belarus real estate market review - sorainen · 2018. 6. 14. · belarus real estate market...

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BELARUS

REAL ESTATE MARKET REVIEW

ANNUAL REPORT, 2013

BELARUS REAL ESTATE MARKET CONTINUES

TO RECOVER

BELARUS

ANDREY PAVLYSHKO

Partner, Managing Director

Colliers International, Belarus

ANDREY ALESHKIN

Partner, Director

Brokerage Department, Belarus

Dear Reader,

2012 was a post-crisis year for the Republic of Belarus. Therefore, it was characterised by

an increase in economic activity of business entities, the recovery in household incomes,

which were eroded by the devaluation of the Belarusian ruble, and, as a result, the

recovery of the consumer market.

This was immediately reflected in the increased demand for commercial real estate. The

recovering labour market created the demand for new office spaces. Some companies

were looking for office spaces of 14-17 thousand sqm, while no interest in such spaces

had been reported on the rental market even during the pre-crisis period. The demand for

office premises exceeded the commissioning rate of new spaces. As a result, nearly all

premises available on the market, irrespective of their condition, were snapped up and the

vacancy rate decreased rapidly.

The situation on the warehousing market was the opposite of what had been reported

during the previous year: in 2011, many tenant companies were optimising their

warehousing spaces and reducing the number of rented facilities; meanwhile, 2012 saw a

considerable increase in demand and new objects were being snapped up after the

minimum market positioning. Professional logistics operators were the most active tenants,

and the demand was highest for large premises with areas starting from 5,000 sqm.

The retail real estate market development scenario was similar. The small number of newly

commissioned spaces amid the increased growth of retail chains and the entry of new

players onto the Belarusian market resulted in the decreased vacancy rate and the

increased rental rates for high-quality spaces.

2012 was a relatively moderate year for the hotel real estate segment in terms of the

commissioning of new objects, but the developers of new hotel projects remained active

and reported the completion of the preparatory works for the 2014 Ice Hockey World

Championship. 2012 also saw the opening of the first apartment hotel in Belarus; this

segment of hotel real estate had not been developed in the country previously. A number

of new projects and agreements with international hoteliers regarding the operation of

some objects were also announced.

REAL ESTATE MARKET | ANNUAL REVIEW 2013 | BELARUS |

CONTENTS

Economic Overview 4

Office Market 6

Retail Market 9

Hotel Market 14

Industrial Market 18

4 | COLLIERS INTERNATIONAL

2012 was the year of economic stabilisation for the Republic of Belarus following the

2011 crisis. Even though the inflation rate remained high, it was five times lower

compared to the previous year. After a nearly three-fold devaluation in 2011, the national

currency remained stable in 2012 and even strengthened somewhat against the main

global currencies: the Euro and the US dollar. GDP growth amounted to 1.5 per cent.

Foreign trade increased in 2012. Positive dynamics of export were observed throughout

the year, and despite a small decrease in the second half-year, the foreign trade balance

was positive in the end of the year.

Salaries and the real income of the population increased. As a result of the devaluation

of the ruble, the average salary in euros amounted to EUR 206 in November 2011.

Meanwhile, the figure went up to EUR 385 in November 2012 and exceeded the rate

reported in the pre-crisis period last year (EUR 351). This increase had a positive effect

on the development of the consumer market in Belarus.

Belarus ranked 58th in the Doing Business 2013 report prepared by the World Bank and

the International Finance Corporation (IFC). The country demonstrated especially good

results in the areas of property registration (3rd place) and registration of enterprises (9th

place). Belarus was included among the world’s leading reformist countries, ranking third

among the top ten reformists. Belarus also ranked 153rd in the Index of Economic

Freedom 2012, up from the 155th position in 2011. The international rating agency

Standard & Poor’s revised the country’s short-term and long-term sovereign credit

ratings from C to B-. The outlook on Belarus was revised to ‘stable’. The country

remained in the 54th position in the Legatum Prosperity Index 2012 rating.

Economic Overview

REAL ESTATE MARKET | ANNUAL REVIEW 2013 | BELARUS | ECONOMIC OVERVIEW

2005 2006 2007 2008 2009 2010 2011 2012 2013f

GDP current prices, bln EUR 24.2 29.4 33.0 41.0 35.8 41.2 42.6 49.2 52.5

GDP growth (real), % yoy 9.4 10.0 8.6 10.0 0.2 7.6 5.3 1.5 8.5

Industrial Production, % yoy 10.5 11.4 8.7 11.5 -2.8 11.3 9.1 5.7 9.3

Unemployment Rate, % avg* 1.5 1.2 1.0 0.8 0.9 0.7 0.6 0.5 0.7

Total central government

debt, % of GDP 2.0 1.6 4.5 5.9 17.1 19.6 42.4 31.5

35.0

PPI, % yoy 12.1 8.3 16.2 12.8 14.5 13.6 149.4 21 11

CPI, % yoy 10.3 7.0 8.4 14.8 13.0 9.9 108.7 21.8 12

Fiscal deficit, % of GDP -0.7 2.2 -1.5 1.9 -1.0 -2.4 -0.3 -0.1 0.0

Export, bln EUR 12.7 15.65 16.3 22.5 15.3 22.5 29.3 34.85 38.0

Import, bln EUR 13.3 17.7 18.5 27.0 20.6 28.1 33.3 35.15 37.6

Current Account, bln EUR 0.4 -1.2 -2.1 -2.5 -5.3 -5.60 -3.9 -1.9 -1.5

Current Account, % of GDP 1.7 -4.1 -6.6 -8.0 -9.76 -11.7 -8.3 -4.1 -2.7

FDI, mln EUR362.3 596.4 960.0 1,559.1

1,635.

0

1,069.

9 1,095.8 878.9

1,500.0

Cumulative FDI, mln EUR1,913.1 2,161.6 3,318.6 4,542.9

6,121.

9

7,187.

5

11,699.

4 9,668.9

12,000.0

BYR/USD avg.2,155.1

3

2,146.2

8

2,144.7

6 2,136.6

2,791.

8

2,979.

5 4,623.4 8,335.8

9,150.0

BYR/EUR avg.2,684.2

9

2,714.8

8

2,897.2

8 3,143.0

3,893.

0

3,954.

1 6,432.0

10,713.

0

12,000.0

KEY MARKET INDICATORS / YEAR

Source: Colliers International; Central Statistical Bureau

* In Belarus, the unemployment data includes only those citizens who are officially registered at the labour exchange. The real unemployment rate

is higher, and the Ministry of Labour and Social Security has recently admitted this fact.


The Decree No. 150 of the President of the Republic of Belarus ‘On some issues related

to renting and gratis using of property’ came into effect on 1 April 2012. It fully liberalised

pricing in the privately owned commercial real estate rental market and introduced the

concept of the basic rental amount to be used in lease relations with state or municipal

real estate objects.

During the first ten months of 2012, the gross foreign debt of the Republic of Belarus

totalled USD 32.966 billion. This accounted for 58.6 per cent of the GDP. Meanwhile, the

external debt of the state administration bodies totalled USD 12.779 billion. The per

capita foreign debt amounted to USD 3,485, down by USD 110 compared with January

2012.

Gross inflows of foreign direct investment decreased by 21.8 per cent in 2012 compared

with 2011. Debt instruments were the main form of attraction of direct investments (88.8

per cent of the total amount of direct investments). Meanwhile, 47.3 per cent of direct

investments were made in trade.

REAL ESTATE MARKET | ANNUAL REVIEW 2013 | BELARUS ECONOMIC OVERVIEW


OVERVIEW

During 2012, only a quarter of all business centres scheduled that year were actually

launched: only 7 out of 23 objects entered the market. It must be noted that some

objects showed a high level of construction readiness by the end of the year, and they

may be launched in the first half of 2013.

Among the objects scheduled in 2012 by developers, some were expected to be

postponed because of low activity level at the construction sites.

The number of launched speculative business centre objects was small. Development in

the built-to-suit segment was more interesting. For example, the headquarters of

Belarusbank, with a total area of more than 35 thousand sqm, the largest office real

estate object, was launched in 2012.

SUPPLY AND NEW PROJECTS

Seven new objects with a total GLA of more than 32 thousand sqm were launched in

2012. There was a high probability of launching at least eight other office real estate

objects, but the developers did not manage to complete the projects by the end of the

year. Such objects are expected to be officially launched during the first half of 2013.

In total, 28 objects are scheduled to be launched in 2013. Such objects include business

centres that were postponed from 2012, as well as those that were initially scheduled for

launch in 2013. If a considerable number of these projects are successfully launched,

then the amount of new office premises that may enter the market in 2013 could reach a

total GLA of up to 249 thousand sqm GLA.

Similar to previous years, most of currently implemented business centre projects

scheduled in 2013 are in the B2 class. The main reason for the lower rating quality of

such office objects is the construction method: developers usually use a shared-equity

construction scheme. As a result, objects have dozens or even hundreds of owners and

low levels of management and services.

Large projects with a GLA exceeding 10 thousand sqm constitute a considerable part of

projects scheduled for 2013. The GLA of two such projects exceeds 20 thousand sqm.

During 2012, the structure of the office market in Minsk did not change significantly,

since only a small volume of new office space was commissioned, and they did not have

a serious impact on the market. With the exception of one office building, all

commissioned business centres belonged to B2 class. As a result, the share of A class

offices, which is the least developed segment in Minsk, decreased slightly, while that of

the B2 class, the most developed segment in the market, went up.

The market of built-to-suit objects was more dynamic and interesting in 2012. New large

office buildings were developed as a result of activity of banks. Two such objects

accommodated the headquarters of banks. Those objects represent high-quality office

buildings and, just like commercial business centres, correspond to B1 class.

BelVEB Bank headquarters office is interesting in that it was initially planned as a

commercial business centre within the framework of the Slavianski Kvartal complex.

However, as the parent company of the developer, BelVEB Bank later made the decision

to use the object for its own headquarters.

A number of built-to-suit objects are expected to be launched in 2013. Two of them,

namely the offices of the Belarusian Potash Company and the National Olympic

Committee, are considered important for the market.

REAL ESTATE MARKET | ANNUAL REVIEW 2013 | BELARUS | OFFICE MARKET

Office Market

DYNAMICS OF SUPPLY OF OFFICE

SPACES IN MINSK

0

100

200

300

400

500

600

700

800Sqm

(000s)

Built-to-Suit New Construction Total Stock

Source: Colliers International


6,2%

31,4%

62,3%

Class A

Class B1

Class B2


DISTRIBUTION OF COMMERCIAL OFFICE

SPACES IN MINSK BY CLASS

BUSINESS CENTRES LAUNCHED IN 2012

Project Class DeveloperGLA,

sqm

Port, 2nd

stage, 1st

start-up

facility

В2 A1 Development7,800

Nemigoff В2Parking 5,000

Antares В2Freliajseksim 4,795

ZebraВ2

Lanex Plus 4,500

No nameВ2

n/a 4,350

Alliance В2IDC Group 3,540

Offices in the

Galileo multi-

purpose

centre

В2BNK-Holding 2,100

Total: 32,085


DEMAND

The demand by companies for premises increased notably in 2012. After the 2011

financial and economic crisis, businesses started operating more actively and increased

their staff size, which had decreased as a result of job cuts and frozen vacancies.

