Russia’s stock market has raced ahead of Brazil, India and China in recent months, with the RTS index up 44% since September.
We have been looking at Russia for a while and as such, actually have a small serviced office in Leningrad (a beautiful city, by the way). We have been looking into the possibility of further commercial property investment in Russia.
When thinking about investing in commercial property in Russia, there are many factors which must be taken into account. The collapse of the Soviet Union and destabilisation of Russia has left many legal loopholes.
Whilst, most problems have been sorted by the centralised government and improving economy, there are still a few remnants of laws from the days of communism and de-centralisation. For example, ‘the individual’s local residency registration’ law, which basically means, Russian citizens may have the right to live in or on a property without actually owning it. This is called ‘propiska’.
As always, any potential problems should be checked with a lawyer or real estate agent. Common checks carried out when buying a commercial property in Russia include, the tenant’s rights to propiska, spousal approval of the sale, the owners history in the property and whether children are registered as living in the property. This rather complex regulation relates to Russia’s strong social laws.
Though, on the other hand, foreigners have absolutely no restrictions placed on them when purchasing commercial property in Russia and are covered by the same laws and regulations as all native citizens.
Land ownership can prove to be more complex though, due to the former communist rule not allowing any one person to own commercial property. A potential issue for off plan investors is the fact that a person cannot own a building until construction has finished completely as buildings in progress are not considered private property.
Another factor that must be thought about is, after all is said and done; general political risk in Russia has not yet gone away. The authorities ignore property rights when it suits them and investment in Russia, says William Browder of Hermitage Capital Management, ‘is a total crap shoot.’
So, should you consider purchasing a commercial property in Russia, remember, there are many peculiar laws that must be tackled.
