Tips from lawyers on how to make the real estate market more attractive for public and investors

Four simple measures can bring an exponential growth in the attractiveness of the real estate market in Romania, according to Roxana Dudau, associate partner of law firm Noerr. Among other things, there is a need for better coordination between public institutions and private companies and a sustained effort on both sides.

Unified building and urbanism legislation

A project in this regard has long been on the MDRAP’s agenda. On March 13, 2018, the draft Government Decision was passed for the adoption of the preliminary theses of the “Territorial, Urban and Construction Code” project, exactly ten years after the initiation of the first such project – the Construction Code in March 2008, by the State Building Inspectorate at that time.

This initiative is more than welcomed by most actors in the field. We hope that it won’t take another decade for the Romanian Parliament to adopt such a code.

Cooperation between the public and the private sector

A clearer and more transparent legal framework would improve the authorities’ cooperation with investors. We must be aware that each new building has an impact on the neighborhood in the city where it is built.

Both authorities and private companies need to be sensitized in terms of town planning and cooperation. The sustainable development of cities implies responsibility on both sides.

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Tax Facilities for green buildings

All new buildings for which the building permit will be issued after December 31, 2020 should be Near Zero Energy Buildings, in accordance with the Energy Performance of Buildings Directive (implemented in Romania by Law 372/2005 on the energy performance of buildings).

Granting tax incentives for green buildings to be built before that date should be a priority for the Romanian authorities. However, only Cluj-Napoca and Timisoara have implemented such tax reductions on buildings. There are other local initiatives, such as in Iasi.

“Even though Bucharest is the city with the largest number of green buildings (1.1 million sqm of green buildings in January 2018), it does not have such a scheme of incentives,” argues Roxana Dudau.

Investment vehicles in real estate

These would be set up with funds from private investors (from Romania, the EU, etc.) and would enjoy a special tax regime, based on the model of Real Estate Investment Trusts existing in other European countries.

An REIT is a way to indirectly invest in real estate, benefiting from two main advantages: the ability to invest collectively, along with other investors, into a fund that is managed by a specialized investment management company and the opportunity to invest in a diversified portfolio versus the usual cases where a sum of money is blocked by investing in a single property.

The first attempt belongs to OTP Bank, who this autumn created OTP Real Estate & Construction, a fund dedicated to retail and institutional clients who want to invest in real estate.