According to the number of requests, the share of companies that require spaces up to

100 sqm decreased in 2012, even though the demand for small spaces in Minsk was the

highest in the previous year. Demand for medium-sized offices of 100-250 and 500-

1,000 sqm was nearly equal. Demand for large spaces increased as well. Such changes

occurred despite the fact that the participation of companies in shared-equity

construction projects is typical for the Belarusian market. Companies that require offices

of several hundred or thousand sqm dominate in shared-equity construction projects.

Requests for office spaces of 10-12 and 14-15 thousand sqm that were submitted by

several companies last year may be mentioned as distinctive cases of unsatisfied

demand. At the current stage, the office real estate market in Minsk is unable to satisfy

the needs of such tenants.

RENTAL RATES

Rental rates for A class premises increased in H1 2012 as a result of the commissioning

of the new business centre Velcom in the end of 2011. As the object was outstanding

among other objects available on the market in terms of quality, its owners set the

highest rental rates in the city, which exceeded the previous existing highest rental rates

by 20 - 22 per cent.

However, the market was not ready for such level of supply, and the demand for those

premises was very low. As a result, rental rates were reduced in Q3 2012. Hence, the

highest level of A class supply went down from EUR 45 per sqm in H1 2012 to EUR 37

in H2 2012. The lowest rental rates went down as well.

Rental rates for offices in the categories B1 and B2 remained stable. This segment of the

market is less prone to hikes and possible exceptions. However, as a result of the limited

supply, a slight growth tendency was also observed here.

Rental rates in B class premises are expected to increase slightly in 2013. The rates in

B1 premises are expected to increase due to the small number of objects in this class,

as well as the intention to get closer to the lower level of rental rates in A class premises.

Rental rates in the B2 class are expected to increase because of the overall deficit in

office supply, especially in the lowest priced segment. Thus, the increased demand amid

the insufficient supply may be balanced by an increase in prices.

In theory, however, the growth of rental rates may be stopped by the actual

commissioning of all projects scheduled for 2013. However, developers operating in the

Belarusian market typically fail to meet announced commissioning deadlines. Therefore,

many objects are unlikely to enter the market in 2013.

VACANCY

Vacancy rates of A class premises increased in 2012 due to the commissioning of a new

business centre of the mentioned class, as well as the presence of vacant premises at

another operating business centre. The volume of vacant rental spaces decreased by

the end of the year, which leads to the forecast that there will be a considerable

decrease in A class vacancy rates in 2013.


STRUKTURE OF DEMAND FOR OFFICE

SPACES IN MINSK IN 2012

10%

22%

27%

22%

19% Under 100 sqm

100 - 250 sqm

250 - 500 sqm

500 - 1000 sqm

1000 and more sqm

0

5

10

15

20

25

30

35

40

45

50

2008 2009 2010 2011 2012

Re

nta

l R

ate

s (

EU

R)

Class B2 Class B1 Class A

DYNAMICS OF RENTAL RATES



0%

10%

20%

30%

40%

50%

60%

Class A Class В

DYNAMICS OF VACANCY RATES OF OFFICE

SPACES



Offices in business centres of B1 and B2 classes were less prone to tenant turnover,

since the volume of the commissioned spaces was insignificant and did not keep up with

the growing demand. Nearly all vacant spaces in business centres in Minsk were

occupied during 2012. Therefore, vacancy rates may be estimated only with a

permissible error of 2 - 4 per cent, which includes unattractive premises that are

unacceptable to tenants. As most of B2 class objects were built using a shared-equity

construction scheme, many such premises are held by the owners, and are not available

on the free rental market.

TENDENCIES AND FORECASTS

• The volume of commissioned office spaces will increase, due in large part to the

considerable number of projects that were postponed in 2012;

• Rental rates in B2 class premises are expected to increase;

• There is a high probability that the upper limit of rental rates in B1 class offices will

increase. Such rates will be moving closer to the lower rental rates of A class

premises;

• Vacancy rates in A class premises will decrease;

• New business centres will be filled as a result of deferred demand.


Источник: Colliers International


SPECULATIVE BUSINESS CENTRES

SCHEDULED FOR LAUNCH IN 2013

Project Class DeveloperGLA,

sqm

Projects implemented without use of shared-equity

construction scheme

No nameВ1 Biznes-Centr

Stolitsa25,930

FuturisВ1 Grad Story

Invest15,394

No nameВ1

IBA Group 11,000

No nameВ1

RM-Investment 8,200

No nameВ1

Lekt 7,700

Farenheit В1 Sinar 5,992

No name В1 Zalka 4,300

No nameВ2

Minsk-City 2,500

Projects implemented using the shared-equity

construction scheme

Royal PlazaВ2

Rubyrose Int. 23,000

VolnaВ2

Sigmapolius 18,345

TimeВ2

IEPU 15,000

No nameВ2

Ofisinvest 10,000

Klever ParkВ2 Fishman

Group10,996

No name В2 Ingrado 9,700

Domashevs

kiy

В2

Belspetsproekt 9,525

Solo

В2 Studencheskiy

Dom 9,200

Forum-

Plaza

В2

Delorm 8,300

Port, 2nd

stage, 3rd

start-up

facility

В2

A1

Development7,800

Tivali-CentreВ2 Festivalny

Centre7,500

No nameВ2

Techinmash 6,700

Park-Plaza,

2nd stage

В2IV-Invest 6,000

No nameВ2 HTP

Administration5,200

Valeo-

Centre

В2IDC Group 3,850

PokrovskyВ2 Promstroy

Trust3,100

No nameВ1

Lankorma 4,500

OptimaВ2 ElitStroyTechM

ontazh2,500

No name

В2

Leskomplekt 7,400

7 8

10

11

9

26

10

1115

2033

34

24 36

22

25818

21

1

1417

16

32

419

31

30

9

2

2829

27

23

13

5

35

7

36 37

38

1

2

5 6

12

14

19

20

3

39

46

44

41

40

43

42

645

1

2

3

4

5

4

13

15

16

17

24

21

22

23

25

26

12

7

27

Map data (c) OpenStreetMap (and) contributors, CC-BY-SA

18

Existing Developments Completions in 2012 Declared for Completion in 2013



OVERVIEW

Unlike in the previous year, the consumer market was stable in 2012 and underwent

neither stages of consumer rush, nor periods of decreased consumption. Meanwhile,

market development was positive and the consumption of non-food products prevailed

over the consumption of food products, which shows an improvement in consumer

moods. The overall growth rate of the retail turnover demonstrated positive dynamics. In

part, this was determined by the recovery of the financial income of the population to the

pre-crisis level after the drop caused by the devaluation of the national currency in 2011.

The growth rate of the retail turnover in euros amounted to 12 per cent in 2012. The

volume of retail turnover through all market outlets was the greatest in the last few years

and exceeded EUR 19 billion.

The normalisation of the financial income of the population, the stability of the national

currency and the activity on the consumer crediting market had an effect on the positive

structure of consumer spending; the spending on non-food products exceeded that on

food products, though the difference was not significant. At the same time, the food retail

segment saw an increase in demand for higher quality products.

An important event last year was the coming into effect of the Decree No. 150 of the

President of the Republic of Belarus of 1 April 2012 ”On some issues related to renting

and gratis using of property”. The decree spelled out the concept of the basic rental

amount for state and municipal objects and, more importantly, waived the administrative

control of the formation of rental rates at privately owned retail real estate objects.

Previously, the state controlled the pricing and owners of shopping centres were required

to justify the prices. On some occasions, the state had to intervene in order to artificially

prevent the price growth.

Retail chains were developing actively in 2012. For example, Euroopt chain, one of the

leaders of the Belarusian food retail segment, increased the number of outlets from 68 at

the end of 2011 to 123 at the end of 2012. Other chains were also increasing the number

of outlets and entering new formats. For instance, the largest format of stores of the

Sosedi chain before 2012 was the supermarket. In 2012, the chain launched a pilot

hypermarket as an anchor tenant at the ALL shopping centre. The market saw the

process of chain consolidation and several facts of mergers and acquisitions were

reported. As a result, the Ministry of Trade of the Republic of Belarus made the decision

to take seriously the issue of applying anti-monopoly measures in the retail market.

According to preliminary information, chains will be prohibited from holding a market

share of more than 30 per cent in one residential area.

SUPPLY AND NEW CONSTRUCTION

Nine new retail real estate objects important to the market were commissioned in 2012.

Among them was Zamok, a large shopping and entertainment centre. Another launched

object was the shopping and entertainment centre Galileo. However, the Galileo centre

has not started functioning yet, as tenants are still preparing to open their shops. The

first stage of the Zamok shopping and entertainment centre was commissioned in 2012:

it includes 31.8 thousand sqm out of a total GLA of more than 93 thousand sqm. Only

the first floor is currently functioning, where a food hypermarket and a domestic

appliance supermarket are located.

It should be noted that the Nemigoff shopping centre was commissioned and launched in

2012 as a part of the shopping and office complex at 3 Nemiga St; this object, which had

been initially announced under the name of Slavianski, was expected to enter the market

back in 2008. Therefore, the format of the object was already outdated by the time of

launching.

Retail Market

DYNAMICS OF THE CHANGE IN

MODERN RETAIL SPACES IN MINSK

Source: National Statistical Committee of the Republic

of Belarus

Ministry of Trade of the Republic of Belarus

REAL ESTATE MARKET | ANNUAL REVIEW 2013 | BELARUS | RETAIL MARKET

DYNAMICS OF RETAIL TURNOVER IN

REPUBLIC OF BELARUS

0%

20%

40%

60%

80%

100%

120%

140%

0

2

4

6

8

10

12

14

16

18

20

2005 2006 2007 2008 2009 2010 2011 2012

billi

on E

UR

Billion EUR Percent of previous year

0

100

200

300

400

500

600

700

800

2006 2007 2008 2009 2010 2011 2012 2013

(f)

(000

) sqm

Total stock New construction ForecastSource: Colliers International


Another important event of 2012 was the construction readiness of the shopping and

entertainment centre Galileo (the object had been initially announced under the working

name of Avtovokzal Centralny). However, since the object will be fully functioning only

after the shops will be opened in Q2 2013, this object is not included in the 2012 data.

The object is planned to accommodate shops of new retail chains that are not yet

present on the Belarusian market.

Among other retail real estate objects of modern formats launched in 2012, the

commissioning and launch of two objects is worth mentioning: namely, the ALL shopping

centre, the anchor tenant at which is the Sosedi chain with a pilot hypermarket, and

Hippo hypermarket.

A large-scale reconstruction of the Stolichny Shopping Centre, former Stolichny

supermarket, which was closed in 2008, was successfully completed in December. With

a GBA of 2.3 thousand sqm, it is not a very large object, but it has been a significant and

symbolic object in the history of the Minsk retail market since the 1960s.

2013 is expected to be rich in terms of retail real estate development in Minsk. Apart

from the beginning of full-scale functioning of shopping and entertainment centres

Galileo and Zamok, a third large shopping and entertainment centre, Arena City, will be

launched. It was initially expected to enter the market in 2012. The total area of the

object is nearly 88 thousand sqm, while the GLA of the shopping and entertainment area

exceeds 33 thousand sqm. The object had a high level of construction readiness in the

end of 2012.

