The Property Banks Buyers Guide to Russia
The real estate buying process in
Russia is theoretically relatively straightforward because
foreigners have the exact same rights when it comes to real estate
in Russia as local Russians do.
But unfortunately there are so many legal subtleties and nuances in
Russia that a property investor has to tread extremely carefully to
avoid getting their fingers burned.
As is always the case when buying property abroad, an investor will
require the services of a lawyer in Russia. An investor would be
best advised to find a lawyer specializing in real estate law and
preferably one personally recommended to them by a trusted source.
Many estate agents in Russia can recommend lawyers but naturally
enough their recommendation may be slightly biased!
In terms of using an estate agent, because few older properties are
heavily marketed for sale in Russia a decent estate agent will be
well worth finding – not only will they have their ear to the ground
and be aware of properties as they come onto the market, they will
also know about the state of the local market currently and be able
to give good advice to a potential property investor.
Many real estate investors are drawn to purchasing older, historical
and beautiful properties in Russia – their thoughts being that the
renovation of these properties and potential conversion of a single
building into multiple units will ultimately generate significant
income and/or capital growth. This can of course be true but
investors considering older properties in Russia may face certain
issues such as the fact that occasionally authorities will place a
compulsory purchase order on an older property to demolish it and
build new apartments.
Properties subject to compulsory purchase orders in Russia do not
attract a very impressive price and investors who are in the process
of spending vast sums on improving a particular project could well
lose out if this were to happen.
In Russia there is not the same regard for older historical property
as there is in countries such as the UK, Germany and Italy – in fact
local Russians much prefer new to old and will pay far more for
brand new property than they will for even well renovated older
property. This is well worth considering for property investors
hoping to profit from the local market.
Those who do decide to purchase an older property should do their
due diligence on the local area to ensure that it has not been
earmarked for demolition and new development. A decent estate agent
may well have a fair idea about which particular districts are
likely to be safe and which aren’t.
There is also another common issue with buying an older property, it
can be a requirement that the investor has to re-home all those
living in a communal building he is interested in purchasing – to do
this will naturally cost a significant sum of money.
These issues aside, an investor who locates investment real estate
in Russia that matches his specific objectives can then enter into
negotiation to purchase that property. The price can be negotiated
along with the terms for the sale of the property such as a set
completion date, the removal of sitting tenants prior to contract
closure or, less commonly, the completion of certain repairs etc.,
before contract completion. It’s not common to have a survey
conducted in Russia but it is possible to arrange and can be a wise
move for those interested in buying older properties.
With the popularity among Russians for brand new property for sale
there are a lot of new apartment and town house developments that an
investor may also like to consider in Russia. Naturally enough these
do not usually require a survey nor are property prices then
negotiable.
Once an agreement has been reached for the conditions of the sale,
the preliminary contract is signed by all parties involved in the
sale and purchase. This can be notarized and at this stage an
investor’s solicitor will begin investigating the history of the
property to ensure that it is safe to purchase and also drawing up
the final contract. As part of his checks the investor’s solicitor
will need to examine the property’s privatization procedure to make
sure all is in order with it and that it is available for sale
legally.
If all conditions for the sale are met it will complete on a fixed
date when the buyer and vendor will meet at a public notary’s office
to sign the final contract. It is still common for many real estate
transactions in Russia to be conducted in cash. If a buyer is paying
in cash they usually place the money in a bank safe deposit box
which will only be released to the vendor upon the presentation of
the registered paperwork indicating that the property has been
transferred into the name of the buyer.
Once the final sale-purchase agreement is signed and notarized the
paperwork is presented to the state for registration which can take
up to two weeks and then the documentary evidence is available to
prove the real estate investor now owns the real estate.
One final word of warning for potential investors in Russia,
currently Russian law places a clear distinction between the right
of use of real estate and the right of ownership and disposal – this
means that anyone considering buying investment property in Russia
has to ensure no one else has the right to use the real estate they
are purchasing.