Urban development goes under Realty 2007 spotlight

Bucharest City Hall plans to change the street furniture, buy social housing and also get involved in construction authorization, announced Vladimir Sommer, cabinet director for the Bucharest mayor, present at the first session of Realty. The construction authorizations law will be changed by the end of this year as to allow the municipality to have a word in the process, said Sommer. The City Hall also wants to control developers by getting involved in construction authorizations, which will also help the Bucharest metropolitan area project. When talking about public-private partnerships, Sommer expressed his discontent with the current legislation in the field, although it has been recently modified. The current state of the law offers very long terms for such partnerships. “The implementation of a PPP may take up to a year, from the moment the PPP is launched until the contract is signed,” said Sommer. The PPP law is currently at the Ministry of Economy and Finance to be re-analyzed.

Bucharest metropolitan area has been defined
The Bucharest metropolitan issue was also tackled by Valentin Mircea, partner with Mircea & Partners. “The Bucharest metropolitan area project was recently updated by setting the future metropolis area, which will be announced very soon,” said Mircea.
The future metropolitan area will include Bucharest and Ilfov County at the moment, which is enough for Bucharest's development in the next 10 to 15 years, said Mircea. The metropolitan area is the only solution to Bucharest's lack of space for new developments, as the city cannot expand, said Mircea. Once approved, the metropolitan area project will offer more real estate investment opportunities and will also trigger changes in current legislation regarding constructions and PPPs.
He underlined the fact that Bucharest's neighboring cities, which should collaborate in order to create the metropolitan area, are reluctant for such collaboration in practice, although they are theoretically in its favor.
The property titles issued in the 90's are not very reliable, said Theodor Nicolescu, vice president of the National Authority for Property Restitutions. “The measurement at the time was not very accurate and this triggers problems nowadays,” said Nicolescu. The current problems will be addressed when the general cadastre will be organized, which is most likely to happen this summer, he also said. In the last 17 years, around 10 million hectares of agricultural land were returned via restitution, according to Nicolescu.
Mixed projects have the major advantage of balancing risks for developers, as they include various types of developments with different risk levels. Mixed projects started to take up in Romania as well, said Mirela Raicu, senior corporate consultant with Esop. Sema Parc and Baneasa projects are two such examples, already underway in Romania. Moreover, high buildings which are part of such mixed schemes are a solution to the high prices paid for plots, she said. However, such buildings bear bigger costs, which is a disadvantage for such big projects.
Romania has witnessed a 15 percent rise in housing prices in 2005, according to a study by RE/MAX Romania, presented by Adrian Sischin, regional director. In Eastern Europe, Estonia accounted for the biggest increases, of 67 percent, which is also the biggest increased in housing prices in Europe. The housing boom was among others triggered by the big decrease of interest rates, from 11 percent in 1992 to as little as 2 percent in 2004, said Sischin.
Romania is also one of the “high yielding six” countries in South East Europe, along with Poland, Slovakia, the Republic of Moldova, Bulgaria and Croatia.
Romania currently faces problem with the cadastre system, as most of the regions in the country rely on personal transcripts of land situations, and only the western part of the country has a real evidence of properties, based on land books. Moreover, the communist state, which used to hold ownership of most properties in the country, didn't have a clear property status, which made it difficult for the cadastre offices after 1990, said Mihai Busuioc, general manager of the National Agency for Cadastre and Land Registration (NACLR). The Agency is planning to transfer its hard copy registers to electronic format, as only 3 percent of paper documents are also to be found in electronic format at this moment. The general cadastre, as opposed to the per-demand cadastre, should be introduced starting this year, through a pilot program in four counties, said Busuioc, who spoke at a Mircea & Partners workshop at Realty Forum.

Market offers alternative financing sources
As the real estate market saw in the last two years a particular growth, Stefano Albaroso, CEO Cefin Holding, and Cefin Romania saw spectacular growth in last years. Albarosa sees the bank financing schemes becoming more aligned to western markets. In Albarosa's opinion, the Romanian market is similar to the European one, in terms of interests practiced by the banks, the value of the land and financing opportunities. Though, Albarosa made some suggestions for a more coherent process of investments from the first phase of the project consisting in acquiring the land until the exit phase of the project, when the developers see their profit: “There are things to be improved regarding the property title. An electronic public guide of the cadastral survey should be prepared so that unfortunate events of property's overlapping are eliminated from the start,” Albarosa explained. Besides the property title, other suggestions to be made in real estate transactions refers to a clear legal background for real estate leasing and tax incentives for end-users, when the governmental institutions should give fiscal inducements for buyers and credit lines policies. Adrian Bulboaca, managing partner at Bulboaca & Associates law firm, also underlined alternatives for financing sources outside of banks for investing in real estate. “I think the legislative system in Romania is one of the most developed in Central-Eastern Europe along with the financing resources are available.
Banks are interested in financing the real estate transactions, and not only the Romanian banks but also the subsidiaries of the international ones,” said Bulboaca.
On the main aspects of investing in real estate, Radu Gilescu, senior partner at Gilescu & Partners CHSH highlighted the stability of the market.
“With current prices tending to reach a certain level according to the European trend, I think the local market is moving away from the speculative phase we faced a couple of years ago. The prices tend to gain economic reasonableness. We have a stable national currency, the National Bank relaxed the financing regulations and, as I saw in the previous real estate fairs from Vienna, Munich and Cannes, Romania is the hot spot for real estate investments,” said Radu Gilescu during the Gilescu & Partners workshop.
On the importance of property valuation in financing real estate projects, Constantin Banu, general director at REAG Real Estate Advisory Group, identified the risk growing in real estate transactions completed without a proper advisory expertise.
“The real estate market is making a transition from the gold-rush phase to a stable one, where market trend setters are required,” said Banu in the second session of Realty Forum.
He explained that the importance of valuation in real estate comes with the increasing risk on an expanding market with growing prices, larger number of market players and ongoing real estate projects.
The consultancy market in real estate is also expanding as a result of these market indicators,
“If a consultancy company such as ours registers a yearly turnover of some EUR 50 million. It is an indicator of this growing market and the urge of advisory services, to prevent major cracks,” said Banu.

Magda Purice and Corina Saceanu

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