Competitive t ax SyStem

Serbias tax regime is highly conducive to doing business.Corporate pro t tax is the second lowest in Europe, whileVAT, salary tax, and social insurance contributions are amongthe most competitive ones in Central and Eastern Europe. Inaddition, businesses in the country can take advantage o abroad range o tax incentives.

Upward Fdi t rend

An FDI stock in Serbia totaled $8.9 bln between 2001 and2006. An all-time record in low o oreign capital last yearreached $4.387 billion. Ongoing substantial legislativere ormsrepeatedly commended by the World Bank andother international institutionsaim to urther acilitatedoing business in the country thereby triggering utureinvestment boom.

Net FDI (USD mln)

2006 4,387

2005 1,550

2004 966

2003 1,360

2002 475

2001 165

Source: National Bank of Serbia

Why Invest in the Real Estate Industry in Serbia

Principal Tax Rates and Tax Incentives

VAT Standard rate 18%Lower rate 8%

Corporate Pro t Tax Uni orm rate 10%

Withholding Tax20% ( or dividends, shares in pro ts, royal-ties, interest income, capital gains, leasepayments or real estate, and other assets)

Personal Income Tax Salaries 12%Other income 20%

Annual Income Tax10% ( or annual income above 5 averageannual salaries)

Social InsuranceContributions

Pension and disability insurance 11%Health insurance 6.15%Unemployment insurance 0.75%

Tax Incentives

A 10-year corporate pro t tax holiday orinvestment over 7.5 mln and 100 employeesCorporate pro t tax credit o 20% o the xedassets investmentCarrying orward o losses over a period upto 10 years

Accelerated depreciation o xed assets

Salary tax base deduction in the xedamount o RSD 5,000 (app. 60)Salary tax exemptions or employees under30 and over 45 yearsSocial insurance contributions exemptions

or employees under 30 and over 45 yearsAnnual income tax deductions up to 50% o the taxable income

Customs- ree imports o equipment basedon oreign investment


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S trong m aCroeConomiC p erFormanCe

In recent years, Serbia has been among Europes astestgrowing economies. Over the past three years, GDP growth

averaged 6.8% with the orecast o 7% or the coming years.GDP per capita o $4,199 is coupled with rapid banking loansexpansion to uel skyrocketing local demand.

Infation in 2006 returned to single digits standing at6.6%, while urther reductions are projected or the comingyears. Macroeconomic stability is also refected in a statebudget surplus or 2006, providing room or an unprec-edented 1.7 bln national in rastructure development plan.

Booming m arket p otential

In Serbia, there is strong demand in the o ce, residential,and retail market. As a result o robust economic growth and

strong FDI orecast, demand or quality o ce space is ex-pected to pick up considerably. Likewise, a residential marketis orecast to experience a sharp upward trend due to a steadyincrease in household income and a wide availability o mort-gage loans at continuously decreasing interest rates. Further-more, yields in the real estate sector tend to be higher thanin other CEE countries, amounting to 9% in the o ce market,4%-7 in the residential market, and 5%-6 in the retail market.

l ow o verhead CoStS

One o the key advantages o doing business in Serbia com-pared to other CEE countries are lower operating costs. Laborcosts in Serbia are comparable to those in EU membership can-didate countries in the region, while standing at merely 40% o their level in Eastern Europe EU countries. In addition, electricity,gas, and other utilities are available at very avorable prices.

GDP Growth Rate

2006* 5.8%

2007** 7%

2005 6.2%

2004 8.4%

2003 2.5%

2002 4.2%

2001 4.8%

* Estimation, ** ForecastSource: Statistical O ce of the Republic of Serbia

Class A O ce Space Yields (2006)

City Cap Rate/Initial Yield

Belgrade 9.0%

So a 7.2%-9.0

Zagreb 6.0%-9.0

Bucharest 7.0%

Bratislava 6.0%

Prague 5.5%Source: Colliers International, Serbia

Total Monthly Labor Costs in 2005 (EUR)

Czech Republic 954Source: EUROSTAT, Croatian Bureau of Statistics, Statistical O ce the Republic of Serbia

Croatia 844

Poland 818

Slovakia 700

Hungary 944

Serbia 363


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BaSiC indUStry indiCatorS

GDPIn the o icial statistics, the real estate industry outputis covered under a broader category, comprising otheractivities not related to real estate (e.g. leasing, R&D). Asa result, the below igures represent an approximation o the recent trends in the sector.

According to the latest data available, 2004 GDP in theindustry gained 2.0% against the previous year. With GDPo around 1.1 bln, the industry accounted or 7.8% o thetotal economic output.

CompaniesIn September 2006, there were 365 companies in the realestate industry, encompassing the ollowing sectors:

Real Estate Development, Real Estate Trade, Real Estate Renting, Real Estate Agencies,

Real Estate Management.

