By Eugene Vorotnikov
The Russian government is considering tightening control over the activities of national real estate agents and to increase of transparency of their activities.
As part of these plans, the Department of Economic Policy of the Moscow government recently signed a Memorandum of Cooperation with the Moscow Guild of Realtors, with the aim to provide assistance to national trade organizations in their activities.
This will take place in the form of joint development and discussion of legislative initiatives governing the real estate industry’s activities and the provision of tax and other benefits.
Both the government of Moscow and the federal government plans to implement several initiatives. One of them is the establishment of specialized higher education institutions, which will specialize in the training of local real estate agents. Currently Russia experiences a lack of such institutions. The majority of real estate agents are trained on low-quality, short-term courses. As a result, many Russian real estate agents do not have skills, experience and even knowledge of the legislation in the field of real estate.
The government is also clamping down on so-called “black realtors”, which in recent years have become a problem in Russia.
A significant increase in the price for apartments in Moscow and other large cities during the last several years has created an increase in the amount of crime involving the participation of real estate brokers. In the majority of cases, such crimes result in the illegal seizure of property. The scams are often committed by criminal groups but the image of real estate brokers has suffered.
According to the Novosibirsk Association of Realtors, the current share of black realtors is estimated at 25 per cent to 30 per cent of the Russian market of brokerage services, and it’s even higher in some regions of the country.
In the meantime, some measures to improve the Russian market have already been taken. On Oct. 1, 2013 new rules of registration of real property rights were introduced along with the mechanisms of their implementation.
In addition, the practice of electronic document management, which has significantly sped the completion and registration of real estate transactions, has also been introduced.
The new initiatives were generally positively received by the Russian real estate community, but some agents have expressed concerns that excessive co-operation with the government may force real estate companies and brokers to send information about their clients and deals to the tax office and the police.
Many Russian agents are critical of the activities of industry associations and guilds, which represent their interests in the government. Irina Shcherbinina, a well-known Russian real estate broker, says, “I have been working as a real estate agent for many years, and during all this time had never seen examples of the usefulness of activities of the Russian Guild of Realtors. For example, despite all the calls of brokers, the guild merely looked on and did nothing against the adoption of the Notaries Act, which is currently considered by the Russian government and may create serious problems for the Russian real estate community, as it will introduce mandatory notarization of real estate transactions between individuals.”
Shcherbinina says this will result in huge queues of brokers in notary offices and additional financial burden on real estate buyers, who will have to pay for notary services and state tax.
Brokers say that despite the attempts of the state to improve the domestic market of real estate services, some of its initiatives could be considered strange.
For example, the Russian government is considering adoption of a law that will introduce a regulatory approval system (instead of the currently used notification procedure) for the acquisition of residential, commercial and industrial properties by foreigners and foreign investors. According to real estate brokers, the adoption of the new rules could result in a significant decline in investments in the sector.
Olesya Dziuba, deputy head of research for Jones Lang LaSalle Russia, says the proposed measures could create unnecessary obstacles for investors.
“The government is currently making significant attempts for the improvement of the investment climate and even achieved some success in the Doing Business rating, so the adoption of this law contradicts earlier announced plans,” says Dziuba.
Eugene Vorotnikov is an international freelance writer who specializes in covering real estate brokerage and property topics. He has worked for several industry titles and can be reached at [email protected].
