Serbia Investment and Export Promotion Agency Vlajkoviceva 3 11000 Belgrade phone: +381 11 3398 550 fax: +381 11 3398 814 [email protected] www.siepa.gov.rs Real Estate Industry in Serbia Contents Plaza Centers in Serbia .................................. 2 Key Information on Serbia .............................. 3 Why Invest in the Real Estate Industry in Serbia ....... 4 Overview of the Real Estate Industry Basic Industry Indicators .............................. 6 Office Market Trends .................................. 7 Residential Market Trends ............................. 9 Retail Market Trends .................................10 FDI in the Real Estate Industry .......................11 Africa-Israel Corporation & Tidhar Group in Serbia ...12 Acquiring Construction Land Land Classification ...................................14 Leasing Municipality Land ...........................15 Acquiring the Right to Use Land .....................16 Conversion of Agricultural Land .....................17 GTC International in Serbia ............................18 Construction Procedure Assessment of Urban Conditions ....................19 Construction Approval ...............................19 Land Development Fee Payment and Main Project Preparation .............................20 Notice of the Start of Construction...................20 Construction .........................................20 Occupancy Permit ...................................20 Registration in the Cadastre..........................21 Financing Options ...................................22 Real Estate Transfer Real Estate Taxes .....................................22 Related Contacts .......................................23 SIEPA Services ..........................................24 Plaza Centers in Serbia Mr. Sagiv Meger, CEO, Plaza Centers Serbia Why did you decide to start a business in Serbia? We feel that Serbia is in an unstoppable race to close the economic gap it has with its neighboring countries. Thanks to economic liberalization and various newly introduced reforms, GDP was steadily increasing over the past years. This is exactly where Plaza Centers comes in–our goal is to provide a new quality of life for the people of Serbia to accommodate this new growth by providing the development they deserve. This has been our strategy for the past 12 years starting in Hungary and has proven to be a winning formula for us. What are your current and future projects in the country? Plaza Centers is focusing on Serbia as a whole and not only on the capital. Currently, we have 3 projects: one in Kragujevac (www.kragujevacplaza.rs) where we started building a shopping and entertainment center of 65,000 sq m GBA and two in Belgrade: Visnjicka Plaza with an approximate GBA of 90,000 sq m and our jewel project, which will be the old Police headquarters building in Knez Milos St, where we plan to build a 5-star+ hotel, Class A office tower, and high-end retail shopping center. We are busy acquiring more plots throughout various key towns, and Plaza intends to invest €500 million in Serbia within the next three to four years. Our aim is to uplift the economy as a whole, while offering the Serbian people quality accommodation, office facilities, and shopping and entertainment facilities. How do you perceive business climate in Serbia? We feel that the people, as well as the Serbian Government are ready for a positive change. Naturally, before the last elections, we were little concerned and we are still keeping a close eye on the political climate of Serbia. But, at the moment, we are very optimistic about the general climate in Serbia. 2 Helsinki 2083 km Oslo 2109 km Tallinn Stockholm 2075 km 2154 km Riga 1768 km Dublin Copenhagen EU Countries 2435 km 1659 km Non EU Countries CEFTA Hamburg 10th Pan–European Corridor 1547 km 7th Pan–European Corridor Amsterdam Berlin London 1721 km 1255 km Warsaw 1982 km 1067 km Brussels Kiev 1672 km 1302 km Frankfurt 1282 km Prague 907 km Vienna Paris 612km 1766 km Stuttgart 1155 km Bratislava Munich Salzburg 578 km 930 km 797 km Zürich Graz 1175 km Budapest 575 km 384 km Ljubljana Zagreb Milan 520 km 390 km 1009 km Bucharest Belgrade 641 km Marseille Sarajevo 1518 km 291 km Soa 403 km Skopje Barcelona Rome 423 km 1956 km Istanbul Madrid 1289 km 980 km 2566 km Tirana 612 km Thessaloniki 630 km Igoumenitsa 924 km Athens 1132 km Official Name Republic of Serbia Form of State Democratic Republic Political Structure President, Unicameral Assembly with 250 seats Key Information on Serbia Information Key Area 88,361 km2 Population 9.5 million South East Europe, central part of the Balkan Geographic Peninsula, at the intersection of Pan European Position Corridors No. 10 and No. 7 In the east, Serbia borders Bulgaria, in the northeast–Romania, in the north–Hungary, in Border the west–Croatia and Bosnia and Herzegovina, in the southwest–Montenegro, and in the south–Albania and Macedonia Temperate continental, with monthly average Climate temperatures ranging between 0.7°C in January and 17.5°C in July Official Language Serbian Main Religion Christian Orthodox