Employment and Salaries

The industry employed 39,489 sta in September 2006. The quali ication structure is dominated by high schooland university-degree holders, accounting or 36.94% and27.48% o total industry employment respectively. Theyare ollowed by quali ied workers with a 10.43% share,while other categories make up a lesser portion o thereal estate labor orce.

In 2006, average monthly net salaries amounted to 491,while total costs per employee averaged 849. However, asharp increase in labor costs was heavily due to local curren-cy appreciation against euro. Over the same period, averagemonthly net salaries in RSD grew by 5.91% in real terms.

Employment by Quali cations (September 2006)

14,587

10,850

4,117

2,646

2,406

Highschool

University Quali ed Elementaryschool

2-yearcollege

Semi-quali ed 1,408

2,132

Unquali edHighly quali ed 1,343Source: Statistical O ce of the Republic of Serbia

An Overview o the Real Estate Industry

Average Monthly Salaries (EUR)

2004 2005 2006

Total costs 734 730 849

Net salary 424 422 491Source: Statistical O ce o the Republic o Serbia

Total Number of Companies by Sectors (September 2006)

130

112

58

4421

Real Estate Agencies Real EstateDevelopment

Real EstateRenting

Real Estate TradeReal Estate ManagementSource: Statistical O ce of the Republic of Serbia


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o FFiCe m arket t rendS

The ollowing market overview was prepared by theColliers International ofce in Serbia. At present, their

reports cover the Belgrade ofce market trends only.

Supply The total supply o speculative o ice space in Belgradehas increased by 40% since the end o 2005, bringingtotal speculative o ice inventory o Class A and Class Bo ice space to nearly 270,000 sqm. Compared to the ClassB market segment, the growth in Class A inventory wassigni icantly higher in 2006 and currently totals around145,000 sqm.

Urban (re)development in the downtown city area re-mains on a low side with New Belgrade being the primarychoice or new o ice development. During the past year,New Belgrade alone accounted or almost 90% o newClass A and 80% o Class B developments.

Vacancy Rates The Class A vacancy rate or multi-tenant/speculative de-velopments is 9%, while the overall Class A and B vacancyrate in Belgrade is 11.7%. The slight increase in 2006 com-pared to the previous year is the result o several leaseexpirations and the continuing increase in overall marketinventory. Available Class A and B o ice space or rent atthe end o the year totaled slightly over 20,000 sqm.

Demand

During the past year, demand or high-quality o icespace was driven by inancial and legal services, telecom-

munication and IT companies, along with the expansionand market positioning o existing banks. Demand orsmall and medium size premises remains robust.

ForecastAs a result o the continuing economic recovery inSerbia, the supply o o ice space is expected to remainrobust during 2007. Along with the expected increasein demand, more and more o ice projects are being an-nounced or the coming years.

Rental Rates The actual average weighted rent or Class A o ice spacerecorded a 7.5% decrease over the last year. The mostexpensive Class A space in the city is still in the centralportion o New Belgrade, where the average net rent is22/sqm/month. Class B o ice buildings command rentsbetween 11 and 17/sqm/month, depending on thebuilding age, location, parking availability, and otheramenities. Converted space averages 10/sqm/motnh.

Office.yield.in.Belgrade.was.roughly.9%.in.2006-higher.than.in.other.CEE.countries

Class A Vacancy Rates in Belgrade (End 2006)

CBD

Broad Center

Total Market

Source: Colliers International, Serbia

7,0%

13,5%

9%

Selected O ce Buildings to Be Delivered in 2007

Building Name Location Area (sqm)19 Avenue CBD 18,000

Airport City Belgrade Broad Center 17,000

Grawe CBD 11,400

Belgrade O ce Park Broad Center 8,000Source: Colliers International, Serbia

Average Rental Prices for Class A Premises in Belgrade (EUR/sqm/month)

182006

202005

212004

222003

232002

252001



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r eSidential m arket t rendS

The ollowing market overview was prepared by theColliers International ofce in Serbia. At present, their re-

ports cover the Belgrade residential market trends only.

Sales Supply The residential market in Serbia began its recovery a ter thepolitical and economic changes in 2000. The period between2001 and 2005 marked the beginning o the new residentialdevelopment cycle, especially in major cities such as Belgrade,Novi Sad, and Nis. In spite o the large increase in residentialinventory recorded during this period, capital investments areyet to occur on the construction scene.

Construction o multi- amily homes has increased by roughly50% every year since 2003, underpinned by the strong marketdemand. The most recent detailed study o residential apart-

ments in Belgrade took place in 2002, at which time Belgradesresidential inventory was 553,307 units (33,935,224 sqm) withan average unit size o 61 sqm.

Residential construction has remained balanced in terms

o unit types in recent years. The breakdown o apartmentsin terms o size reveals that 2-bedroom apartments make up32% o the supply, making this the most popular size; othersizes (Studio & I BR, 3 BR, and 4 BR or more) make up almostequal shares o the remaining stock.

