Tag Archives: bureaucratic barriers

Industrial parks

Koshcheyev, Sergey. “Ravil Muratov: Why dirty Moscow? Why don’t you build here?” (“Ravil Muratov: Zachem zagryaznyat’ Moskvu, luchshe davayte stroit’ u nas”), BiznesOnline, 3 June 2010. 22 July 2010 http://www.business-gazeta.ru/article/25010/16/.

Article discusses different regions’ systems of industrial parks: Moscow Oblast doesn’t invest a kopek in them, but leaves their construction up to investors; Leningradskaya and Kaluzhskaya Oblasts rent land with infrastructures; and Tatarstan offers ready-to-operate facilities.  This can serve to lessen concerns of entrepreneurs that new niches in markets will disappear before necessary capital is gathered to begin production: this way, the government takes on the obstacles of land registration and re-zoning, often a two-year process.  In Moscow, however, the returns on industrial parks in 2009 reached 5 trillion rubles.  Both the Republic of Tatarstan and Moscow Oblasts have programs for bargain mortgages on residential spaces in these parks.

Russian administration plans to nullify land category divisions

“Administration of Russia plans to introduce nullification of land category divisions” (“Pravitel’stvo Rossii planiruet provesti otmenu deleniya zemel’ na kategorii”), World Heritage Sites, 2 March 2010. 27 July 2010 http://rpmira.org/news/468.

Explication of new legislative reforms, which will most notably end land classifications (i.e. agricultural; urban; industrial; special reservations; forest reserves; water reserves; land reservoir).  The goal of the new law is to decrease the pressure of bureaucratic corruption in land transactions and rezoning processes.  The 52 items amending current legislation should go into action in 2011.  In place of the complicated system of land categories, a Ministry of Economic Development representative says, the structure of allocated use for land plots will be strengthened through renewed territorial planning and city zoning plans.  The law will also impose penal tax rates for enterprises sitting on unused state lands, which administrators hope will push these enterprises to either use or dispose of the lands, removing the burden of “blocked lands,” which otherwise would be well utilized.

Another aim of the legislation is to increase transparency of land transactions and accessibility: information about available plots will be posted on the land Cadastre’s new online database, and all land will be required to be sold at auction.  The distribution of permissions to build on land should be simplified, and will be overseen by the administration.

Braverman’s Land Patrol

Stupin, Ilya. “Braverman’s Land Patrol” (“Zemel’nii patrul’ Bravermana”), Ekspert 41, 26 October 2009, 28-34. 28 June 2010 http://dlib.eastview.com.ezproxy.middlebury.edu/browse/doc/20828585.

An examination of the federal government’s practice of distributing seized land in auctions to developers via the Residential Construction Development assistance fund (RZhS Fund).  The new government organization, an initiative of Medvedev’s aimed at creating a renewed market for construction, has begun seizing land from agricultural institutes on grounds of underuse.  Developers in Tyumen’, Kirov, Cheboksarakh, and Kursk have already begun leasing these lands, promised the opportunity to privatize the land after 9-11 years of use.  The article criticizes the RZhS Fund institution as short-sighted, as it is so far unclear as to who will consist the buyers and renters in this new, real-estate-flooded residential building market.  Although, both RZhS Fund head Aleksandr Braverman and construction business heads credit the Fund’s creation with the streamlining of bureaucratic processes and incentivizing of developers’ building-up and eventually privatizing the plots.  Controls on where developers can set rent rates, as well as insufficient budgetary funds allocated for the RZhS count among the Fund’s problems.

Quoting from an interview with Kirov Oblast governor, Nikita Belikh, the second half of the article examines what may be the RZhS’s greatest weakness: a lack of a central region development plan and poor cooperation with the regions in which these infrastructure-less lands are being auctioned.

Land taxes increase 50 times over

“Land taxes increase 50 times over” (“Zemel’niy nalog podorozhaet v 50 raz”), Agentstvo “Kadastrovie Novosti”, 11 September 2009. Federal Cadastre Agency for Real Estate, Media Materials: 14 July 2010 http://r41.kadastr.ru/news/media/1059085/.