The probable completion of a number of large retail objects that were initially scheduled

to enter the market in 2013 is quite high. More than 10 neighbourhood and district

shopping centres are likely to be commissioned. In general, new retail spaces with a total

GLA of more than 250 thousand sqm are expected to enter the market in Minsk in 2013.

Two multi-purpose shopping and entertainment centres will undergo the active

construction stage in 2013. These will be Galleria Pobediteley 9 in the centre of Minsk

and Green City in one of the most populated suburbs.

Objects of large formats with GLA exceeding 10 thousand sqm are prevailing among the

projects scheduled for completion not only in terms of the total number, but also in terms

of the total area.

Projects expected to be completed in 2013 reflect the tendency observed during the past

three years; the geography of such objects is gradually shifting from the city centre to

suburbs. This is caused not only by the increasing deficit of land plots suitable for project

implementation in the city centre, but also by the growing interest of developers in

residential districts where most of the population resides.

REGIONS

The retail real estate market was developing very actively in some regional cities during

the last few years. Such areas mostly included cities and towns with more than 100

thousand inhabitants.

The rate of development of the modern retail real estate market in regional cities is

comparatively uniform. Retail spaces are slightly bigger in Vitebsk as a result of the

commissioning of large objects like the Korona shopping centre and the Marko-City

multi-purpose complex. Other large objects are currently being constructed in Vitebsk.

Compared with the overall situation in the regions, the retail infrastructure in Brest is well

developed. Large new shopping centres Korona and Euroopt are operating in the city.

Sovetskaya Street in Brest has probably the most developed segment of street retail in

the entire country. The Grand Fashion House company is expected to launch its

shopping complex on Kuibysheva Street this year. In terms of its format, the object is

very similar to a fashion centre. A number of other projects are currently in various

stages of implementation.

DISTRIBUTION OF NEW PROJECTS

SCHEDULED FOR COMPLETION IN

MINSK IN 2013 BY AREA

MODERN RETAIL REAL ESTATE

MARKET IN REGIONAL CITIES OF

THE REPUNLIC OF BELARUS


4

4,8%

5

15,2%

11

80,0%

Number of projects Share in total

projects' area

>10,000 sqm

5,000-10,000 sqm

under 5,000 sqm


68 400

114 700

60 450 59 200 64 500

49 824

90 800

22 000 28 600

66 400

0

50 000

100 000

150 000

200 000

250 000

Brest Vitebsk Gomel Grodno Mogilev

Total stock New construction

GLA sqm



In 2012, the city of Gomel was leading in terms of large purchase and sales transactions

in the retail real estate market. For instance, Eurotorg company acquired the Liniya

shopping centre, the total area of which exceeds 13.5 thousand sqm, from Russia’s

Liniya GRINN group. NP-Service acquired a 29.5 thousand sqm shopping centre with a

multi-level parking facility from the local development company Novy Standart.

DEMAND

The demand for small areas in retail galleries (up to 50 sqm and 50 to 100 sqm) still

remains high. Individual entrepreneurs and domestic retailers from the category of small

enterprises are interested in such areas. Such areas also attract chains selling

expensive items, e.g. watch shops, jewellery shops, mobile phone shops and some

others.

Meanwhile, the development of the most successful chains present on the market as

well as the entry of new market participants has increased the interest in areas of 300 to

500 sqm and larger, depending on the standards adopted by the companies. The

number of applications for such areas is gradually increasing.

Food retail chains became more interested in rental spaces. Such companies are

interested in areas starting from 700-800 sqm and up to the hypermarket territory areas.

RENTAL RATES

Rental rates in rubles went up in 2012 due to the coming into effect of the Decree No.

150 of the President of the Republic of Belarus. For objects owned by the state or

municipalities or of equivalent form of ownership, rental rates went up due to the

introduction of the basic rental amount (BYR 54 thousand) instead of the previous basic

amount used to set rental rates, which amounted to BYR 35 thousand by 1 April 2012.

Since the exchange rate of the Belarusian ruble against the Euro remained relatively

stable throughout the year, rental rates in euros at such objects increased as well.

The rates at privately owned objects went up because the Decree No. 150 legitimated

free pricing in this sector. As a result, the average rental rates in the city increased within

a few months after the Decree had come into effect: rental rates for food product retail

spaces went up from EUR 8 to EUR 19 per sqm; those for non-food product retail

spaces increased from EUR 14 to EUR 25 per sqm. According to experts at Colliers

International, the rates at some objects went up by as much as four times.

The most noticeable increase in rental rates occurred in marketplaces and shopping

centres of old formats, where individual entrepreneurs are the main tenants. Rate

fluctuations were not so obvious at modern objects, where tenants are retail chain

operators, because in such cases the tenants and the operators had been trying to agree

on mutually acceptable rates since the end of 2011, after the situation on the monetary

and financial market had stabilised.

Price changes that occurred in 2012 can hardly be referred to as an increase in rental

rates. The rates did not reach the pre-crisis level reported in H2 2010 and Q1 2011 at all

shopping centres. However, there are objects that saw a considerable growth of rental

rates. The increase of the rates for small premises was especially notable. The main

reason for such an increase was not the aforementioned decree, but the stabilisation of

the consumer market, the growing demand and, as a result, the increasing activity of the

retailers.

STRUCTURE OF DEMAND FOR SPACES

IN MODERN SHOPPING CENTRES BY

THE NUMBER OF APPLICATIONS


39%

33%

22%

3%3% under 50 sqm

50 - 100 sqm

100 - 300 sqm

300-500 sqm

>500 sqm


RENTAL RATES

Area Rental Rates*

Up to 50 sqm 40 – 100

50 to 100 sqm 25 – 45

100 to 500 sqm 10 – 30

more than 500 sqm 7 – 19

* - EUR per square meter per month, VAT excluded



VACANCY

The increase in the amounts of rental rates did not result in a considerable increase in

the volume of vacant areas. According to city authorities that monitored the situation at

shopping centres and marketplaces across Minsk during the first few months after

Decree No. 150 came into force, only 0.01 per cent of all the tenants in Minsk refused to

enter into new agreements or additional agreements appended to contracts still in force.

Experts at Colliers International notice that the vacancy rates did not increase at privately

owned shopping centres either. There are objects on the market in which premises either

are not being filled or are being positioned on the market for a long time before being

filled. Such objects are of old formats.

New objects did not have a significant effect on the vacancy level because they did not

have a large volume of vacant spaces to offer on the free rental market. The ALL

shopping centre was the only exception, as it was a totally speculative project. However,

the premises at this object were filled within some three months after opening.

Rental spaces at large objects like shopping and entertainment centres Galileo and

Zamok as well as Arena City, which is to be launched next, will have much influence on

vacancy rates in 2013, because the filling of the object by tenants will peak during that

period. Since the filling process continues, it is difficult to tell how many vacant spaces

will remain at the object at the time of opening, but there will definitely be some.


• A number of construction projects with GLA of more than 20 thousand sqm will be

completed;

• Objects launched in December 2012 will start functioning on the full scale;

• New foreign chain operators will enter the Belarusian market;

• The geography of presence of some retail chains will be expanded. Retail operators

will be active in the markets of regional cities;

• Rental rates will remain stable and will be increasing at some new projects;

• The dynamics of the growth of retail turnover will be positive;

• The volume of investments in the retail sector and retail real estate will increase;

• Retail companies will keep acting as developers;

• Anti-monopoly regulation of retail trading activities will be toughened.

VACANCY RATES AT SHOPPING

CENTRES IN MINSK


RETAIL REAL ESTATE OBJECTS

SCHEDULED FOR LAUNCH IN 2013

Project DeveloperGLA,

sqm

Arena-City* Triple 33,270

Koltso (1st

stage)

Rostem 24,000

Zamok (2nd

stage)

Tabak-

Invest

21,400

Galileo BNK

Engineering

20,400

Korona-Uruchje Tabak-

Invest

20,300

Tivali Centre Festivalny

Centre

20,000

Skala Rapa Torg 17,000

А-100 А-100 12,200

Bonus PIK - Invest 10,400

No name Mortex BCZ 10,000

Euroopt Eurotorg 10,000

Nemiga-5 Fart i V 9,900

Grand Fashion

Mall

Autobiznes 8,700

Euroopt Eurotorg 8,000

Slavianski Kvartal Vneshekono

mstroy

6,200

Vitalur Vitalur 5,000

No name Lankorma 4,900


А-100 А-100 2,475


0,0%

1,0%

2,0%

3,0%

4,0%

5,0%

6,0%

7,0%

2007 2008 2009 2010 2011 2012Source: Colliers International



1. Zebra

(

phase)


12

3

67

17

22

23

24

25

28

30

31

32

11

39

39

36

37

40

41

4

44

45

4

5

9

10

6

7

8 29

910 11 13

124

1415

35

19

20

18

5

21

42

43

8

46

5

16

47

55

48

49

50

51

52

53

54

1

2

3

8

17

1

20

2

6

7

12

13

14

15

16

3

18

33

26 27

34

9

Map data (c) OpenStreetMap (and) contributors, CC-BY-SA

19


OVERVIEW

Ever since 2009, the development of the hotel real estate market in Minsk has been

related to the preparation of the city for the 2014 Ice Hockey World Championship

(hereinafter – the 2014 World Championship).

In 2011, the possibility to strip the Republic of Belarus of the right to host the event was

being discussed and the risk remained that the championship in Minsk would be

cancelled. However, on 18 May 2012, the Helsinki Congress of the International Ice

Hockey Federation (IIHF) approved Minsk as the host city for the 2014 World

Championship. Documentary approval of Belarus as the host country of the 2014 World

Championship had a positive effect on the moods of investors and developers and

added new dynamics to the construction of hotels and the development of related

infrastructure.

2012 saw the active development of hostels and the hospitality business sector, which

was new to Minsk. Only two hostels had been operating in Minsk previously, and both

were launched in 2011. Meanwhile, four new hostels were launched in 2012, two of

which belonged to the same owner.

2012 was also characterised by the development of yet another hotel real estate

segment in Minsk: Comfort apart-hotel with 134 apartments, the first of its kind in

Belarus, was opened in March.

Marriot and Accor chains officially confirmed their intentions to operate on the Belarusian

market in 2012. Marriot showed interest not only in the Minsk market, but also in the

markets of regional cities like Brest.

Meanwhile, it was also announced that the Rezidor SAS chain refused to operate the

hotel based in the complex of the National Olympic Committee headquarters, and the

municipal company called Stolitsa joined the project as the operator. The hotel was

named Victoria Olymp.

SUPPLY AND NEW CONSTRUCTION

A total of 30 hotels with 3,319 rooms, including the Robinson Club hotel that was opened

in Minsk suburbs in 2011 and the Comfort apart-hotel, are currently operating in Minsk.

The hotels can accommodate approximately 4,400 guests.

14 hotels in Minsk that have a total of 1,912 rooms are officially certified for 2- to 5-star

ratings. Hotel Tourist has been certified for a three-star rating too. To achieve that, in the

period between 2005 and 2012 nine floors of the hotel were renovated, including full

replacement of furniture and plumbing equipment.

President Hotel (5*) and the reconstructed Poliot hotel were expected to start operating

by the end of 2012. However, neither of the two hotels was launched.