Other Religions Roman Catholic, Islamic, Jewish, Protestant Belgrade: 1,576,000; Novi Sad: 298,000; Largest Cities Nis: 250,000 Currency Dinar (RSD) GDP (2007) €29.54 billion GDP pc (2007) €4,002 Time Zone Central European Time (GMT + 01:00) Internet Domain .rs 3 Why Invest in the Real Estate Industry in Serbia COMPETITIVE TAX SY S TEM ROBU S T RE C ENT GR OWTH Serbia’s tax regime is highly conducive to doing business. For years, Serbia was among Europe’s fastest growing Corporate profit tax is the second lowest in Europe, while VAT economies. Between 2004 and 2008, economic growth is among the most competitive ones in Central and Eastern averaged 6.3%, while GDP per capita almost doubled. Strong Europe. In addition, businesses in the country can take GDP performance was largely driven by service sectors such advantage of a broad range of tax incentives. as telecommunications, retail, and banking. In addition, local food, beverage and construction industries expanded rapidly. Principal Tax Rates and Tax Incentives Based on the metal, food, textile, chemical, machinery, and Standard rate – 18% furniture sectors, Serbian exports also increased at a sharp rate VAT Lower rate – 8% of more than 33% annually. Corporate Profit Tax Uniform rate – 10% 20% (for dividends, shares in profits, royalties, GDP Growth Rate Withholding Tax interest income, capital gains, lease payments 2008 5.4% for real estate, and other assets) 2007 6.9% Salaries – 12% Personal Income Tax Other income – 20% 2006 5.2% 10% (for annual income above 5 average 2005 5.6% Annual Income Tax annual salaries) 2004 8.3% Social Insurance Pension and disability insurance – 11% Source: Statistical Oce of the Republic of Serbia Health insurance – 6.15% Contributions Unemployment insurance – 0.75% A 10-year corporate profit tax holiday for investments of over €7 million that create at least 100 new jobs A corporate profit tax credit of 20% of the fixed assets investment Carrying forward of losses over a period of up to 10 years Accelerated depreciation of fixed assets Salary tax base deduction in the fixed amount Tax Incentives of RSD 5,938 (app. €65) Salary tax exemptions for employees below 30 and above 45 years Social insurance contributions exemptions for employees below 30 and above 45 years Annual income tax deductions of up to 50% of the taxable income Customs-free imports of equipment based on foreign investment 4 ST R ON G FDI FI G U R E S BOOMIN G MA R KET POTENTIAL Since the onset of economic reforms in 2001, Serbia has In Serbia, there is strong demand in the office, residential, and grown into one of the premier emerging investment retail market. As a result of robust economic growth and strong locations in Central and Eastern Europe, with the FDI inflow FDI forecast, demand for quality office space has been on a of over €12 billion. The list of leading foreign investors steady rise. Likewise, a residential market is forecast to experience is topped by world-class companies and banks such as an upward trend due to a steady increase in household income Telenor, Philip Morris, Mobilkom, Banca Intesa, AB InBev, and a wide availability of mortgage loans. Furthermore, yields and many others. in the real estate sector tend to be higher than in other CEE According to PwC, Serbia is the 3rd most attractive countries, amounting to 10% in the office market. manufacturing and 7th most attractive services destination among emerging economies. Additionally, E&Y recorded over Prime Office Yields (Q1 2009) 100 inward investment projects in Serbia in 2007 and 2008– City Office Space Yields the 2nd best performance in the South East Europe region. Belgrade 10.00% Sofia 10.00% Inward FDI (EUR mn) Bucharest 9.50% 2008 2,255 Zagreb 8.50% 2007 2,601 Budapest 7.75% 2006 4,279 Bratislava 7.25% Prague 7.00% 2005 1,329 Warsaw 6.75% 2004 788 Source: CB Richard Ellis Source: National Bank of Serbia LOW OVE R HEA D CO S T S One of the key advantages of doing business in Serbia compared to other CEE countries are lower operating costs. Labor costs in Serbia are comparable to those in South East European countries, while standing at less than 50% of their level in Eastern European EU member states. In addition, electricity, gas, and other utilities are available at very favorable prices. Total Monthly Labor Costs in EUR (2007) Romania 527 Serbia 566 Slovakia 927 Croatia 973 Poland 997 Hungary 1,055 Czech Republic 1,201 Source: EUROSTAT, Croatian Central Bureau of Statistics, Statistical Oce the Republic of Serbia 5 Overview of the Real Estate Industry Basic Industry Indicators Employment and Salaries The industry employed 39,105 staff in September 2008. GDP The qualification structure is dominated by high school and According to the latest data available, 2007 GDP in the university-degree holders accounting for 35% and 28% of industry gained 10.35% in nominal terms against the previous total industry employment, respectively. They are followed by year. With GDP of around €2.72 billion, the industry accounted qualified workers, with a 11% share, while other categories for over 9% of the total economic output.