Sales DemandAs a result o the general supply increase and an expansiono housing credit options, the residential market has seen

a urther increase in sales demand. With only a slight difer-ence in price levels o old and new middle-class apartments,many potential buyers are ocused on new buildings that oferquality nishes and acilities appropriate or todays li estyle.Smaller apartment sizes are in the strongest demand.

Rental SupplyOver the past year, the rental supply o high-quality units inBelgrade continued its growth. The supply was mostly con-centrated in the areas o New Belgrade, Dedinje, Vracar, anddowntown, comprising mostly 2- and 3-bedroom units.

Rental LevelsWith a slight decrease noticed on a yearly level, the averageprime rent in Belgrade is 11/sqm/month as o the end o 2006.In the most prominent areas o Vracar, Dedinje, and Senjak,rental levels showed a slight decrease in light o the continuallygrowing supply o quality apartments in those areas. Demand

or rental apartments in New Belgrade has increased along

with the supply over the last ew years, keeping rental ratessteady. Only in rare cases are the most luxurious, large urnished

Belgrade.yields.for.mid-end.category.apartments.vary.between.4%.and.5%,.whereas.for.high-end.apartments.their.level.is.between.6%.and.7%

Belgrade Residential Construction

2006 10,000

2005 7,000

2004 5,000

2003 3,000

2002 2,000



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apartments able to achieve rents rom 17 to 19/sqm/month. These apartments are most o ten situated in the green areaso Dedinje or Senjak eaturing beauti ul yards or in downtownclose to the pedestrian zoneKnez Mihailova Street.

Price Levels The Statistical O ce reported a price increase o 5% in the

rst six months o 2006 compared to 2005 levels. The recordedgrowth can be mostly attributed to constantly improvingcredit conditions, which keeps residential demand at a highlevel. Price levels are expected to continue increasing untillarge-scale developments start to appear on the market.

Including both mid-end and high-end category apart-ments, the sales prices have recorded the ollowing ranges:1,650-2,500/sqm in Dedinje (Belgrades residential area),

1,500-2,400/sqm in Stari Grad and Vracar (downtown Bel-grade), and 1,300-2,100/sqm in New Belgrade.

Rental DemandRental demand or high-quality apartments and housingunits remained steady in 2006. Demand continues to bedriven by embassy sta and personnel o international

companies and organizations. The most desired apartmentunit sizes range rom 100-120 sqm with New Belgrade anddowntown being the most pre erred areas.

r etail m arket t rendS

The following market overview was prepared by the Colliers International office in Serbia.

Supply The most concentrated retail concepts are still to be oundalong high-street locations and within the expandingnetwork o retail warehousing. Numerous shopping mallsare under construction or in the planning phase. The city o Belgrade continues to be the main investment destination,

ollowed by the second largest cityNovi Sad.

Gross Sales Prices of New Apartments in Belgrade in 2006 (EUR/sqm)

Dedinje


Stari Grad

New Belgrade

Vracar

1,4001,900

1,7002,200

1,700

1,6002,300

Mid-end High-end

2,200

Average Rental Rates in Belgrade in 2006 (EUR/sqm/month)

Stari Grad 11

Vracar 12

New Belgrade 10

Dedinje 11



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Shopping MallsIn 2006, the supply o modern shopping malls in Serbiaremained limited with less than 30,000 sqm o leasablespace existing in the capital. Over the past year, the marketsituation improved slightly with the opening o two shop-ping mallsone in Belgrade and another one in Novi Sad.Concerning other parts o Serbia, only major cities eatureshopping centers, which are mostly o smaller sizes andout-o -date.

In 2007/2008, the next mall scheduled or comple-tion is DeltaCity 67, which will bring an additional 30,000sqm o gross leasable area to the capital. In Novi Sad, twoshopping malls are in the pipeline to bring approximately

45,000 sqm o GLA to the city. In the mid term, develop-ment is expected to continue at a rising pace with various

projects scheduled or opening, predominantly in the capi-tal city. New projects will be located in both downtownand suburban locations.

High StreetsHigh streets o Serbian major cities are still the mostdesired way o entering the market. The biggest expansionin todays high street market is coming rom internationalbanks. Among the international ashion retailers, Zaraentered the Belgrade and Novi Sad markets in 2006. In thecoming years, high streets o Belgrade are expected to ex-perience an increase in retail opportunities because o theasset disposal o several state-owned companies.

Retail Warehousing The retail warehousing market in Serbia developed rapidlyand was among the best per orming market sectors in 2006. The existing international retailers Metro (Germany), Agrokor(Croatia), Mercator and Merkur (Slovenia), Interex (France),and Veropoulos (Greece) steadily expand their networks.

