Serbia

General Information

Serbia is a country that is in the process of rebuilding itself. It incurred a significant war and now has emerged as a strong developing market. The population of Serbia is approximately 7.7 million (UN census), and during the last five years the country has developed strongly. Serbia offers excellent
prospects to investors.

Economy

The government has acknowledged the need to open the economy to foreign investment. This is also reflected by the immediate acceptance of foreign investors and the implementation of varied Foreign Investment Laws, which outline guarantees and safeguards for foreign investors and improve overall business regulations.

It is viewed that foreign capital is crucial in restructuring the nation's economy. Leading investment nations within Serbia include Austria, France, Germany, Greece Italy and the United States.

By law, urban lands are held by the Municipal Governments and can be leased. Investors may acquire the building/assets but may not hold the actual title to the land. New laws are expected to occur which will change this practice and will allow a right to ownership that will also apply to urban land.

Rural land is regulated in a different manner. Investors can acquire the land/property rights. Expropriation is not common and safeguards exist for investors.

The major employment sectors are industry, trade, construction and transportation/communications. The agricultural sector represents approximately 20% of the GDP.

Taxation System

The taxation system has undergone reforms to simplify taxation and increase revenues. The Serbian tax system comprises VAT standard 18% exceptions 8%, personal income tax, corporate profit tax 10%, excise duties (tax on "luxury goods"), property taxes, payroll tax and taxes on the use and permission of goods.

Property Market Overview

Despite the implications of the war, Serbia is undergoing huge development activities, which are modernising the country. There is a significant availability in the development and growth of the real estate sector and the government has taken steps to encourage foreign investment.

This has produced a high level of foreigners relocating to Serbia, which in turn has encouraged the improvement of all infrastructure works, transforming the country. Serbia is becoming a very modern city, which retains its historical charms. It is not uncommon to find a variety of uses within the same areas, be it residential complexes, office buildings, shopping centres and business centres.

Residential Property Market

This market is improving strongly as a high availability of finance through foreign and domestic financial institutions exists. The government introduced measures to assist housing problems.

These measures were:

• The VAT levels of 18% on new constructions were reduced in 2005 to 8%
• The creation of the National Corporation for Housing Loans Insurance.

This covers the 75% of the loss if a buyer does not meet obligations towards financial institutions. Theses two factors assisted in providing the Financial Institutions reduced risks and thus allowed for the reduction in interest rates.

Interest rates are still higher than those on offer within other European Countries. These factors assist in driving the residential real estate market. Construction activity is high, concentrated mainly within the largest cities being Belgrade, Nis and Novi Sad. Due to the increased amount of foreign residents the country lacks modern residential properties.

Belgrade is leading the residential market sector with the most building permits issued. The Avenues Avnoja and Arsenija Carnojevica located within Belgrade have consumed the majority of middle end residential developments. The more affluent developments are concentrated with the areas of Vracer (downtown) and Dedinje (Savski Venec).

The result of the increase supply and the strong demand of the residential property have made buyers particular to the quality of construction, finishes and amenities on offer.

Commercial Property Market

The commercial property market has seen a significant amount of growth within the last five years. Many development companies are entering this market, as it was relatively underdeveloped. Most companies are focussing on Belgrade only and in specific the New Belgrade region. Significant
developments include the Airport City Belgrade - Business Park, The Mahler's Business Class project, Dutch MPC - 25-story building, new shopping centres and office buildings.

Outlook and Opportunities

Currently Serbia offers prime opportunities and potential for substantial economic growth. This country is situated within the centre of the Balkan peninsular, which assists in connecting Europe with the Black Sea and to the Mediterranean Sea.

Changes occurred to assist foreign investment and have been welcomed by locals. Opportunities exist for residential and all types of commercial developments.

Source: Lambert Smith Hampton