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A Word from the Executive Director of AmCham Dear Readers, The theme of this issue was not selected randomly. Over the Spring / Issue 9 last decade the city of Baku has seen a spectacular economic rise, as increasing oil prices brought strong economic growth Credits to Azerbaijan. The country's rapid rise can be seen in its GDP growth which quadrupled between 2000 and 2010. Editor-in-Chief: This growth and Baku's glimmering skyline, including the Nargiz Nasrullayeva-Muduroglu creations of world's leading architectural and construction Editor: firms, are seen as symbols of economic development and Emma Triller prosperity that many in the region have sought to emulate. Over the past few years the real estate sector is recording a Design & layout: booming growth and development and we would like to offer our readers an insight QuadroM Media Agency into this interesting trend. This issue includes an independent overview of the sector, Photographer: a brief on land administration and the new Construction Code as well as the number Huseyn of interviews with the city's most prominent real estate developers. Articles contributed by: Do not miss the "About Us" section featuring a number of important CSR activities Arzu Geybullayeva we have been involved in over the last several months and of course the splendor Emma Triller and glamour of our 6th Annual Black&White Ball on p.46! Natalia Corobco Baker & McKenzie Deloitte Azerbaijan Kind Regards, Indian Clinic Nargiz Nasrullayeva-Muduroglu Salans Advertisers: Aquavita-Taj Austrian Air Azerfon-Vodafone Editor’s Comment Deloitte Azerbaijan Garadagh Cement Dear Readers, Hill International Hyatt Hotels During my four years in Azerbaijan, I have been privileged to The Landmark Hotel witness the phenomenon of a city evolving before my very Mozaik LLC NJT Group eyes. In a very few years, Baku will be barely recognizable Nobel Oil as the city of oil barons’ mansions and Soviet architecture. A Pasha Construction glittering metropolis on the Caspian unfolds, home to some truly iconic buildings, new hotels, luxury office and retail Cover artwork: space. Quadro M Such rapid urban growth must pose some challenges to urban planning, so the establishment of infrastructure and Printing: Nurlar better access to data are essential if the real estate market is to be regulated and encouraged to grow. The adoption of a “one-stop shop” Publisher: mechanism in land administration will go a long way towards ensuring more efficient American Chamber of Commerce registration procedures, lower costs and better service for customers. in Azerbaijan It is also encouraging to note that many of the new developments are in conformity Tel: (+994 12) 497 13 33 with Azerbaijani and international construction codes and that environmentally Fax: (+994 12) 497 10 91 www.amchamaz.org friendly solutions are being implemented in a region that for years has suffered ecologically. Advertising opportunities: It is the sincere hope of many that the very real benefits of all these developments Please contact the Editor will be felt and enjoyed by the citizens of Azerbaijan, as the country welcomes a new Emma Triller era of reform and growth in the real estate sector. [email protected] Our sincere thanks to all of our advertisers and contributing editors for their support Tel: (+994 12) 497 13 33 of Impact Azerbaijan. The articles in IMPACT AZERBAIJAN express the opinions of the authors and Best wishes, do not necessarily reflect the position of Emma Triller the American Chamber of Commerce in Azerbaijan. 1 contents Getting Real about 6 Great Expectations: Real Estate Price per m2 RENtALS: (Price per Month): Residential: 480 to 7200 AZN Commercial properties (shops): An overview of developments in the real estate 10 to 120 AZN per sq. m and construction sector, by Arzu Geybullayeva. Offices and Business Centers: 9 A Landmark in Baku 25 to 60 AZN per sq.m The doyen of the real estate and construction sector in Azerbaijan, PURCHASES: Landmark owner Efruz Residential: Muduroglu looks back 500 to 5000 AZN on a career spanning Commercial: 50 years. 1200 to 30 000 AZN 12 Ariel Ivanier, UNECE, on Reforms in Land Administration Interview with the Secretary of the Working Party on Land Administration WPLA (UNECE) Ariel Ivanier on challenges facing Azerbaijan and reforms initiated by the government to regulate the real estate and construction sector. 14 Hill Comes of Age The Flame Towers will be Azerbaijan’s most successful showcase of its program to embrace western international standards of construction and living. 18 Promotion Feature AmCham member NJT shares its successes and strategies as the most reliable supplier of plastic products. 