The hotel on Zamkovaya Street, constructed using city budget funds, had also been

previously declared to be launched in 2012. However, by the end of the year the

construction was only about 40 per cent complete, and the Minsk city authorities

announced it was looking for a private investor to be able to complete the construction

works. Neither the potential investor, nor the possible construction completion time, was

known by the end of the year.

The situation with the one-star hotel on Yakubovskogo Street, the first of its kind in

Minsk, was unclear. The hotel was launched in the end of December 2011. However, it

was not operating during the entire year of 2012. Meanwhile, as a real estate object, the

hotel is officially planned to be launched in the beginning of 2013.

Hotel Market

REAL ESTATE MARKET | ANNUAL REVIEW 2013 | BELARUS | HOTEL MARKET


OPERATING CERTIFIED HOTELS IN MINSK

Star

RatingName

Number

of

Rooms

Operator

5* Crowne Plaza

Minsk115

Princess

Group (IHG)

5* Europe 67 Hotel Europe

4* Victoria 169 Stolitsa

4* Minsk 252 Hotel Minsk

3* Dom Moskvy 14 Dom Moskvy

3* Orbita 210Hotel complex

Orbita

3* Planeta 306 Hotel Planeta

3* Sputnik 136 Minotel

3* U Fontana 18Hotel U

Fontana

3* Yubileynaya 239Hotel complex

Yubileiny

3* IBB

41

Johannes Rau

International

Centre for

Education and

Exchange

3* Tourist 202Hotel complex

Tourist

3* Garni 49 Minotel

2* Zvezda 94 Zvezda

Total 1,912

PROJECTS CONPLETED IN MINSK IN 2012

Star Rating Name

Number

of

Rooms

Operator

Apart-hotel Comfort 134 Hotel

Comfort

3* Garni 49 Minotel



Therefore, just two new hotels with a total of 183 rooms were actually launched in Minsk

during 2012.

34 projects (including those announced in the end of 2012) are currently in various

stages of implementation and construction readiness in Minsk. 12 to 15 announced

projects may actually be completed before the beginning of the 2014 World

Championship.

Sites earmarked by the Minsk City Executive Committee for the construction of hotels

remain reserved and investors are still interested in them. Therefore, the development of

new projects to be completed in 2015-2016 may be expected in the future. The total

number of ongoing and potential projects in Minsk is estimated at 46.

A number of new hotel construction projects were announced in 2012. Some of them are

currently at the level of declarations of intent and have not been designed yet. Some

others started being constructed immediately upon announcement. Among new

participants of the hotel development sector, Lada OMS Engineering is especially worth

mentioning. After the completion of the Comfort apart-hotel project, the company

announced the beginning of implementation of two other hotel real estate projects

adapted for international operator Accor, which owns Novotel and Mercure networks.

Adjustments to the previously announced projects were voiced as well. For example, the

number of rooms in the project of a hotel located in the multi-purpose complex at the

intersection of the Pobediteley Ave. and the Narochanskaya St. was reduced from 264 to

130.

Some market participants start noticing yet another problem related to the rapid

development of the hotel market in Minsk, and that is professional personnel. At least 3

thousand qualified staff members are expected to be needed in the 2013-2014 period.

There is a risk that due to the lack of well-trained personnel, the vacancies will be filled

by staff with a high-turnover, which will negatively affect the quality of services.

DEMAND AND PRICES

According to the statistical data provided by the State Border Committee, 6.13 million

foreigners visited Belarus in 2012. 4.3 million of them visited the country on private or

business visits or as tourists. Minsk was visited by 400 thousand foreigners, mostly on

business visits.

More than 118.7 thousand people visited Belarus as members of organised tourist

groups in 2012.

Just like previously, medical tourism, especially the segments of health resorts and

dentistry, remain popular with foreigners, being very attractive in terms of the price to

quality ratio. Hunting tourism tours are also popular; such tours generated 50 per cent

more revenue in 2012 compared with the previous year. In 2012, market participants

also noticed that the visiting of farmsteads and gaming establishments is becoming

popular with foreign tourists, and especially with citizens of the Russian Federation.

TOURIST ACTIVITY BY COUNTRY


ENTRY OF FOREIGN TOURISTS TO

THE REPUBLIC OF BELARUS


0

20

40

60

80

100

120

140

2007 2008 2009 2010 2011 2012

000s

Source: National Statistics Committee of the Republic of

Belarus

ACCOMMODATION PRICES AT MIMSK HOTELS, PER DAY

Star Rating Standard Room Double Standard Deluxe Apartment

5* 240 - 270 260 - 310 330 - 370 550-1400

4* 138 - 143 159 - 184 222 - 247 437 - 615

3* 67 - 86 87 - 125 99 - 201 214 - 367

78%

3%2%1%2%2%2%

3%7% CIS

Lithuania

Poland

Latvia

Germany

Italy

UK

Turkey

Othercountries



Residents of the CIS are prevalent among the foreigners visiting Belarus due to the

absence of a visa regime. Citizens of a number of remote foreign countries also enjoy a

visa-free regime with Belarus, but they visit Belarus not as actively because of their

remote geographical location. In 2012, Belarus issued 450 thousand visas to citizens of

countries that have a visa regime with Belarus, including the EU Member States.

Hotel accommodation prices in Minsk remained virtually unchanged in 2012 compared

with the previous year; on the one hand, accommodation costs did not decrease, and on

the other hand there was no point for hoteliers to raise the prices, since prices at Minsk

hotels were higher than those found at most capital cities of Central European countries.

As a result, the situation in which potential hotel clients prefer private apartments

available for short-term rental is typical for Minsk.

However, prices increased slightly in the segment of three-star hotels at the end of the

year; the Garni hotel was launched in September, and the prices of certain types of

rooms at the hotel were above the market average.

In December 2012, hoteliers were offered a draft memorandum stipulating the pricing at

Minsk hotels during the period of the 2014 World Championship. The main purpose of

the document was to reach a corporate agreement not to raise the prices of hotel

services by more than 10 per cent compared with the current level.

OCCUPANCY RATES

According to the results of 2012, the number of guests at the hotels in Belarus and Minsk

is expected to go up by 2.5 to 4.5 per cent compared with the previous year.

The positive dynamics of the growth of the number of guests led to good occupancy rate

results. The average occupancy rate in Minsk was 68 per cent, while the national

average was 43 per cent.

Occupancy rates were the highest at inexpensive hotels without a star rating as well as

at two-star hotels. The average occupancy rate of such hotels reached 96 per cent.

The three-star hotel Garni, which was launched in September, reported the occupancy

rate of more than 90 per cent during the first months of operation.

Just as in previous years, the number of foreign guests exceeded that of the local

guests.


• Within the framework of preparation for the 2014 Ice Hockey World Championship,

construction works in projects scheduled for completion before the aforementioned

event are becoming more active;

• The number of announced new projects at sites reserved for hotel construction will

decrease;

• The integration of Belarusian hotels into international booking systems will continue;

• Developers will keep attracting major international operators to the projects;

• International operators are expected to show interest in projects developed in

regional cities of the Republic of Belarus;

• The level of competition on the market of hotel services will remain moderate in 2013

due to the completion of most of the announced projects by the end of the year.

DYNAMICS OF THE CHANGE IN

MODERN RETAIL SPACES IN MINSK


DYNABICS OF THE AVERAGE HOTEL

OCCUPANCY IN BELARUS AND

MINSK

30

35

40

45

50

55

60

65

70

2005 2006 2007 2008 2009 2010 2011 2012

%

Belarus Minsk

0

50

100

150

200

250

300

350

400

450

2006 2007 2008 2009 2010 2011 2012

000s

Foreigners Local

Source: National Statistical Committee of the Republic of

Belarus

Source: National Statistical Committee of the Republic of

Belarus



13

5

710

8

11

12

Map data © OpenStreetMap (and) contributors, CC-BY-SA

11

1

14

15

16

20

12

3

4

5

79

6

2

1

8

10

1

4

632

9

13

Map data © OpenStreetMap (and) contributors, CC-BY-SA

17

18

19

2122

23

24

25

26

27

28

29

30

2

31

32

33

34


OVERVIEW

Construction work on 23 large warehouse real estate objects was undertaken at 22 sites

in the Republic of Belarus in 2012. 15 such projects were located in the territory of the

Minsk Region. When taking into consideration both new objects and existing objects that

are undergoing modernisation and development of warehousing infrastructure, a total of

48 projects are being developed in the country.

Rapid high-quality development of modern logistics infrastructure is important for Belarus

because of the need to implement the action plan aimed at improving the country's rating

in the World Bank's Logistics Performance Index. This fact is not a mere formality for

Belarus; the development of logistics infrastructure and the improvement of the country’s

position in the mentioned rating opens up many new prospects for Belarus in the global

goods movement system. This is especially important considering the location of the

Republic of Belarus between the EU and the CIS, the country’s participation in the

Customs Union with Russia and Kazakhstan, and the transition of trans-European

corridors No. 2 and No. 9 through the territory of the country (west to east and north to

south).

The prospect of Belarus in the European logistics system was mentioned in the

”European Industrial & Logistics: A Long-Term Review” report of the central office of

Colliers International in the EMEA region, according to the results of extensive research

of the European logistics market, which was carried out together with the company’s

partners.

According to the conclusions made by European researchers, Minsk and Belarus have

all chances to become potential centres of distribution in Europe, potentially being

incorporated into the global regional logistics system by 2020. In order to realize this

possibility fully, both the state and business community need to develop the logistics

infrastructure in Belarus to similar levels as in established logistics centres throughout

Europe, especially since other regional logistics centres are expected to emerge in the

East, and they may either add to the Belarusian vector or become its rivals.

REAL ESTATE MARKET | ANNUAL REVIEW 2013 | BELARUS | INDUSTRIAL MARKET

DYNAMICS OF THE LAUNCHING OF

MODERN WAREHOUSSING FACILITIES IN

MINSK AND MINSK DISTRICT

Industrial Market


0

100

200

300

400

500

600

700

2006 2007 2008 2009 2010 2011 2012 2013

Sqm (000s)

Expected Construction

New Construction


EUROPEAN LOGISSTICS CENTRES IN 2020


The expediency and attractiveness of this segment of commercial real estate for

developers is worth mentioning separately. According to information from the

Beltamozhservice company, the owner of two transportation and logistics centres, the

workload of the company’s transportation and logistics centre in Brest exceeds 100 per

cent (the company has to look for additional spaces to meet clients’ demands); the

workload of the object located near Minsk, which was launched later, reaches 72 per

cent, and the profitability of logistics services stands at 80 per cent.

The analysis of the first year of activity of the transportation and logistics centre revealed

that the estimated project payback period may be decreased from 8 to 5 years.

Therefore, the payback period of the Schitomirichi transport and logistics centre, a new

large object scheduled for launch in 2013, is estimated at 6 years.

The recent Decree No. 284 of the President of the Republic of Belarus on 21 June 2012

simplified the documentation procedures and eased the requirements for wholesale and

warehousing of alcoholic beverages, alcohol-containing products and tobacco products;

this decree, in turn, has simplified the activity of logistics operators.

SUPPLY

New industrial real estate objects, including warehousing logistics objects, were being

actively launched in 2012.

13 new warehousing complexes with a total area of around 140 thousand sqm were

launched in the territory of Minsk and the Minsk Region during the year.