Reporting on land tax raises as a result of new Cadastral evaluations.  Land values in Samarskaya Oblast are up 40-60%, in Rostovskaya Oblast they have increased 5 times over, and in Smolensk Oblast they are up 47.7 times.  Rosnedvizhimost’ officers say that tax rates have not yet been adjusted to new market conditions coming after a peak in the land market in late 2007/early 2008.  A managing partner of Miller Samuell Real-Group says these taxes “will simply kill any proprietor and will place a cross on the back of any business.”  In Smolenskaya Oblast, values of land plots under industrial enterprises have increased 47 times, which specialists say will harm production costs, productivity of local industry, profits, and competitiveness.

Problems for other enterprises and administrative bodies have arisen: in Moscow, City Hall is threatening terminating developers’ contracts for residential construction on some 5 million square meters of land that Rosreyester is refusing to register.  The Moscow Oblast Forestry Management has gone against federal recommendations in completing some of its recent land transactions; similar forestry land-use scandals have taken place in Petersburg and Leningradskaya Oblast, as well.

Note: Recent (in action since January 2010) changes to the land tax code are outlined at http://taxpravo.ru/analitika/statya-71574-popravki_po_regionalnyim_i_mestnyim_nalogam_v_2010_godu.

Perpetual land – for three years

Vasil’eva, Yuliya. “Perpetual land – for three years: Business asks to postpone the buy-out deadline for land plots to Jan. 1, 2013” (“Zemlya bessrochno – na tri goda”), Rossiiskaya Biznes-gazeta 692, 3 March 2009. 1 July 2010 http://www.rg.ru/2009/03/03/zemlya-vikup.html.

Summary of the history and current state of the Land Code amendments; stresses business’ desire to privatize/restructure their land use, but inability to do so due to bureaucratic barriers and high buy-out prices.  Power-mongering and super-control of the restructuring procedures on the part of local powers also complicate the conditions in which businesses were being required to buy-out their land.   The decrease in businesses’ liquid funds due to the crisis—funds that would be needed for land transactions—also increases the hardship.

In addition to these issues, RSPP department head Irina Kotelevskaya notes the lack of a “good register of land territories” as another complicating problem.  In the federal Duma’s Committee on Property, “it has been noted that in crisis-time conditions, with the increase in the price of credit and the insufficiencies of working capital at many industrial enterprises, the direction of significant monetary resources towards the organization of the buy-out of land plots might just lead to a worsening of their financial situation all the way to near-bankruptcy.

Land is looking for an owner

“Land is looking for an owner” (“Zemlya ishchet sobstvennika”), Agentstvo “Kadastrovie Novosti”, 18 February 2009. Federal Cadastre Agency for Real Estate, Media Materials: 14 July 2010 http://r41.kadastr.ru/news/media/805304/.

A step-by-step description of what must be done by Vladivostok enterprises wishing to restructure its land use from permanent (perpetual) use into private ownership or a rent.  “The procedure for restructuring land plots is both technically and judicially complicated and multiphase.  Realistically, it can take no shorter than six months. . .”  Enterprises, paying for all these services themselves, must order an official topographic map of the property from an authorized organization (though these sometimes turn out to be poor quality); they must have documents drawn up stating how they desire to restructure their land; they must arrange for a cadastral evaluation of their land; and finally submit these items to the territorial division of Rosnedvizhemost’ and the Department of Land Resources.

Profit spot: Land races

Terent’yev, Ilya. “Profitable spot: Land races” (“Dokhodnoe mesto: zemel’nye gonki”), Vedomosti 199 (1973), 22 October 2007.  23 July 2010 http://www.vedomosti.ru/newspaper/article.shtml?2007/10/22/134777.

Informative cataloguing of recent changes to the land market of the region up to 30 kilometers outside the Moscow ring road (MKAD), as a need for infrastructure to support growing numbers of suburban dwellers attracts commercial and industrial land buyers.