In 2006, the ocus extended beyond Belgrade to otherlarge Serbian centers, such as Nis, Novi Sad, and Kraguje-vac. At the end o 2006, the capital saw two major open-

ingsSerbian Delta launched the largest cash-and-carryacility in the Balkans (18,000 sqm on the route towardsthe Belgrade Airport), while Croatian Idea opened anotherhypermarket o 12,500 sqm in New Belgrade.

Retail Warehouse Developments

Name Year o Entrance No. o Outlets

Rodic MB 1998 6

Mercator 2002 3

Interex 2004 4

Tempo 2004 4

Merkur 2005 1

METRO Cash&Carry 2005 5

Super Vero 2005 2

Agrokor 2006 2Source: Colliers International, Serbia

Yields.for.retail.units.in.Belgrades.high-street.locations..are.in.the.range.of.6%-7%


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Two major events that marked 2006 are the merger be-tween Delta and Agrokor, which is due to conclude in 2009and is to enable urther investment in local and regionalmarkets, and the acquisition o local Rodic company by

Slovenian Mercator.

DemandAs Serbias macroeconomic recovery maintains a strongpace, accompanied by increasing purchasing power o thepopulation, the country is experiencing a rising interest

rom international retailers and a consequently higherlevel o market activities. New and existing retailers areexpressing a strong interest in both high-street locationsand new shopping centers.

The traditional high-street areas in Serbian major citieshave witnessed demand primarily rom well-known chainso ashion goods, ast ood restaurants, and inancial in-stitutions. The increasing demand is expected to continuethrough the ollowing period.

Rental Rates The limited availability o space in the Serbian marketcoupled with rising interest rom various retailers is keep-

ing rental rates high or both high streets and shoppingcenters. In light o present and anticipated market condi-tions, there is a low probability o a decline in rental ratesin the next ew years. While the retail rents or the top capi-tal locations reach levels between 50-150/sqm/month,secondary locations along the most prominent boulevardscost between 20-50sqm/month. With the exception o the anchor tenants, net rents within new shopping centersvary between 20-60sqm/month.

Fdi in the r eal e State indUStry

Growing investment opportunities or international real estatedevelopers in Serbia have been re ected in recent FDI gures. The total value o their projects in 2005 reached merely $14.6million, while in 2006 they amounted to $90.6 million.

International developers are led by Israeli investorsA rica-Israel Corporation and Tidhar Group top the list with the 120million rst business park in Serbia, awarded by OECD as thelargest Green eld investment in South East Europe in 2005. Theyare ollowed by GTC Internationals projects totaling 58 millionand Austrian Hypo Alpe-Adria-Consultants pledging to invest66 million by 2009. In addition, TriGranit Corporation is to startlarge-scale construction works estimated at 170 million upon -nalizing the negotiations with the Government, whereas anotherIsraeli companyEngel Group is expected to start the construc-tion o its 160 million residential and business complex in all

2007. Other key players in the local market are Austrian Raifeisenevolution and Uniqa Real Estate Project Construction Company.

Retail Rental Levels in Belgrade (2006)

Location Rental Levels (EUR/sqm/month)

Shopping Centers 20-60

High Streets 50-150

Secondary Streets 20-50

Hypermarkets/Supermarkets 7-12Source: Colliers International, Serbia


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Mr. Gili DekelCEO,.Airport.City.Belgrade

Why did you decide to start a busi-

ness in Serbia?Airport City Belgrade (ACB) is ownedby A rica-Israel Corporation and TidharGroup, one o Israels most success-

ul construction companies. I cameto Serbia around our years ago toexplore real estate business oppor-tunities, already having in mind theintroduction o something di erent

rom the standard o ice building. De-velopers normally identi y a piece o land, acquire it, build on it, and thenlease or sell the property. However,our approach is to build a completemodern business and residentialcomplex beyond the boundaries o the city center. Airport City Belgrade iscurrently the biggest real estate devel-opment in Belgrade with the irst two

buildings o around 20,000 sqm deliv-ered in 2006 and another two o thesame area to be completed in 2007.Altogether, it is a 120,000 sqm plot o landthe largest piece o land ownedby a private company in Belgrade.

Prior to arrival in Serbia, our com-pany had completed developmentsin Russia, Ukraine, Czech Republic,Poland, and Hungary. We choseBelgrade a ter a thorough researcho all other major sites in the region.Apart rom Ljubljana, which is alreadywell developed, our research includedcities, such as Skopje, Zagreb, andSarajevo. Among those cities, Belgradeseemed an apparent priority with its1.5 million population, strong eco-nomic growth, rapid internationaliza-

tion o business activities, and a highlydeveloped construction industry. I

A f r i c a - I

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l and C laSSiFiCation

In Serbia, land is classi ied into two categories: construction land, agricultural land.

Construction land is the land on which structures havebeen built and the land that serves or the regular use o these structures, as well as the land that is designated bythe corresponding plan or the construction o structuresand their regular use.Construction land can be:

public construction land, other construction land.