2 Spring / Issue 9 contents IN FOCUS AMCHAM AZERBAIJAN 21 Cementing the Market: 37 About us Domestic producer invests in technology to boost capacity. Interview with Horia Adrian, the General Manager of market leader Garadagh Cement. As a member of AmCham, your company 24 A Revolution in Retail has access to a vast network of business information and contacts. Park Bulvar brings the mall to Azerbaijan 39 Business Events as a ‘life experience’. What are Bakuvians getting out of this? MEMBERS 27 Draft Construction Code A draft construction code has been introduced in Azerbaijan. Baker & 40 Committee Highlights McKenzie discusses the implications for 42 Members’ News and Events potential investors. 43 Projects 46 5th Annual Black and White Ball 30 A Clean Bill of Health Hind Klinikasi tells newcomers to Azerbaijan what they need to know about obtaining a health certificate. 32 Easy Leasing AmCham member Salans provides important information on the legal ramifications of commercial leasing in Azerbaijan. 34 Bilateral tax treaties A brief introduction to benefits to be gained from International Tax Treaties. 48 M2M Discount Program 3 in focus New Members The American Chamber of Commerce is proud to announce that the number of our members has now exceeded 200. We would like to congratulate everybody on this achievement and say that we are committed to supporting our members in working together to build a strong future for business in Azerbaijan. AECOM Baku LLC Caspian Region Oilfield Services Corp Borusan Makina Servis ve Tic A.S Pasha Construction Caspian Accounting ZQAN Holdinqs & Consulting Services Limited LLC Capital Resources Bank VTB Advisors (Azerbaijan) OJSC Relaz Consult and AMEC Crown Hotel Baku Services LLC AREVA GROUP 1 Security RealGaz LLC Caspian Crystal NORM LLC The European Azerbaijan Society (Partner Organization) 4 Spring / Issue 9 in focus Great Expectations: Overview of the Real Estate Sector country’s door, the direction and the future of the market is Arzu Geybullayeva rather obscure. Regional freelance analyst, BA International Relations, MSc Global Politics An overview of the sector Overall, the real estate sector in Azerbaijan picked up pace in the early 2000s, when the country began to slowly reap the benefits of the incoming investment. According to Rena Baku, once the city of Alis and Ninos, small pathways, Akhundova, one co-founder of the Azerbaijan Association of oil barons and ordinary people, is now a booming capital Realtors and Managing Director of Caspian Property Services of construction, pricey real estate, luxury cars and (CPS), a local company providing real estate consultancy and boutiques- a city of wealth and stature. Often called the a range of other services, “in total, since 2000, in Baku and Monte Carlo of the Caspian, Baku is no doubt a great within the surrounding cities, 480 new residential complexes place to live if you are wealthy. Its future is guaranteed by with a total of 11,879,400 m.sq were built”. As the Association ‘black gold’ and its rapidly growing oil and gas industry of Realtors of Azerbaijan reports, at the end of 2009, the has turned the capital of this Islamic country into a number of registered residential units totaled 1,720,000 growing investment hub. overall. However, an additional 5% of illegal residential construction as well as the new construction units that have It is in this setting that the real estate market has became not been registered by the government should be added to Azerbaijan’s rapidly evolving non- energy sector. And yet, that general number. with its quickly expanding economy on one hand, tight government control over most of the sectors of the economy Nevertheless, as the financial crisis hit the world, it was also felt on the other, and financial crisis still knocking on the in Azerbaijan and in particular in the real estate sector. In fact, 6 Spring / Issue 9 in focus as CPS reports, starting from the last quarter of 2008 and the Azerbaijanis living abroad. As the Central Bank of Azerbaijan beginning of 2009, it was really the beginning of a crisis year for reports, remittances declined by 16 percent between January Azerbaijan’s real estate market. From 2008, the construction and September 2009.1 sector decelerated as private demand for housing dropped and no new construction foundations were laid. “A sharp decrease Changes in costs of construction materials also had a in demand versus growing supply and the expense of new substantial impact. Prices for construction materials grew by constructions changed the structure of demand and supply in 19.8 percent in March of this year, which is a 13.1 percent disproportionate form”, says Rena Akhundova, adding, “One increase according to the prices listed last year.2 of the most serious problems in the market was limitation of sales in cash that most adversely affected property owners, Renting of property in Azerbaijan was also altered as a result construction companies and real estate companies”. of these small- scale crises. For instance, in comparison with February, in March 2010 the volume of housing rent decreased From September to November 2008 alone, apartment sales in by 19.2 percent, and by 19.6 percent in the first quarter of Baku fell by 20 percent, says Arif Garashov, head of the State this year.