Real Estate is a key component of each and every investment, be it a production facility, an industrial development, a shopping mall or simple store, an office building or residential complex, for brick and mortar is hosting them all. The same goes for hospitals, schools, sports facilities and other buildings of public interest – every one of them needs a piece of land.
Roxana Dudau, Associated Partner – Head of Construction & Real Estate, Noerr
(published in “Romania’s Real Estate Yearbook 2020”, launched in September 2019 – read here)
Four directions should be pursued by authorities to make Romania more attractive for investors. Some of them are already being tackled by authorities, while others are only in the focus of investors. In the end, there must be better coordination between public institutions and private companies, and a sustained effort on both sides. These measures refer to (i) better and unified legislation, (ii) fiscal incentives for green buildings, (iii) specialized investment vehicles in real estate, and (iv) cooperation between the public and the private sectors.
A unified town planning and construction legislation has been on the agenda of the Ministry for Regional Development and Public Administration (MDRAP) since March 2018, when the preliminary theses of the unied code were published on MDRAP’s website – exactly 10 years after the rst project of a Construction Code which was initiated, in March 2008, by the State Constructions Inspectorate. This initiative is most welcomed, yet it needs a huge codification effort, as the legislation in this field is spread in various pieces of legislation of all possible rankings: laws, government decisions, orders of different ministries etc. It is to be expected that the process will be long-term, yet it is most important that it is transparent and that real estate professionals (architects, lawyers, engineers) as well as public authorities and investors be actively involved.
Tax Incentives for Green Buildings
All new buildings for which the building permit will be issued after December 31, 2020 shall have to 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). therefore, one may argue that granting tax incentives for green buildings which are being built before that date should be a priority for the Romanian authorities. However, only Cluj-Napoca and Timisoara have implemented such tax incentives on green buildings, and there are other local initiatives, such as in Iasi. Unfortunately, Bucharest, even if it is the city with the biggest number of green buildings, does not have such an incentives scheme in place.
Investment Vehicles in Real Estate
Such investment vehicles would be set up with funds from private investors and enjoy a special tax regime, based on the model of Real Estate Investment Trusts (REIT) existing in other European countries (e.g. Belgium, Bulgaria, France, Greece, Hungary, Italy, Luxembourg and the Netherlands). A REIT, as a form of indirect investment in real estate, offers two main advantages: (i) the possibility to invest collectively with other investors in a fund that is managed by a specialized investment management company, and (ii) a more diversied portfolio, as opposed to having invested in a single property for the same value. On the other hand, direct investments in real estate require significant financial resources and expose investors to ownership risks such as the ones associated with maintenance and management of the property, and underlying costs such as property insurance, levies, property charges and taxes.
Cooperation Between the Public and the Private Sectors
A clearer and more transparent cooperation of the private and public sectors is definitely needed, as each new building or complex of buildings to be erected in a city has a direct and concrete impact on the respective city district. Better planning and master planning of infrastructure projects should be in the focus of both authorities and investors alike, since a sustainable urban development implies responsibility on both sides. Real estate developers and investors should stick together and represent the industry’s interests in front of public authorities through the unified voice of industry’s associations and tackle major issues such as infrastructure, public parking lots, enlargement of streets following the implementation of new real estate projects etc. e Real Estate Task Forces of the various chambers of commerce in Romania are a good place to start, as venues for investors (for now mostly through their lawyers) to pursue the interests of the real estate industry.
Roxana Dudau, Associated Partner,
Head of Construction & Real Estate, Noerr
General Constantin Budisteanu
Street, No. 28 C, District 1/010775
T +40 21 3125888
F +40 21 3125889
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