Just as in previous years, companies of the built-to-suit segment were the most active

developers in the warehousing real estate market in 2012. However, during the previous

years, such objects were usually small and aimed at covering the existing demand of

companies for warehousing spaces. Meanwhile, projects developed in 2012 were

focused on quality and technological equipment. For instance, the Minsk Kristall trade

and logistics centre is a unique object in its own way; being 24 meters high at the highest

point, it allows eight-tier storage, has autonomous water supply and heating systems,

and features fully automated transport operation management.

Not all announced objects entered the market in 2012. However, this year was well

ahead of the previous ones in terms of the amount of launched warehousing spaces.

In 2012, developers had planned to launch modern warehouses with a total area of more

than 240 thousand sqm. However, the first stages of the biggest logistics complexes,

including Prilesye and Schomyslitsa, as well as some smaller objects were not

completed.

Projects and start-up facilities in projects that postponed their launch dates are likely to

be launched in 2013 because the construction readiness of such projects is quite high.

Therefore, more than 240 thousand sqm of new warehousing spaces may be launched

in 2013.

A number of projects scheduled for launch in 2014-2015 were also announced in 2012.

For example, Eurotorg Company, which operates Euroopt, one of the biggest retail

chains in Belarus, announced the construction of new warehouses. The need to build

new warehouses arose because two of their existing warehouses that were launched

near Minsk in 2010 and 2012 are unable to satisfy the needs of the rapidly growing

network. As a result, the company is currently building a 23 thousand sqm logistics

centre in Baranovichi, Brest Region, and may also build another large object in the Minsk

Region.

The Belintertrans Company, which operates the logistics centre in the Valozhyn District,

intends to build a large transportation and logistics centre near the Khatezhino village in

the Minsk District. For this purpose, it established the authorised company M-Logistic-

City; more than 55 thousand sqm of warehousing facilities will be built in the territory of

15 ha.


ОСНОВНЫЕ СКЛАДСКИЕ ДЕВЕЛОПЕРЫ

В 2012 г. (ПО ОБЪЕМУ НОВОГО

СТРОИТЕЛЬСТВА)

14 800

9

68 755

4

77 205

Number of projects % GBA of projects

above 10 000 sqm

5 000 - 10 000 sqm

under 5 000 sqm


MODERN WAREHOUSING COMPLEXES

LAUNCHED IN 2012

Developer TypeGBA,

sqm

Belvingeslogistik

(Belintertrans)

Logistics

Centre

19,300

BLT-Logistic,

second stage

Logistics

Centre

20,770

Vladprodimport Logistics

Centre

19,340

Eurotorg Distribution

Centre

10,795

MZBN Logistics

Centre

10,000

Logicom Import Ltd. Warehousing

Complex

9,750

Ernis Distribution

Centre

9,055

Grand-Elite Warehousing

Complex

8,000

Minsk Kristall Logistics

Centre

7,300

Evrokad Warehousing

Complex

6,700

Belrusinvest,

Second Stage

Distribution

Centre

5,950

Amazon-Kolorit Logistics

Centre

5,600

Victoria-91 Warehousing

Complex

4,800

Total: 137,360



Transportation and forwarding company InterTransEkspeditsiya intends to build its own

transportation and logistics centre in Dzerzhinsk.

Another logistics operator and developer, the Belrusinvest group, will start building a new

18 thousand sqm logistics centre in 2013.

The objects scheduled for launch in 2013 preserve the tendency of the increase in the

number of projects with large areas and the prevailing of such projects over the small

ones. However, medium-sized objects with areas of 10 to 20 thousand sqm are popular;

they are prevailing in terms of the number of such objects and constitute a considerable

percentage of the total volume of spaces.

DEMAND

Unlike the crisis year 2011, 2012 saw a clear normalisation of the demand for

warehousing spaces. The demand from consumers for spaces in new warehousing and

logistics complexes launched in 2011-2012 was stable. What is especially important, the

demand for large spaces was high, and the main tenants were professional distributors

and logistics companies: in some objects, the tenants were affiliated with the owners,

while other objects were rented out to third-party operators.

For example, an area of 6,000 sqm at the BelVingesLogistic logistics complex was

rented out to foreign limited liability company ALIDI West, a regional subsidiary of

Russia's ALIDI Group. The remaining spaces were operated by its subsidiary L-BIT

Group.

The entire complex of Techstroyresurs company, including warehouses and

administrative and residential premises, with a total area of 15,811.5 sqm was rented out

to the limited liability logistics company Kompaniya FSK Logistic, a subsidiary of the

Russkie Sladosti limited liability company, which was previously located at the Novinki

complex owned by BLT-Logistic. Limited liability company European Fastening

Technologies became the new operator of the mentioned complex.

Meanwhile, BLT-Logistic focused on running a new complex in the Obchak village with a

total area of more than 41 thousand sqm. The complex was launched in two stages in

2011-2012.

Distributors and retail trade representatives were also active in the rental market. For

example, the entire warehousing complex with administrative premises with a total area

of 7,000 sqm, built by Evrokad in Bolshoi Trostinets, was rented by Patio, the operator of

the 5 Element chain of domestic appliance supermarkets.

Companies within this segment as well as manufacturing companies were also the most

active in the built-to-suit segment.

In 2012, the main tendency in the rentals market was as follows: professional logistics

companies became the main tenants instead of food product distributors, who dominated

in the warehousing rental market previously. Another typical feature of 2012 was that the

demand for large warehousing premises was not satisfied; as a result, the demand for

spaces in objects to be launched in the short and medium term is likely to be high.

RENTAL RATES

Following the drop and the subsequent rise observed in 2011, rental rates stabilised in

2012. However, the range of rental rates for objects of comparable quality expanded

slightly, partially because of certain cases when tenants rented large spaces and even

the entire new objects (resulting in a drop of rates), and partially because of owners’

attempts to raise the rental rates for small spaces above the market level.


DISTRIBURION OF PROJECTS

SCHEDULED FOR 2013 BY AREA

25%

6

44%

4

51%

Number of Units % GBA of Units

20,000 and more sqm

10,000-20,000 sqm

5,000-10,000 sqm


50,0%

25,0%

25,0%

Professional logistics companies

Non-food products

Food products

DISTRIBURION OF PROJECTS

SCHEDULED FOR 2013 BY AREA



There are no obvious preconditions for a drop in rental rates in 2013, as some of the

objects expected to be launched this year are built-to-suit objects, and others are being

built through shared-equity construction projects, which reduces the total volume of

rental spaces. There is also a high probability that not all of the planned projects will be

completed this year.

Therefore, the market will not be oversaturated with new warehousing spaces in 2013,

and the rental rates will remain on a considerably high level.

VACANCY

Following the post-crisis normalisation of economic activities of Belarusian companies,

by the end of 2011 the vacancy rate in the market of warehousing spaces stopped

growing and started showing signs of decrease. This process continued throughout

2012.

The launch of a considerable volume of new spaces did not result in increase of the

vacancy rate: the supply was being immediately absorbed due to the deferred demand

that occurred in the previous year.

The supply was increasing only upon the launch of some new objects. However, rental

spaces were being positioned on the market for a very short period of time and were

removed from the supply within 1.5 to 3 months. While small spaces were still available

on the market, the demand for spaces of several thousand sqm was often not satisfied.

The situation did not change by the end of the year, since several new objects were

launched at that time, causing the supply to increase. Some spaces may also become

available to market participants within built-to-suit objects after their owners make final

decisions regarding the necessity for spaces to meet the needs of their own businesses.

For instance, at the end of the year, the Minsk Soft Drink Factory offered for rent 3,200

sqm of warehousing spaces in its complex with a total area of 10 thousand sqm.

Meanwhile, Vladprodimport rented out some of its spaces to the retail chain operator

Euroopt.

TENDENCIES AND FORECASTS FOR 2013

• There will be moderate growth of supply in the rental market as a result of the launch

of new objects;

• The first objects in large logistics parks that are currently under construction will likely

be launched;

• The current level of rental rates will remain unchanged;

• The demand for the services provided by customs warehouses and terminals,

including the demand from non-residents of the Republic of Belarus, will increase

because of the activity of the Customs Union of Russia, Belarus and Kazakhstan;

• Activity of developers from the built-to-suit segment will remain high;

• The market will see implementation of projects adapted for subsidiaries of logistics

companies and logistics companies affiliated with the developers.


DYNAMICS OF RENTAL RATES

2

4

6

8

10

12

2007 2008 2009 2010 2011 2012

Class B Class A

EUR


0,00%

1,00%

2,00%

3,00%

4,00%

5,00%

6,00%

7,00%

8,00%

9,00%

10,00%


DYNAMICS OF VACANCY OF

WAREHOUSING FACILITIES



1

17

2

3

5

11

7

64

8

910

11

12

13

14

15

16

18

19

20

21

22

2

3

4

5

6

78

9

10

1

2

3

5

4

6

12

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BELARUS

Legal

Real estate in Belarus can be purchased in two ways – via an asset transfer deal or via a share transfer deal.

Asset deals and share deals relating to real estate are both commonly used in practice.

Asset Transfer Deals

Main Steps

Usually the sale of real estate by one party (seller) to another party (buyer) would be completed within 2-3 months

following these main steps:

1. The parties agree on the main terms of the deal (eg full information about the real estate object, purchase

price, payment mechanism, deadline for signing the final agreement). Sometimes, in the case of a larger

real estate transaction, the agreement between the parties on the main terms of the deal is reproduced in a

letter of intent or a preliminary purchase agreement concluded by the parties. Due diligence of the real estate

may be performed before the transaction.

2. If the real estate is subject to a right of first refusal to acquire the property by local authorities, the seller

offers the local authorities to exercise their right. The offer contains the same conditions as agreed between

the seller and the buyer. Local authorities have up to 5 working days to decide.

If the real estate is in joint ownership, the seller offers the co-owner to exercise its right of first refusal to

acquire the property. The co-owner has up to one month to decide.

3. If a third party with a right of first refusal acquires the property, then the purchase agreement is concluded

with that party. If a party with the right of first refusal declines acquisition then the seller and the buyer sign

a purchase agreement in at least three copies.

4. All copies of the signed agreement must be registered with the Unified State Register of Real Estate, Rights

thereto, and Transactions therewith (the Real Estate Register). Registration is performed on the basis of

an application signed by the representatives of both parties. In the purchase agreement the parties are free

to authorise one of them to sign the application on behalf of both of them.

5. After registration of the purchase agreement with the Real Estate Register, registration of the transfer of the

title to the property may be requested. Registration of the title may also be requested together with

registration of the agreement, unless otherwise provided by the purchase agreement.

It is common for the seller to require payment of the full price prior to the transfer of real estate to the buyer

and registration of the buyer’s rights in the Real Estate Register. Under current law, as a general rule, real

estate is considered to be mortgaged by the seller if it was transferred to the buyer but has not been fully

paid.


Main Benefits and Drawbacks

limited scope of due diligence investigation since the review concerns only the target asset;

agreements on supply of utilities and other services must be assigned to the buyer or new agreements signed with service providers;

in some cases possibility of exercise by the local authority of its right of first refusal to buy buildings situated within the respective administrative unit; and

foreign individuals and legal entities cannot own land plots (except for foreigners who inherit land plots).

