In the past years the real estate market in Belarus has been booming. It is especially true for the capital and to a lesser extent – for Belarusian province. However, in relation to the province the term “lesser” is not quite appropriate. Thus, while in Minsk price of the real estate during the past four years has grown almost three times higher, in the other developing Belarusian cities it has grown twice higher. The current rate of the prices is obviously not the limit. It is proved by the growing demand for the real estate objects, resulting in the rapid and continuous increase of the prices. This is happening despite of the annual increase of building volumes and constant stimulation of the construction programs (especially in rural areas) by the government.
Now, the market of commercial real estate:
According to estimation of the Information Center of the Commercial Real Estate Center of Tvoya Stolitsa Real Estate Agency the number of requests for office premises in the business centers and administrative buildings that are already opened or still under construction, has grown almost twice more from April. It became obvious that the buyers are not anymore scared by the rate that the prices achieved at the beginning of this year.
Specialists say that the present deficiency of supply, especially in the market of share construction of high class office premises will remain at least until February – March of the next year. This is the time when some companies – construction owners – plan to obtain respective permits and commence construction of the business centers and administrative buildings which are now at the stage of designing.
What is the reason for such economic appeal of investment in construction/purchase of commercial real estate then? When answering this question, one should refer to the numbers: thus, the cost of one square meter of office or trade premises varies from USD 600 to 3 500 depending on location of the real estate object, year of construction, and equipment. Average cost is USD 1 200 (we would like to note that with this rate Minsk has caught up with or is approaching such largest Eastern European capitals as Prague or Warsaw). This is almost 2,5 times higher than in the year 2001. I. e. the investor which invested in the real estate in 2001 has already increased his capital more than by two times in four years. According to the specialists’ forecasts the prices will continue to grow – by 15 – 17 % every year (whereas during the first half of the year 2005 the prices increased by 7,5 %). Besides, there is another very substantial factor – cost of lease. Here the prices vary quite significantly: from USD 10 to 50 for a square meter per month. Average leasing rate is about USD 20. Thus, it is easy to calculate that the owner of the “average” real estate should grant it on lease at an “average” rate for five years in order to return the money invested in purchase of the real estate. One should note that the cost value of the object will increase approximately by 2 – 2,5 times during this period.
Housing market:
According to the statistics, dwelling houses with total square of 426,2 thousand square meters put in commission during seven months of the year 2005. This includes 8,3 thousand square meters of housing constructed at the expense of the republican budget, 44,7 thousand square meters – at the expense of the local budgets, 62,2 thousand square meters – at the expense of the organizations’ own funds, 235,2 thousand square meters – at the expense of the population’s funds, 74,2 thousand square meters – at the expense of the bank loans, 1,3 thousand square meters – with the money received from foreign sources.
In general, in January – July 2005 BYR 346 billion (USD 160,93 million) was spent on construction of dwelling houses, which made 18,9 % of the total volume of investments in the city. This is what the contractors received for the performed amount of work. Therefore, averaged cost of construction of one square meter amounts today to approximately USD 340. Meanwhile, the cost of realization of housing in the share construction market (this is 35 – 40 % of the volume annually constructed and put in commission) is USD 750 – 850 on the average (instead of USD 600 – 700 last year). It is easy to calculate that the prices grow by approximately 20 % a year. Considering the impressive difference between construction cost value and market price of a square meter, one can make a conclusion that investment in construction of real estate becomes one of the most profitable commercial proposals in Belarus.
Opportunities for foreign investment:
It is quite natural that construction boom along with domestic investment attracts foreign investments as well. Due to the latter a range of large construction projects was realized in the country. Forms of the foreign investors’ activity in the construction market of Belarus are quite multifarious. Thus, participation of foreign investors in share construction (as shareholders) of the commercial real estate objects without registration in the capacity of legal entity on the territory of the Republic of Belarus has become quite popular. Also, foreign investors (both legal entities and individuals) may without registration of the juridical person on the territory of the Republic of Belarus purchase commercial real estate, including purchasing at the contests and auctions organized by the government. For this purpose a foreign investor should register as a taxpayer of the Republic of Belarus in the area where the object of real estate is located.
Foreign investors may participate in the contests for development of the allocated land plots. At present this form of activity is being spread due to development of domestic tourism in Belarus as well as construction in rural areas. A glaring example could be the contest for development of the territory adjacent to the Naroch Lake for purposes of development of tourist industry in this area.
The most effective form of business activity in the sphere of commercial lease and sale of real estate is creation of a resident company in the Republic of Belarus or acquisition of a share in the existing Belarusian company.
Besides, one should note that Belarusian laws allow foreign companies to open representative offices on the territory of the Republic of Belarus which may effectively control real estate objects which belong to the foreign investor, organize commercial lease thereof, and do further research of the market.
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