Public construction land is the land on which publicstructures o common interest (roads, schools, hospitals,in rastructure, etc) have been built, as well as the land des-ignated or the construction o such structures. This kind o construction land is exclusively in state property.

Other construction land is not classi ied as public con-struction land, and, as such, it is designated or the con-

struction o other structuresresidential, o ices, industrialacilities, etc. Other construction land is trans erable and canbe ound in all types o ownership.

Construction land may be used as developed or non-de-veloped land. Developed construction land is the land im-proved with structures which are constructed and intended

or permanent use.Non-developed construction land is land on which:

No structures are erected; Existing structures were constructed contrary to the law; Temporary structures exist.

Agricultural land is subdivided into: cultivable, uncultivable.Cultivable agricultural land encompasses felds, gardens, or-

chards, vineyards and grazing felds. A cultivable land user has theobligation to till the soil or use it in accordance with its purpose.

Non-cultivable land encompasses all other unlisted typeso agricultural land.

Acquiring Construction Land


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Agricultural land can be re-classi ed, i.e. it can be convert-ed into construction land.Other construction land can be acquired in the ollowing ways:

By leasing land or the period o up to 99 years with apossibility o extension through a public bidding proce-dure ( or land under 10,000 sqm) or a tender procedure( or building structures over 10,000 sqm);

By obtaining the right to use landby acquiring a legallybuilt structure, an investor acquires the right to use landunder that structure with a possibility to build new premis-es o even greater area, according to the master plan;

By acquiring land through the conversion o agriculturalland into construction landby acquiring agriculturalland under private ownership with a possibility o con-

version into construction land, an investor acquires theright to build a construction.

l eaSing m UniCipality l and

Other construction land under state ownership can be leasedor up to 99 years under conditions prescribed only by the

municipal authorities. The land is leased through either publicbidding or a public tender.The duration o a leasing contract is being determined

based on the land area, purpose, depreciation period etc. Be-ore the expiry o the leasing period, a lessor and a leasee can

extend the contract period by a mutual agreement. The right o use can be obtained through a direct bargainbetween the municipality in question and the interested partyin the ollowing cases:

Construction o structures or the purpose o carry-ing out activities o state administration and agencies,administration and agencies o autonomous provincesand o units o local sel -government, and organizationsin charge o public services who operate with state undsand assets, as well as other state-owned structures;

Leasing the land to an owner o a structure who has con-structed that structure without a building permit, or thepurposes o obtaining construction permission, i erect-ing such an object is in accordance with the provisions o

the urban plan; Correction o boundaries o adjacent cadastral or con-struction parcels.


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Apart rom the land ee, pad only once, the user continuouslypays a ee or land use, as a type o rental ee. The ee or usingdeveloped public construction land and other constructionland in state property is paid by the owner o the structure. As

an exception, when the object or a part o it is leased, the eeis paid by the lessee o the object or part thereo . The ee orthe use o non-developed public construction land and otherconstruction land in state property is to be paid by the user. The amount o the ee is determined depending on the scopeand degree o the propertys development, its location, accessto amenities, transportation connections to the local or citycenter, business areas, etc.

The land ee varies heavily at the local level. There is anincreasing number o municipalities ofering building land

or lease ree-o -charge, while e.g. in Belgrades prime areasthe ees can run up to 100/sqm. On average, the ee rangesbetween 10 and 60 per sqm.

All city plots are under the state property regime. Eventhough the land itsel is public, the structures built on it areprivate. A person, who owns real estate built on a city plot,automatically enjoys an exclusive right-o -use o the plot.Upon the sale o premises, all the rights on the land under thepremises and the land that serves or the regular use o thepremises are trans erred as well.

a CqUiring the r ight to USe l and

As opposed to long term lease (up to 99 years), the Law onPlanning and Construction introduced the right to use landgranted or an inde nite period o time, based on either:

The ownership o a building on urban land in accordancewith the urban plan;

The intention to construct a building on urban land (theright to use is related to the ownership o a buildinglocated on urban land entitling users to permanently usethe land or as long as they own the building).

The right to use is irrevocable and permanently attachedto the ownership o a building located on a particular land

Most.building.land.can.be.leased.from.a.municipality.for.up.to.99.years.with.a.possibility.of.extension .A.land.fee.averages.from.10.to.60.per.sqm


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lotit is acquired, trans erred and ter-minated automatically with acquisition,trans er or termination o ownership o the building.

The right to use can only be acquiredrom previous holders o that right,including privatization. An investor mayacquire the right to use on a plot o building land rom the party who wasinitially allocated the right to use or asole use or may enter a joint venture withthe original holder o the right to use.

In addition to the costs o acquiringthe construction designated or decon-struction, as well as the costs o acquiringcompanies through privatization, aninvestor is obliged to pay the ee or thedevelopment o other construction land.