Transfer of assets of a unitary enterprise features certain peculiarities. A unitary enterprise is an organisational form of commercial legal entity established by one shareholder (founder). All assets of a unitary enterprise are considered the property of the founder and assigned to the unitary enterprise under business management. The authorised capital of a unitary enterprise is not divisible into shares.

Assets of a unitary enterprise can be transferred either individually (asset transfer) or as an asset complex (a kind of share transfer). An enterprise as an asset complex is considered as real estate. Hence, a unitary enterprise as an asset complex, transactions involving an assets complex and rights to it must be registered with the Real Estate Register.

Transfer of an asset complex requires subsequent amendments to the articles of association of the unitary enterprise and state registration of the amendments. The buyer of an asset complex (new founder of the unitary enterprise) assumes responsibility for the whole company including any matters that occurred before change of ownership, so that extensive due diligence is recommended.

Share Transfer Deals

Main Steps

The main steps for share transfer deals are:

1. Initial agreement on the transaction. This involves the understanding by both parties of the sale process.

At this stage, the parties may sign a Letter of Intent (usually non-binding) that will in general state the

understanding of both parties on the subject of the sale and the potential price (including price calculation).

The parties may also sign a confidentiality agreement to prevent leak of valuable information.

Usually at this stage a due diligence of the target company starts. Depending on the volume and business

activities of the target company, the buyer performs legal due diligence, tax due diligence and financial due

diligence, as well as other diligences that are less common – technical, environmental, and others.

The aim of the due diligence is to identify potential risks having negative consequences for the business or

share value of the target company.

Results of the due diligence can lead to decrease of the purchase price, change of the transaction structure

or even to a decision not to proceed at all.

2. Pre-emptive rights of shareholders

If the seller sells a share in a limited liability company, additional liability company or closed joint stock

company, the seller should first offer the share to other shareholders and the company itself. The

shareholders and company itself should waive their rights to acquire the share prior to sale of the share to

third parties. The share may be sold to third parties at the price and on the same conditions as offered to

the shareholders and the company.

3. Obtaining consent of the antimonopoly authority to the transaction.

In certain cases the consent of the antimonopoly authority (Department of Price Policy of the Ministry of

Economy of Belarus or departments of price policy of municipal authorities) is needed before the transaction

is even signed. Examples include transactions where the buyer and the target company operate in the same

commodity market and all the following conditions are met: (i) the intended transaction relates to acquisition

of shares of the target; (ii) the buyer and the target perform their activity in the same commodity market; (iii)

the buyer’s activity covers more than 30 % of a certain commodity market; (iv) the buyer is a legal entity or

an individual entrepreneur. The antimonopoly authority has one month to issue its consent for carrying out

the transaction.


1. Agreement on terms and conditions of the transaction.

If the results of the due diligence were satisfactory, the shareholders and the company waive their right of

first refusal to acquire the share and the consent of the antimonopoly authority was obtained, the parties

start work on the transaction documents.

Depending on the complexity of the transaction, negotiations on the terms and conditions of the transaction

documents can take from several weeks to several months.

2. Closing the transaction.

When the parties have agreed on all terms and conditions of the transaction agreements, signing of

documents takes place.

The time for closing is required to perform acts required for closing so that the title to the shares and control

of the target company can be transferred from the seller to the buyer on the closing date. These include eg

obtaining shareholders’ and company waivers, consent of antimonopoly authority, obtaining payment for

shares, plus performing other acts stipulated in the share transfer agreement.

3. Registration of changes of shareholders

The amendments to the articles of association reflecting new shareholders of limited liability companies

must be registered with the Unified State Register of Legal Entities and Individual Entrepreneurs (the USR).

Registration takes one day. A change in the shareholders of open and closed joint stock companies is

registered by the depository who enters new shareholders in a special shareholders register. No

amendments of the articles with USR are required to formalize changes of shareholders of these companies.

Issues to Take Into an Account

A share transfer of a company holding target real estate features the following:

the buyer, on completing the transfer of shares, assumes responsibility for the whole company including any matters that occurred before change of ownership;

due diligence investigations are more extensive as a share transaction transfers the entire company (with all known and unknown rights and liabilities) as opposed to due diligence of target real estate only;

ownership of shares is transferred either as of the date the company is notified of the share purchase agreement (for LLC) or as of the date of transfer of shares to the account of the buyer, held with a depositary (for JSC); and

VAT is not payable.


Title to Real Estate, Real Estate Register

Land plots can be held by legal entities (including those with foreign investments) in Belarus on the following

titles: right of ownership, right of permanent use, right of temporary use. Individuals and Belarusian and foreign

legal entities can also lease land plots.

Land plots, transactions, and titles to them must be registered with the Real Estate Register.

Buildings, agreements with respect to buildings, and titles to buildings are also registered with the Real Estate Register. Lease agreements and lease rights to buildings need not be state-registered.

The Real Estate Register stores information regarding the legal status of real estate, including encumbrances.

The real estate information contained in the Real Estate Register is publicly available. However, a list of all real

estate objects owned by a particular individual or legal entity is unavailable to third parties.

General

Land plots can be acquired as a result of allocation as decided by local authorities or as a result of a transaction.

Transfer of a building involves transfer of title to the land plot to the new owner of the building. If the underlying land plot is leased, then the rights and obligations of the tenant of the land plot are transferred to the new owner of the building.

An acquisition may be invalidated upon a claim by the buyer if the building is leased and the acquisition agreement

does not contain information about it.

Change of Ownership

Change of ownership requires registration of the transaction, transition, and accrual of the right to real property

with the Real Estate Register. The period for registration is usually seven working days as of filing all necessary

documentation with the Real Estate Register. Fast-track registration procedure takes two working days.

Form of Agreements

Transactions with real estate require written form. The transaction should be certified by a notary or the registrar of the Real Estate Register, if an individual is a party to the transaction (except for individuals acting in the capacity of individual entrepreneurs and having a seal). A transaction with real estate requires registration with the Real Estate Register, except for lease agreements of buildings and constructions.

Lease agreements of buildings and constructions require written form.

Language Requirements

No specific requirement exists under Belarusian law to use only the official state languages (Russian or

Belarusian) in agreements on real estate. However, the Real Estate Register may register only documents in

Russian or Belarusian. Hence, foreign language documents require a translation either certified by a notary or

signed by the parties. A bilingual agreement is also possible, but sometimes finds resistance on the part of

registrars.

Due Diligence

Before carrying out any real estate transaction, it is advisable to research, for example, ownership, history,

encumbrances, and lease agreements. The results of research may help to set the final purchase price reflecting

the value of the real estate. Some information is publicly available and can be obtained independently; other

information requires involvement of the seller.

Rights of First Refusal

Local authorities enjoy a right of first refusal to acquire certain buildings and other real estate located within their territory. The list of such buildings and other real estate is determined every year by local authorities. In practice this right is exercised very rarely. However, sale-purchase agreements may be registered with the Real Estate Register and ownership transferred to the purchaser only after the local authority has decided not to exercise its right of first refusal.


Restrictions

Restrictions on Acquisition of Real Estate

Restrictions on real estate acquisition in Belarus apply to land plots and buildings.

A foreign legal entity cannot own a land plot. A foreign citizen or person without citizenship may own a land plot only in cases of inheritance. Commercial buildings and constructions can be owned by foreign legal entities and individuals.

Encumbrances

Real estate may be encumbered by servitudes, mortgages, lease rights, gratuitous use, and other encumbrances

that should be considered in purchase and use of land plots and buildings.

Property Management

Maintenance of real estate is usually carried out by the owner. In the case of joint ownership, owners may

establish an owners’ association.

Lease Agreements

General

General terms for lease agreements are laid down in the Belarusian Civil Code. Terms of lease are subject to

agreement between the parties. Lease agreements should specify the description of leased objects (inventory

number, location, area) and the rent.

Duration and Expiry of Lease Agreement

The duration and expiry of a lease agreement are usually fixed in the agreement. Belarusian law lays down some

general rules under which lease agreements may be for a definite or indefinite term. The Civil Code sets grounds

for termination of a lease agreement by the court at the request of a party. The parties may agree additional

grounds for termination by the court or unilaterally.

Lease Payment and Accessory Expenses (Utilities)

The amount and the currency of lease payment (rent) are subject to agreement between the parties. However, several restrictions apply to property owned by the state or companies with state share.

Maintenance and utilities (such as water, gas and electricity) are usually paid by the tenant in addition to the rent.

Distressed Assets Purchase

Acquisition of distressed assets may be a feature if a company that owns real property faces financial difficulty and needs emergency funds to cover debts. Distressed assets purchase is not specifically regulated in Belarus. However, the following issues should be taken into consideration.

Time for closing a transaction with distressed assets is usually shorter as the selling company is under pressure to receive funds to settle with its creditors. Consequently, due diligence time frames may be shorter. At the same time, due diligence is especially required as risks related to distressed assets are higher (eg the property may be mortgaged or seized by a creditor).

The risk is that insolvency proceedings may commence against the seller after disposal of distressed assets to a buyer. Under the Belarusian Law on Insolvency, transactions by the seller preceding insolvency may be held invalid. For example, a transaction may be held invalid if it took place within six months, one year, or three years before commencement of insolvency proceedings, depending upon the circumstances and grounds involved.

Sometimes distressed assets are sold at a low – even nominal – price. This option should be thoroughly assessed,

as the transaction may be held to be fictitious (eg intended to cover up a gratuitous transfer). This may mean that

the transaction is held invalid and may also entail tax consequences (charge of profit tax plus penalties).


ESTONIA, LATVIA, LITHUANIA, BELARUSTAX*

ESTONIA LATVIA LITHUANIA BELARUS

SPECIAL NOTES Estonia offers a unique

CIT system as resident

companies pay no

income tax for retained or

reinvested earnings.

Income tax at a gross

rate of 21% is deferred to

the moment of payment

of dividends, gifts, fringe

benefits, non-business

expenditure and

excessive capital

reductions.

Personal income tax of

residents, however, uses

a more common

approach, and tax is

charged annually.

As an alternative to the

general system of taxation

businesses may use the

simplified taxation system

(STS) and pay a unified tax

imposed on gross revenues,

provided that the

established requirements on

gross revenues within one

calendar year and number

of personnel are met. Gross

revenues are considered to

be the amount of revenues

received during the taxation

period as the result of sales

of goods (work, services),

property rights and non-

operating income.

Depending on

circumstances, the main tax

rates under the STS are 3%

(if the STS with payment of

VAT is used); and 5% (if the

STS without payment of

VAT is used).

Certain taxpayers and

certain activities are subject

to special taxation

treatment. Eg, special

taxation regimes are

provided for residents of

SEZ, residents of a High

Technology Park (HTP),

businesses carrying out

their activity in small towns.

The information provided

below mostly concerns the

general system of taxation

RENTAL INCOME Rental income of

resident corporates does

not trigger CIT.

Rental payments by

Estonian corporates to

Estonian natural persons

or non-residents are

subject to Estonian 21%

withholding tax.

15% (equal to CIT) applies

to taxable income based on

annual financial profit or

loss adjusted for taxation

purposes.

Individuals earning rental

income pay 24% PIT on the

profit (individuals with no or

immaterial expenses can

pay 10% on the gross rental

income).

15% CIT applies to net

income.

