Hope for big real estate investment?

The new Minister of Interior has announced that he is introducing a “one stop shop” which will deal with largescale real estate investments (over EUR 5.0 mln). This office will have a project manager, whose responsibility is to keep a close watch and follow up on the procedures regarding planning applications and issue of permits.

This need came about after numerous projects of a size seem to have extensive delays and difficulties with the existing procedures, whereas the frustration of large foreign investors who have been lured to invest in Cyprus is expressed with full page adds exposing their dissatisfaction on the red tape and inefficiency of the system. An example in hand was the St. Raphael Marina, the Makenzy Hotel, the Yeroskipou project, the Limni project, etc.

Will this new approach to real estate investment procedure have the expected results, however? Allow me to have my doubts.

This new office will be managed by the same civil servants that are already dealing with the applications. It is a matter of attitude and efficiency and by changing one’s name will not help matters.

In an interview I had with the I.M.F. delegation that reviewed the Cyprus real estate market, I informed the committee that “the Government is trying to repaint an old car in the hope that it will go faster”! For this reason, I suggest that the issue of the permits be undertaken by specialised licensed private firms, with Governmental Departments carrying out spot checks.

Examples of success in the matter is the privatisation of land surveys which has reduced the delays in establishing the demarcation of a plot from one year to less than one month.

So, yes, it can be done, but with safety procedures.

To be prepared in the form of a recommendation, duly reasoned, to the Governmental Planning Office. The applications to be examined by specialised private planning firms of at least ten years’ experience. The firms to have a professional indemnity insurance cover of at least EUR 100,000 per project and in the event of error or otherwise the Government to have the right to confiscate the guarantee and cancel the firms license to operate.

No need to have the structural survey checked by the Government, since the initial study is already prepared by a qualified engineer. Again similar years of experience and guarantees as above.

To be prepared in principle by the Planning Office/P.W.D. and details to be left to individual consultants in private practice – same guarantees.

So far, private firms cannot be said to be up to it, more so looking after their client’s interest. We still believe that such issues should be studied by private environmental firms, but to be under strict quality control – as above.

of To the extent possible this part of the work (e.g. exchange land, estimate of the rental market, market value, 1.1.2013, tax issues, etc), to be undertaken by two independent valuation firms for the same subject. The reason for this (two firms) is that valuations are somewhat subjective and it is better to have two opinions – again subject to the Lands Office spot checks and the securities offered as above.

The Minister has set out time limits for reply for each application stage by the authorities. He has suggested that planning permits must be examined within 12 months, reduced to 6 months as time passes. The environmental studies to be completed within 3 months, etc. Needless to point out these time frames are already in force, but not kept at all.

For this reason I suggest that if applications are delayed over the time limits, compensation should be sought from the Government and which should go down to the individual/civil servant(s) who has caused it.

In a country where the President of the Republic had to intervene in order for the applicant to get a response (see Yeroskipou project, the 1.5 year delay for a reply for the Troodos venture park, etc), I have my doubts. The Minister of Interior means well, but unless drastic measures, including compensation, are introduced, the situation will not improve.

Can our proposal happen? I doubt it since the civil servants union and (surprise-surprise) even some private firms will object.

As an example is that privatisation of planning permits already exist for small projects, but the architects do not apply this, since they either do not know how to go about it or prefer to play it safe through the Government Departments.

Let’s keep our fingers crossed and we will come back to you on the developments.