ConverSion oF a griCUltUral l and

A plot o agricultural land may be con-verted into construction land with the

consent o the competent bodies andthe payment o a ee or a change o theland use, i approved. For a change o the land use, an investor must submita ormal application containing the ol-lowing: in ormation on the current andintended use o the land in question; acerti cate o the title or the right o use;and an extract rom the detailed urbanplan detailing the possibility o obtain-ing a building permit.

By acquiring privately owned agri-cultural land with a possibility o theconversion into urban constructionland, an investor also acquires the rightto build structures on it.

Apart rom paying the market priceo land, an investor is also liable or the

ee or converting agricultural land into

construction land and the ee or the de-velopment o public construction land.


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Mr. Robert Snow

Managing.Director,.GTC.Serbia

Why did you decide to start a busi-ness in Serbia? There are, o course, many reasons orentering a new market. Serbia present-ed both a challenge and an opportuni-ty or GTC. Firstly, as it is an emergingmarket, one o the principle reasonsis that we perceived a large gap in thereal estate sector and a need or moreo ces, hotels, shopping malls, andquality mid-to-upper level residentialbuildings. Choosing to come here alsorefected our con dence that Serbia is

ull o promiseeverything exists herein terms o opportunity, resources,and skilled workers or the country tocatch up to its more developed neigh-

bors in a short time. The world o business buildings isone which has a very long-term visiono the uture. The needs o today areo critical importance but those o tomorrow are paramount. GTC hasseen in Belgrade a vision o a majorEuropean center o commerce, busi-ness, industry, and transport. Belgradeis in the very heart o the Balkansand at the epicenter o all movementthroughout South East Europe. As theimportance o Belgrade grows, so toowill its requirements or o ce spaceand business parks.

What are your current and uture proj-

ects in the country?GTC HOUSE is the rst o GTC Interna-tionals investment in Serbia. The build-ingcompleted in April 2005 appearedas the long anticipated building, ofer-ing Class A o ce acilities or leasing tothe leading international companies inBelgrade. The modern building is ullyequipped with all high-tech acilities,sophisticated telecommunications, andelegant double height entrance lobbyleading into a covered central atrium.

Our new o ce project 19 Avenue willconsist o two 1st class o ce buildingswith a unique design o 20,000 sqm. The19 Avenue will be completely equippedwith high-tech telecommunicationdevices, ofering not only exceptional

working environment, but also acilitiessuch as a restaurant, bar, storage, andunderground garage.

Other GTC Internationals projects

include GTC Square and Park Apartments.GTC Square is the newest innovative o -ce project located in New Belgrade with

ample parking space, an open interiorcourtyard overarched by translucentcatwalks, and an expansive and majesticatrium. Park Apartments is a top o therange residential building, introducing anew concept o living, with 200 apart-ments, 2-level underground parking, retailstores, tness center, 24-hour receptiondesk, security services, maintenance ser-vices on the spot, and a video interphone.

How do you perceive the businessclimate in Serbia? This is a very exciting time to be doingbusiness in Serbia. In the context o its

GTC International in Serbia


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The construction approval is issued within 15 days romthe date o submission o the application. The approval orin rastructural works is issued by the Ministry o Capital Invest-ment, while the issuance o the approval or other structures isthe responsibility o the city or municipality.

The approval is not obligatory or the construction o auxil-iary structures, nor is it necessary or adaptation or renovationbut it is required or the reconstruction o premises.

Upon obtaining the construction approval, the consultingcompany will start elaborating other documents (e.g. mainproject) or the investor, whereby technical inspection o thedesign must be carried out by another licensed consultant.

a n otiCe oF the S tart oF ConStrUCtion

A ter the completion o building documents, the investorshould select the contractor who will be responsible or thewhole building site and noti y the city or municipality o thestart o works. The investor is obliged to provide the o ce incharge o issuing the construction approval with the name o the contractor, construction start date, and completion targetdate within a period o 8 days be ore the construction starts.Also, an investor must submit:

a con rmed main project, a report on completed technical control, a construction approval, an evidence o payment o compensation or the devel-opment o construction land, and

an evidence that the administrative ee has been paid. Inaddition, the investor must also report to the municipal-ity o ce in charge o inspection that the construction o the structure has started.

The investor can start construction works when the relevant

municipal department con rms the receipt o the noti cationon the commencement o works. The receipt o documenta-tion should be con rmed within 8 days provided the docu-mentation is complete.

Prior to construction, the surveyor should set out the buildingsite, a ter which it will be possible to commence excavations orthe oundation. Upon the construction o the oundation, thecontractor should submit the geodetic survey o built-up ounda-tion, so that the competent body can inspect its con ormity withthe main project. Within 3 days, i everything is in order, a writtencerti cate will be received and the works can be continued.