Reduced rate of 5% CIT

applies to small companies

with:

- income less than LTL 1

million (approx. EUR

289,620) in 1 calendar year;

and

- less than 10 employees.

Rental profit is taxed at the

general CIT rate of 18%.

Individuals earning rental

income pay 12% PIT on the

profit.

If an individual rents an

apartment to some

individual and the income

from renting


Deductions: all customary

expenses incurred in

relation to earning rental

income. Exception: non-

deductible expenses falling

into an exhaustive list, e.g.

fines, penalties, dividends,

gifts.

obtained during a calendar

year does not exceed a

certain amount, then the

rate of PIT is fixed. The

exact fixed amount of PIT

is determined by local

authorities depending on

the location of the

apartment within the limits

provided in laws.

THIN

CAPITALISATION

There are no traditional

thin capitalisation rules,

i.e. substantial debt

financing at market rate

interest is tax-neutral.

Two tests are applied:

- the first is based on a 4:1

debt-to-equity calculation;

- the second compares

the interest rate paid

with a rate of 1.2 times

the statistical average

of short-term loans by

Latvian banks in the

last month of the

taxation period.

Any excess interest

calculated under either

method is not deductible,

and if both methods result

in non-deductible interest,

the higher amount is non-

deductible.

Non-deductible interest

cannot be carried forward

and is lost as a deduction.

Financial and insurance

institutions are not subject

to thin capitalisation rules.

Interest and currency

exchange losses on debt in

excess of a debt/equity ratio

of 4:1 are non-deductible for

CIT purposes if debt capital

is provided by a creditor

that:

- directly or indirectly

holds more than 50% of

shares or rights (options)

to dividends;

- or

- together with related

parties holds more than

50% of shares or rights

(options) to dividends,

and the holding of that

creditor is not less than

10%.

Exception: if a taxpayer

proves that the same loan

could exist between

unrelated parties, thin

capitalisation does not

apply.

Company Law: the interest

rate on shareholders' loans

may not exceed the

average bank interest rate

current in the location of the

lender's business.

Financial institutions

providing leasing services

are not subject to thin

capitalisation rules.

Thin capitalisation rules

were introduced on 1

January 2013. These rules

limit the deductibility of

interest on loans to related

parties and apply if the

lender is:

- a foreign company that

directly or indirectly

owns more than 20%

of the authorised

capital of a Belarusian

company; or

- a Belarusian company

which is an affiliate of

such a foreign

company. The debt-to-

equity ratio is 1:3.

Exception: These rules do

not apply to banks,

insurance companies and

companies which during

the tax period received

lease payments in an

amount more than 50% of

total revenues received

from the sale of goods

(works, services), property

rights and income from

operations of leasing

(financial leasing) of the

property.


DEPRECIATION

AND LOSSES

Depreciation: A unique

CIT system operates so

that depreciation is

entirely an accounting

matter and any

restrictions do not trigger

CIT.

Losses: A unique CIT

system operates in

relation to losses so that

losses can be carried

forward without

limitations.

Depreciation Buildings and

constructions are

depreciated at a specified

tax rate of 10% using the

reducing balance method.

Land is not depreciable.

Losses

Losses arising before and

including the 2007 tax year

can be used for the

following 8 years. Losses

arising in 2008 and later tax

years may be carried

forward indefinitely.

Taxpayers registered in

SEZ or Free Ports with

losses arising before 2005

may carry them forward for

up to 10 years, and losses

arising after 2005 may be

carried forward indefinitely.

Intra-group transfer of

losses allowed.

Depreciation

Buildings are depreciated

using the straight-line or

double-declining method

(for certain types of assets).


Losses

Tax losses can be carried

forward for an unlimited

number of years as long as

they are set off against

income from the same type

of activity (Exception:

losses from disposal of

securities can be carried

forward for 5 years only

and can only be offset

against income from sale of

securities)

Intra-group transfer of

losses allowed.

Depreciation

For the purposes of tax

depreciation real estate

objects are divided into

two main categories:

buildings and

constructions, each of

which contains a range of

corresponding groups and

types.


With regard to real estate

objects the straight line

depreciation method is

used.

Losses

Losses can be carried

forward for a period of 10

years.

A taxpayer may not carry

forward losses if it made a

profit on its activities

overall. A Belarusian

company can carry

forward losses only if total

costs for the previous tax

period connected with

production and sale of

goods (works, services),

property rights, and non-

operating expenses

exceeded the amount of

revenues and non-

operating income.

WITHHOLDING

TAX

Dividends (without

participation

requirement), interest

(not exceeding market

interest rate) and

royalties (payments

within the EU and 25%

participation) are not

subject to withholding

tax.

Rental payments by

Estonian corporate

taxpayers to Estonian

natural persons or non-

residents are subject to

21% withholding tax.

Dividends are tax exempt

unless payments are made

to “black listed”

jurisdictions.

Interest: 0% – on

payments to unrelated

parties; 10% – on payments

to related parties; 5% – on

payments to related EU

companies (up to 30 June

2013, thereafter – 0%); as

of 1 January 2014, any

outgoing interest payments

will be tax exempt unless

paid to “black listed”

jurisdictions.

Management and

consulting fees: 10%, can

be reduced to 0% under a

tax treaty.

Royalties: 15% on

literature or art; 5% in other

cases; 5% on payments to

related EU companies up to

30 June 2013; as of 1

Dividends

From a Lithuanian company

to a Lithuanian company –

15% CIT to be withheld by

the distributing company

unless the participation

exemption applies.

From a Lithuanian company

to a foreign company –

15% CIT to be withheld by

the distributing company

unless the participation

exemption applies.

Participation exemption

applies where:

- the receiving entity holds

at least 10% of the shares

granting the same

percentage of votes in the

paying entity;

- for at least 12 months.

Not applicable to

Dividends

From a Belarusian

company to a Belarusian

company – 18% CIT

which is withheld by the

distributing company.

Foreign companies that

do not carry out activities

through a Belarusian

permanent establishment

pay withholding tax on

certain types of income

derived from sources in

Belarus. Unless otherwise

provided by DTTs,

withholding tax is imposed

on the following types of

income at the following

rates:

dividends and income

from sale of shares in

authorised capital of

Belarusian companies –

12%;

royalties (payments for

use of property in Belarus

or the right to use such

property; fees for use of

property rights to

copyright objects, objects

of related rights;

payments for industrial

property objects, including

know-how) – 15%;


January 2014, outgoing

royalty payments tax

exempt unless paid to

“black listed” jurisdictions.

Rental fees on property

located in Latvia – 5%.

Sale price of real estate

located in Latvia or shares

in “real estate companies”:

2% (a “real estate

company” is a company

more than 50% of whose

assets comprise real estate

directly or indirectly owned

within Latvia). Latvian DTTs

can reduce or eliminate

payment of withholding

taxes.

Most payments to “black

listed” jurisdictions – 15%,

though the tax authorities

may grant relief.

0% for all payments to

Lithuania.

dividends payable to FEZ.

Interest

Paid to foreign taxable

entities registered in EEA

or DTT country – non-

taxable.

Paid to foreign entities

registered in other

countries – 10%.

Exemptions:

- interest paid on

government securities

issued in international

markets;

- deposit interest;

- interest on subordinated

loans meeting the criteria

set by the Bank of

Lithuania.

Royalties

Paid to associated EU

companies – no

withholding tax applies.

Paid to other foreign

companies – 10%.

interest – 10%;

freight and other charges

connected with international

shipping transactions and

forwarding services – 6%;

other income (in particular,

income from sale of real

estate located in Belarus;

income from real estate

transferred in trust; income

from supply of various

types of services) – 15%.

CAPITAL GAINS Capital gains of resident

corporates do not trigger

CIT.

Income tax is charged

only on gains derived by a

non-resident from sale of

Estonian real estate or

shares in a real estate

company if the non-

resident's holding in that

real estate company is or

exceeds 10% and more

than 50% of the

company's property is

directly or indirectly made

up of real estate located

in Estonia in any

preceding 2 years. No

income tax is charged on

a share deal if DTT allows

taxation of capital gains in

the seller's country only.

PIT and CIT on capital

gains applies to individual

taxpayers and corporate

taxpayers, both being

subject to a 15% rate.

However, capital gains

from sale of shares held by

a Latvian company are tax

exempt, unless shares are

held in a “black listed”

jurisdiction.

Capital gains earned by

Lithuanian entities – 15%

CIT (capital gains are

included in general

taxable income).

Capital gains from sale of

shares in entities

registered in EEA or DTT

countries – exempt from

tax if:

- at least 25% of the

shares in the entity were

held;

- for a period of not less

than 2 years.

There is no specific

concept of capital gains

tax.

Gains received by

Belarusian companies from

the sale of property are

taxable at the 18% CIT rate

Gains received by

Belarusian companies from

the sale of shares in

Belarusian companies are

taxable at the 9% CIT rate.

Foreign companies that do

not carry out activities

through a Belarusian

permanent establishment

are subject to withholding

tax on gains obtained from

the sale of:

- real estate located in

Belarus – 15%;

- shares in authorised

capital of Belarusian

companies – 12%;

- securities in Belarus

(except shares in

authorised capital of

Belarusian companies)

– 15%.


REAL ESTATE

TAXES

Land tax

The rate ranges from 0.1%

to 2.5% of cadastral value of

land excluding buildings.

The rate is set by

municipalities by 31 January

each year.

An owner-user ofresidential

land and building is exempt

from tax within some limits.

Real estate tax

Payable by corporate

owners or entities having

legal ownership or control

over use of Latvian real

estate. Individuals are liable

to tax on their residential

homes and apartments.

Tax applies at a rate of 1.5%

of the real estate’s cadastral

value and is levied annually.

A rate of 1.5% applies to

engineering structures and a

3% rate applies to

uncultivated agricultural

land. Subject to municipal

regulations, derelict or

unsafe buildings may be

subject to a 3% tax.

Local municipalities can set

the tax rate ranging from

0.2% to 3% in regulations to

be issued no later than 1

October of the preceding tax

year. If this is not done, the

default tax rates apply.

Individual property owners

pay the following

progressive rates on their

residential buildings and

apartments:

- 0.2% – for cadastral value

not exceeding LVL 40,000

(approx. EUR 56,900);

- 0.4% – for cadastral value

from LVL 40,000 to LVL

75,000 (approx. EUR

106,700);

- 0.6% – for cadastral

value exceeding LVL

75,000.

A LVL 5 (approx. EUR 7)

minimum is payable for each

registered item of real

estate.

Local municipalities have

power to grant taxation

reductions to specific

categories of individual

Land tax

Payable by owners of

private land for land other

than forest land, roads of

common usage and land

owned by embassies.

Tax base: market value

of the land calculated

against the results of

mass valuation.

Tax rates: 0.01%-4% of

the value of the real

estate. A precise tariff is

established by the local

municipality annually.

Payment: before 15

November of the tax year

concerned based on a

declaration provided by

the tax administrator.

Real estate tax

Payable by Lithuanian

and foreign legal entities

for real estate other than

land in Lithuania.

Tax base: market value

of the real estate

calculated against the

results of mass valuation

.

Tax rates: 0.3%-3% of

the value of the real

estate. A precise tariff is

set by the local

municipality annually.