In the demand structure of the Moscow suburban land market, pre-crisis buying-up of land by speculators for cottage (individual house) construction has been replaced with developers and investors buying land zoned for industrial use, intending to launch manufacturing and building infrastructure; large retail firms and foreign logistic operators are especially active.  Since the completion of new residential complexes and houses, prices on industrially-zoned lands have gone up in anticipation of developers’ seizing on the opportunity to cater to new suburban residents: 50 kilometers from the MKAD, industry land costs $9000 per 100m2, and 10 kilometers from the MKAD, it can be $30,000 to $35,000 per 100m2.  These prices seem to scare foreign companies the least, as they often invest in these land with long-term plans in mind.  Competition among supermarkets and commercial chains (Auchan, Perekrëstok, IKEA, etc.) is expected to increase.

Side note: French chain Auchan purchases the land used under its supermarkets.  Although standard Auchan stores are 12,000-14,000 m2, the most recently opened Russian store in Petersburg was 9,000.  In Petersburg, Auchon representatives say the opening of new branches is in question due to the lack of desirable land available for purchase.  Additionally, the company has begun to experiment with different formats for new garden and bargain supermarket chains across Russia, the sizes of which range from 3,000 to 5,000-7,000 m2 (see http://www.bn.ru/articles/2009/10/14/49745.html and http://realty.lenta.ru/news/2009/12/11/raduga/).

Administration has little reason to block the increased purchases of land, as the population increase in the Moscow suburbs strains financial resources on the region budget for developing infrastructure.  However, difficulties remain in the process of land acquisition.  In the opinion of one commercial real estate specialist, those companies that have already successfully bought land in the region have less difficulty in obtaining more land for their enterprises than others; they have the necessary experience, and presumably, the capital and credit, to purchase non-agricultural land and to apply for the land’s rezoning as industrial land, taking on the risk that this back-door purchase strategy might not work.  However, forecasters speculate that landlords will next year see and fill the empty hole in the supply-side of the market. Accordingly, it seems administration will be less inclined to fulfill rezoning requests of this sort, and that prices will continue to grow.  Swiss cosmetics company Oriflame decided to buy a 40-hectare plot in an under-construction industrial park for 175 million euro, though investors expect a quick profit turnover once the factory begins work in 2013 (http://rus.ruvr.ru/2010/02/27/4878971.html).

“Many proprietors simply hold back their land, waiting until it becomes more expensive (i.e. private landowners holding property rights to 5-10 plots in the most in-demand areas of Moscow Oblast).  This way, a tacit agreement about the regulation of the market is in effect: a limited quantity of land goes up for sale in order to not saturate the market and to preserve the deficit of liquid land.”  In some cases, it is necessary to be personal acquaintances with sellers: “Sales [in these regions] carry a political character.”

Also: “Industrial lands towards Kiev Highway get expensive,” Arendator.ru: Commercial Real-Estate, 23 April 2008.  26 July 2010 http://www.arendator.ru/articles/1/art/21122/.  The 30-40% growth rate of land prices along the Kiev Highway outside of Moscow went up to 58% between 2007 and 2008.

Note: This falling of prices is an interesting fulfillment of a favor, with which the RSPP came to Medvedev in 2005, asking to lower prices for industrial land (Kommersant, 46.3130, http://www.kommersant.ru/doc-y.aspx?DocsID=555248).  It is conceivable that the barriers to land purchases (i.e. “political character,” etc.) are now what should be dealt with.

The Surveyor

Belykh, Anton.  “The Surveyor” (“Zemlemer”), Biznes-Zhurnal 7, 10 April 2007. 15 July 2010 http://www.business-magazine.ru/trends/government/pub282369.

Survey of Moscow land reform.  Article discusses the unwillingness of the Moscow bureaucracy to let go of land ownership, despite the April 2006 passage of No 431-PP “On the transfer of land plots in the city of Moscow to private ownership,” which was aimed at bringing Moscow land legislation and procedures in line with the federal Land Code.  More precisely, it was to change what had been, for all intents and purposes, a non-existent procedure for land privatization into its first existence.  For the law firm Vegas Lex, despite the significant number of land buy-out applications filed with the firm in the first nine months of the new law being in effect, no more than 10 privatization transactions have been successful.  Oleg Ryzhkov and his officers promise that the number of unsuccessful privatizations will soon start to come down.  In addition the bureaucracy’s grasping onto its land rights as a power control, the article also points out that lease payments from land tenants (mostly developers) generate more revenue than would land taxes (i.e., than they did in 2007 at publication).