ConStrUCtion

Throughout the construction stage, the investor must haveconstruction documents (i the main project does not containdetails required or the construction process) and providesupervision.


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t eChniCal inSpeCtion

A technical inspection o a structure isdone upon the completion o construc-tion, i.e. the completion o all the worksspeci ed in the construction approvaland de ned in the main project orupon the completion o a part o thestructure or which an occupancy per-mit may be issued.

Upon the submission o the investorsrequest or the technical inspection,this assessment may also be carried outsimultaneously with the construction

process, i the veri cation o the actualcondition o certain parts o the struc-ture is not possible a ter its completion.

The inspection includes the controlo compatibility o as-built conditionswith the construction approval andtechnical documentation on the basiso which the structure was constructed,as well as with the technical regula-tions and standards applicable tocertain trades or materials, equipment,and installations.

p roBation o CCUpanCy

To ensure the suitability or the useo a structure, an assessment andveri cation o installations, devices,machinery, stability or sa ety o

structure, devices and equipment orenvironmental protection may takeplace. I envisaged by the technicaldocumentation, the commission incharge o a technical inspection maypropose to the relevant o ce to ap-prove probation occupancy, providedthe conditions are met. The probationperiod that cannot last longer than 1year. Upon the expiration o a proba-tion period, an investor is obliged to

submit the results o the probationoccupancy to the relevant o ce.

o Btaining an o CCUpanCy p ermit

To obtain an occupancy permit, theinvestor must submit the main project(with possible changes occurred duringconstruction) which is compatible withthe construction approval and the tech-nical inspection o a structure.

The structure may be put in opera-tion only upon obtaining the occupancypermit. The o ce competent or issuing

the construction approval issues theoccupancy permit within 7 days romthe date o receiving the commissions

ndings which have established thestructure to be suitable or use.

r egiStration in the CadaStre

The nal stage in the constructionprocess is the registration o a structurein the Real Estate Cadastre, a ter the oc-cupancy permit is obtained.

The process o establishing the RealEstate Cadastre on the entire terri-tory o Serbia is under way. By 2010, acomprehensive system o tracking realestate and real estate property rightswill replace the existing records on realestatethe Land Cadastre and Land

Books. The project is aimed at boostingthe security o ownership and real es-tate rights, while leading to a transpar-ent and prosperous real estate market.At present, the Real Estate Cadastrecovers 83% o cadastral municipalities,with the Land Cadastre and Land Booksaccounting or the remaining 17%.

The Real Estate Cadastre containsthe data on real estate, its shape andposition, sur ace area, orm o use, land

ertility, cadastral income, real rightsand rights holders, as well as the dataon encumbrances and limitations.

Unlike the Real Estate Cadastre, theLand Cadastre contains no data on realestate property rights, eaturing in or-mation on plots and structures builton land with respect to their position,shape, area, type o land, land ertility,class, cadastral income, and users.

Lastly, the Land Book is a public recordregistering real estate (land and struc-tures), real rights, encumbrances, andlimitations related to such real estate.

Once the uni ed Real Estate Cadas-tre is introduced, registration o realestate will be done in one placewitha local o ce o the Republic GeodeticAuthority. Currently, the procedure ishandled by a competent court.

Assessment of Urban Conditions

The Construction Procedure

Acquiring Construction Land

Obtaining a Construction Approval

Notice of the Start of Construction

Construction

Technical Inspection of the Structure

Probation Occupancy

Obtaining an Occupancy Permit

Registration in the Real Estate Cadastre


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FinanCing o ptionS

In response to the expanding market needs, project nanc-ing services are introduced by a growing number o localcommercial banks. As indicated in the table, loan conditionstend to vary heavily and may be subject to the negotiationswith a speci c client.

Based on the new Law on Mortgage, citizens are entitled topurchase real estate while in a construction stage or upon itscompletion. In the rst case, banks will accept mortgage claimas collateral, while the unds rom sale o the real estate willserve as collateral or loan repayment.

Real Estate Trans er

An Overview o Construction Loans

Banca Intesa Hypo Alpe-Adria-Bank Raifeisenbank Volksbank

Interest Rate As agreed with client 5.5%-8.0% + EURIBOR n/a 5.0%-6.0% + EURIBOR

Loan Limit From 500,000 Depending on project valueand construction period Up to 45 mln Up to 3 mln (local unds) orover 3 mln (international unds)

Repayment Depending on sale pace Up to 10 years Up to 10 years Depending on sale pace

Grace Period Equal to construction period 1-2 yearsEqual to construction andproject implementation

periodEqual to construction period

OtherConditions

Loan amount up to 85% o project value; available in

Belgrade and Novi Sad

Down payment rom 30% to35%, clear ownership relations

Down payment rom 35% to40%

Down payment rom 25% to30%, establishment o new

company

Source: Commercial banks

r eal e State t axeS

Real estate property in Serbia is subject to threebasic taxes:

property tax, tax on trans er o title, and capital gain tax.