Payment: before 1

February of the

subsequent year.

Advance payments are

made quarterly where the

annual amount of tax

exceeds LTL 1,500

(approx. EUR 434).

Land lease tax

Payable by legal entities

and individuals for state

or municipal land leased

by legal entities and

individuals.

Tax rate: 0.1%-4% of the

land value

Tax rates: 0.01%-4% of.

A precise tariff is set by

the local municipality for

each individual case.

Land tax

Payable by companies and

individuals who own or use

land.

Except for a limited

number of cases, the tax

base is the cadastral value

of the land, which can be

found at the official website

of the National Cadastre

Agency http://nca.by/.

Tax rates vary significantly

depending on the cadastral

value and functional use of

land. Local government

authorities may increase

(not by more than 100%)

or decrease (not by more

than half) the tax rates for

certain categories of

taxpayers.

Real estate tax

Corporate real estate tax is

imposed on the

depreciated value of

buildings, constructions

and car parking spaces

owned or leased by

companies.

If the landlord is a foreign

company not carrying out

activities in Belarus

through permanent

establishment, the

taxpayer is always the

tenant.

The annual corporate tax

rate is 1%. A 2% rate

applies to incomplete real

estate objects where the

terms of construction are

exceeded.

Buildings and

constructions in the

process of reconstruction

or modernization are not

subject to the real estate

tax.

Individual real estate tax is

imposed on buildings,

constructions and car

parking spaces owned by

individuals (including

individual entrepreneurs).

http://nca.by/


An individual that owns

more than one apartment

has to pay real estate tax.

One apartment is

exempted from taxation;

other apartments are

subject to real estate tax.

The annual tax rate is

0.1%. Tax is calculated by

the tax authorities based

on the assessed value of

the real estate object. The

tax authorities send an

individual written notice to

taxpayers by 1 August of

the relevant year.

Local government

authorities may increase

(by not more than 100%)

or decrease (by not more

than half) the tax rates for

certain categories of

taxpayers, with the

exception of the case

when Regional (Minsk

city) Councils of deputies

increase, but not more

than five times, the real

estate tax rate on

buildings and

constructions, parts

thereof, which are unused

or inefficiently used.

VALUE ADDED

TAX

Sale and rental of real

estate

Generally VAT-exempt

without the possibility to

deduct input VAT. However,

VAT applies to:

- Leasing, letting or

establishing a usufruct on

multi-storey car parks or

premises for parking

vehicles;

- real estate with new

buildings, if transferred

before 1st use;

- real estate with re-

constructed buildings, if

reconstruction costs exc-

eed at least

- 10% of theacquisition cost

(i.e. 110% of acquisition

cost) and transfer is before

1st use after reconstruction;

- building lots within the

meaning of the Planning

Act if the lot contains no

buildings.

Sale of real estate

Sale of land and used

buildings is VAT-exempt.

Sale of unused real estate

(buildings and

constructions) and building

land (land granted a

building permit) is subject to

21% VAT.

In sale transactions, the

value of land (exempt) and

unused buildings (taxable)

cannot be separated for

VAT calculation purposes.

The taxable value for the

sale of reconstructed or

renovated property is the

difference between its sale

price and the value of the

property before

reconstruction or

renovation.

Sale of real estate

Sale of real estate (land

and buildings) is generally

VAT-exempt.

Exceptions:

- sale of land for

construction;

- sale of land with new

buildings; and

- sale of new buildings.

Buildings are regarded as

new if they started to be

used or were critically

improved less than 24

months before the sale

(uncompleted buildings are

also regarded as new

buildings).

Lease of real estate

Lease of real estate is

generally VAT-exempt

except lease of dwelling

houses.

Sale and lease of real

estate

Subject to the standard

VAT rate – 20%.


An option is available to add

VAT at a rate of 20% to the

following:

- leasing or letting real

estate or parts thereof,

except residential;

- establishing ausufruct on

real estate or parts thereof;

- real estate and parts

thereof, except residential.

Input VAT is recoverable if

paid for VAT supply. The

purchaser of an immovable

has to adjust deducted input

VAT within a 10-year period

according to use of the

property for taxable/non-

taxable purposes.

Real estate should be

registered with the

taxation authorities.

Deducted input VAT

should be corrected and

over the next 10 years

according to use of the

real estate for VAT taxable

and exempt transactions.

Rental of residential

premises to individuals is

VAT-exempt, whereas

lease payments for

commercial property are

subject to 21% VAT.

Optional taxation

Lithuanian VAT payers

have the option to tax the

sale or lease of real estate

if the buyer or lessee is

another Lithuanian taxable

person registered as a

VAT payer or a diplomatic

mission, consular office,

EU institution, international

organisation or office. This

option applies for a period

of not less than 24

months.

REAL ESTATE

TRANSACTION

RELATED COSTS

Costs incurred

Typically these include:

brokerage fees, real estate

valuation, bank fees, fees

for legal due diligence and

reviewing the sale and

security agreements, notary

fees and state duty.

Sharing costs

Sharing transaction costs is

a matter for agreement

between the parties.

Usually, the buyer pays

state duties for registering

ownership, whilst notary

fees are shared equally

between the parties and the

seller pays state duties for

deleting old encumbrances

(e.g. mortgages).

Costs incurred


brokerage fees, bank fees,

fees for legal due diligence

and reviewing sale and

security agreements,

notary fees and state duty.

Sharing costs

Sharing transaction costs

is a matter for agreement


Usually, the buyer pays

state and stamp duties,

whilst notary fees are

shared equally between

the parties.

Costs incurred


brokerage fees, real estate

valuation fee, bank fees,

fees for legal due

diligence, notary fees and

state duty.

Sharing costs

It is up to the parties to

agree how they will bear

the transaction costs.

Usually, the buyer pays for

state and stamp duties,

whilst notary fees are

shared equally between

the parties.

Costs incurred

Costs incurred during

purchase of real estate

include state duty,

payment for state

registration, and (if

applicable) translation

costs, technical inventory

costs, fees for legal due

diligence.

Sharing costs

Sharing of costs incurred

during purchase is a

matter for agreement


STATE AND

TRANSFER

STAMP DUTIES

State duty

Is paid for registration of

ownership and

encumbrances in the Land

Book. The amount depends

on transaction value and is

a fixed sum laid down by

law. For instance, duty for

registering a new owner of

real estate at a purchase

price of EUR 500,000 is

approx. EUR 767. Notary

fees and state duty are

usually less than 0.5% of

transaction value.

Stamp duty

None.

State duty

For registration of title to

real estate – 2% of either

the real estate purchase

price or the cadastral

value of the real estate,

whichever is higher.

However, duty is capped

at LVL 30,000 (approx.

EUR 42,700). Duty does

not apply to mergers and

other restructurings. A 1%

duty applies to

investments in kind of real

estate in the share capital

of a company; duty is

capped at LVL 1,000

(approx. EUR 1,400).

Stamp duty

LVL 15 (approx. EUR 21)

for registration of title and

issue of a Land Book

certificate.

State duty

Duty for registration of

transfer of title to real

estate is calculated

separately for each real

estate object transferred

or acquired and depends

on the average market

value of the real estate.

Duty varies from LTL 10

(approx. EUR 3) to LTL

5,000 (approx. EUR

1,448) per object.

Stamp duty

None.

State duty

The transaction is subject

to certification by a notary

or the registrar of the Real

Estate Register, if an

individual is a party to the

transaction (except for

individuals acting in the

capacity of individual

entrepreneurs and having

a seal).

Duty for certification of a

purchase agreement by

the notary amounts to

BYR 500,000 (approx.

EUR 45), by the registrar

of the Real Estate

Register – BYR 112,000

(approx. EUR 10).

In the case of

simultaneous registration

of the purchase

agreement and one real

estate object payment for

state registration amounts

to:-BYR 320,000 (approx.

EUR 29) for legal entities;

and

-BYR 110,000 (approx.

EUR 10) for individuals.

Stamp duty

None.


NOTARY FEES Fees are set by law. In sale

transactions the fee for

notarising the purchase

agreement depends on the

value of the transaction.

For instance, the notary fee

on sale of real estate for

EUR 500,000 is approx.

EUR 1,548 plus VAT.

Notary fees and state duty

are usually less than 0.5%

of transaction value.

Fees for drafting the Land

Book registration

application and approving

the parties’ signatures

generally amount to LVL

65 (approx. EUR 92).

The notary fee amounts

to 0.45% of the real

estate transaction value,

capped at LTL 20,000

(approx. EUR 5,792) for

transactions that involve

one real estate object and

at LTL 50,000 (approx.

EUR 14,481) for

transactions involving two

or more real estate

objects.

If a purchase agreement

is certified by a private

notary, the parties also

pay a notary fee from

BLR 100,000 (approx.

EUR 9) to BYR 150,000

(approx. EUR 14)

depending on transaction

peculiarities.

MORTGAGE Real estate purchase is

often financed by a loan.

Usually, a mortgage is

established on real estate

as security in favour of the

bank financing the

purchase. The mortgage

agreement is usually

concluded at the same time

and in the same document

as the sale agreement.

If a mortgage already

encumbers real estate

before sale and the

purchaser needs a

mortgage for its own

financing purposes, the

existing mortgage is

typically transferred to the

bank financing payment of

the purchase price. This

transaction structure is

more cost-efficient

compared to deleting the

existing mortgage and

establishing a new one,

since it saves on both

notary fees and state duty.

Purchase of real estate is

often financed by banks,

which require a mortgage

over real estate. As with

all encumbrances on real

estate, a mortgage

agreement must be

registered with the Land

Book. State duty for

registration amounts to

0.1% of the loan amount,

capped at LVL 1,000

(approx. EUR 1,423).

Stamp duty and notary

fees are the same as for

title registration.

A mortgage is a security

aimed at securing

fulfilment of contractual

obligations. A mortgage is

created by executing a

mortgage contract signed

by the debtor, the

creditor, the owner of the

mortgaged real estate,

and notarised. The

notary’s fee for

certification of mortgage

agreement is capped at

LTL 500 (approx. EUR

145) and at LTL 1,000

(approx. EUR 290) for

perfecting a mortgage

over an enterprise (as a

pool of assets).

In addition, costs for

services related to

notarisation of the

mortgage and registration

of the transaction with the

Mortgage Register would

be added (approx. LTL

500, i.e. approx. EUR

145, on average).

A mortgage of real estate

may be used as an

instrument for securing

liabilities (e.g. repayment

of loan). However, the law

lays down several

restrictions. A building

located on an owned or

leased land plot can only

be mortgaged with a

simultaneous mortgage of

the underlying land plot or

right of lease. A mortgage

of a land plot or right to

lease a land plot may

secure only repayment of

a credit extended by

Belarusian banks or a

loan provided by the

International Finance

Corporation (IFC) or

European Bank for

Reconstruction and

Development (EBRD).

Belarusian banks may act

as mortgagees only if

they hold a licence from

the National Bank to

place attracted funds in

their own name and for

their own account on the

condition of recurrence,

interest payment and

maturity. The President of

the Republic of Belarus is

entitled to determine other

organisations which may

be mortgagees of land

plots and rights to lease

land plots.

Mortgages must be

registered with the Real

Estate Register.

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belarus real estate market review - sorainen · 2018. 6. 14. · belarus real estate market...

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