Published on 18 February 2006 at 05:39 pm
Filed under: Europe:- Serbia Property Guides » Serbia Property Buying Guide
Serbia has of course been dogged by periods of conflict and war and its property market has naturally suffered as a direct result. A once relatively attractive market sector was reduced to tatters following the last series of conflicts which effectively ceased in 2001. Now just a few years on, the real estate sector in Serbia particularly in and around the capital city of Belgrade is slowly beginning to flourish again.
A great deal of real estate has yet to be returned by the state to its former owners, this fact together with the fact that the land registry system of titling property in Serbia is out of date means that the property market in Serbia is not without its potential pitfalls. This article detailing the property buying process in Serbia should provide investors with a basic introduction.
The Serbian Ministry of Urban Planning and Construction and The Serbian Geodetic Institute are currently working in conjunction with The World Bank to implement a country wide real estate cadastre and registration project which will bring an end to the uncertainty over title deed registration and property ownership.
Currently there are believed to be around a quarter of a million properties unlisted in Serbia which are effectively illegal structures, which have no title, which cannot legally be sold or mortgaged and this just adds a weight of confusion to the real estate market in Serbia.
The Serbian government are keen to open up their property market to foreign investment and to do this they realize they need to resolve these outstanding issues. The real estate cadastre and registration project is their solution and the entire project should be completed within six years.
In the meantime an investor considering the property market in Serbia needs to tread incredibly carefully when it comes to establishing the identity of the legal owner of any real estate that they are interested in purchasing. The normal due diligence that an investor and his solicitor undertakes to determine if all is in order with the title of a property should take extra precedence in Serbia.
Article 82 of the Law on Basic Ownership Legal Relations details the rules relating to the foreign ownership of real estate in Serbia. Basically the rules are based on the reciprocity principle whereby if a Serbian national has the right to own real estate in the investor’s country of origin then the investor has the right to own real estate in Serbia. If reciprocity exists a foreign investor is afforded the same levels of legal protection in Serbia as a Serbian when it comes to their property assets.
There are some restrictions placed on either individual foreign purchasers or overseas companies wishing to own real estate in Serbia. No foreign ownership of property close to military land is permitted for example, nor is a foreign entity permitted to own city construction plots.
Assuming an individual has targeting investment property in Serbia that they are legally permitted to acquire and had an offer to purchase accepted by the vendor, the next stage in the process is for the vendor and buyer to sign and have notarized a preliminary purchase agreement. In a country like Serbia where there are a number of ongoing issues relating to the real estate market an investor has to find decent legal representation to ensure that they do not victim to unscrupulous practice or fall foul of the laws in Serbia.
Upon signing the preliminary contract and paying a non-refundable deposit the investor should instruct his solicitor to examine the title deed of the property and also the property’s history as well as the rights of the vendor to dispose of the property. Once all is found to be in order with the sale it can complete. A completion date will be written into the original contract and the whole process can take around 6 weeks from start to finish.
The final contract is signed in the presence of a public notary and an overseas investor can expect to pay the following taxes and charges when buying investment property in Serbia: -
5% property transfer tax
Annual real estate tax of between 0.4 and 2% of the property’s assessed value – payable quarterly and in advance
Estate agent’s fees – usually around 3% of the property’s value – occasionally these are paid by the vendor
Capital gains tax of 14% can become payable upon disposal of a non-primary residence
Income tax is due on any income derived from renting or letting property and the rate is 20%
Lawyer’s fees which are usually negotiable in advance.
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