Property tax is payable by all legal entities andindividuals who own or have rights over real estatelocated in Serbia. For a taxpayer who keeps books,property tax on the rights to real estate is 0.40%o the propertys book value, while or individualsand entrepreneurs, the rates are progressive.

Tax on trans er o title over property is payableby all legal entities and individuals who sell rightsin relation to real estate. The taxable base is theprice stated in the contract or the market value o the property with the current tax rate set at 5%.

Capital gain is determined as the diferencebetween the sale price and purchase price o thereal estate. The applicable rates or legal entitiesand individuals are 10% and 20%, respectively.Capital gains can be ofset against capital losses

occurring in the same period, and a capital losscan be carried orward or a period o 10 years.


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S tate inStitUtionS

Serbia Investmentand Export Promotion Agency

3, Vlajkoviceva St. 11000 BelgradePhone: +381 11 33 98 55 0Fax: +381 11 33 98 81 4e-mail: o [email protected]

O ce o the Prime Minister11, Nemanjina St. 11000 BelgradePhone: +381 11 36 17 71 9Fax: +381 11 36 17 60 9e-mail: [email protected]

Business Registration Agency5, Nikola Pasic Sq. 11000 BelgradePhone: +381 11 33 31 44 4Fax: +381 11 33 3 1 41 0e-mail: [email protected]

National Bank o Serbia12, Kralja Petra St. 11000 BelgradePhone: +381 11 30 27 19 4Fax: +381 11 30 27 39 4e-mail: [email protected]

Statistical O ce o the Republic o Serbia5, Milana Rakica St. 11000 BelgradePhone: +381 11 24 12 92 2Fax: +381 11 24 11 26 0e-mail: [email protected]

Republic Geodetic Authority39, Blvd. Vojvode Misica 11000 BelgradePhone: +381 11 26 50 88 6Fax: +381 11 26 51 076e-mail: o [email protected]

www.rgz.sr.gov.yu

r eal e State p roviderS

CB Richard EllisGENEX Business Center A407 6,

Vladimira Popovica St. 11070 BelgradePhone: +381 11 22 23 64 7Fax: +381 11 22 23 64 6e-mail: [email protected]

Colliers International Serbia20, Blvd. Kneza Aleksandra Karadjordjevica11000 BelgradePhone: +381 11 26 63 86 3Fax: +381 11 36 74 53 8e-mail: [email protected]

EC Harris87, Blvd. AVNOJ-a 11070 BelgradePhone: +381 11 21 20 33 4Fax: +381 11 31 32 25 8e-mail: [email protected]

www.echarris.comForton5, Zmaj Jovina St. 11000 BelgradePhone: +381 11 26 35 43 2Fax: +381 11 30 37 50 6e-mail: nradovic@ orton.bgwww. orton.bg

King Sturge6, Blvd. Mihajla Pupina, Usce Tower11070 BelgradePhone: +381 11 22 00 10 1Fax: +381 11 22 00 10 2e-mail: [email protected]

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Serbia Investment and Export Promotion Agency (SIEPA) is a governmental institution committed to success ullyhelping oreign investors and buyers. Created as a one-stop-in ormation-shop, SIEPA has a mission is to support oreigncompanies, seeking to set up or expand in Serbia and Serbianproducers when doing business internationally.Key services ofered to potential investors are ree-o -chargeand readily available:

Providing statistical and economic data, as well as in or-mation on the investment-related legal ramework;

Linking companies to Green eld and existing sites op-portunities, including site visit organization;

Assistance with registration, licenses, permits and otherdocumentation;

Identi ying local partners and suppliers;

Presenting ready-to-invest projects.Our assistance resulted in some o the largest recent investmentprojects in Serbia. The list o SIEPA clients includes compa-nies, like US Ball Corporation, Austrian Knau , Japanese Japan Tobacco International, as well as British Albon Engineering andBianca Alena with almost 400 million worth investment. To help potential investors speed up the completion o theirprojects, SIEPA networks with all FDI-related public and privatesector bodies, including ministries and other governmentalbodies, municipal authorities and local sel -government, build-ing land agencies, tax and customs authorities, statistical bu-reaus, chambers o commerce, and the National Bank o Serbia.SIEPA publications and materials on doing business in Serbia,as well as detailed sector analyses and studies eature numer-ous business opportunities in our country. They are availablein hard copy and can be downloaded rom our web-site atwww.siepa.sr.gov.yu.We would like to invite you to contact our expert staf ready inassisting you and your business interests. Our services are tai-

lor-made to best match your companys needs and requests.Working with us is simple, sa e and costs nothing.


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Serbia Investment and

Export Promotion Agency

Vlajkovieva 311000Belgrade

tel.: +381 11 3398 550ax: +381 11 3398 [email protected]

real estate serbia siepa

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