Serbia Investment and

Export Promotion Agency

Vlajkovićeva 3
11000Belgrade
tel.: +381 11 3398 550

Real Estate Industry in Serbia

fax: +381 11 3398 814
office@siepa.sr.gov.yu
www.siepa.sr.gov.yu
 Contents

TriGranit in Serbia.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Key Information on Serbia.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Why Invest in the Real Estate Industry in Serbia. . . . . . . . 4
An Overview of the Real Estate Industry
Basic Industry Indicators.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Office Market Trends.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Residential Market Trends.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Retail Market Trends.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FDI in the Real Estate Industry.. . . . . . . . . . . . . . . . . . . . . . . 11
Africa-Israel Corporation/Tidhar Group in Serbia.. . . . . 12
Acquiring Construction Land
Land Classification.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Leasing Municipality Land.. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Acquiring the Right to Use Land.. . . . . . . . . . . . . . . . . . . . . 16
Conversion of Agricultural Land. . . . . . . . . . . . . . . . . . . . . . 17
GTC International in Serbia.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
A Construction Procedure
An Assessment of Urban Conditions.. . . . . . . . . . . . . . . . . 19
Acquiring Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Obtaining a Construction Approval.. . . . . . . . . . . . . . . . . . 19
A Notice of the Start of Construction. . . . . . . . . . . . . . . . . 20
Construction.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Technical Inspection.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Probation Occupancy.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Obtaining an Occupancy Permit.. . . . . . . . . . . . . . . . . . . . . 21
Registration in the Cadastre. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Financing Options.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Real Estate Transfer
Real Estate Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Relevant Contacts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SIEPA Services.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
TriGranit in Serbia
Mr. George Bobvos
Director, Business Development–Serbia

Why did you decide to start a business in Serbia?

TriGranit considers Serbia to be an important target market in
South East Europe. Based on the international experience of
the TriGranit Group, we recognize a great potential in develop-
ing large-size real estate development projects primarily in re-
tail but also in office/residential market segments. We believe
in the country and its people and are hopeful of developing
our Serbian business over the coming years.

What are your current and future projects in the country?

TriGranit is currently in the final-stage negotiations with the
Serbian Railways related to the completion of the Prokop Rail-
way project–Belgrade’s future main railway station seated in
one of the most prestigious areas in the city. This investment,
as well as another TriGranit project (128,000 sqm Belgrade’s
first international shopping mall to be built above the Prokop
Railway Station), would represent the largest infrastructure
project of this type in Serbia to date. Total development costs
are estimated at around €170 million. Given the size of this
investment, we expect it to put Serbia in the limelight of re-
gional developers community and eventually generate a large
number of new jobs for local population.
As for other possible future projects in Serbia, they are cur-
rently under consideration.

How do you perceive the business climate in Serbia?

The investment climate is certainly becoming more inves-
tor-friendly with significant room for further development
particularly in the area of land and construction legislation. In
terms of our future expansion, we embrace the Government’s
initiative to introduce private ownership of building land and
implement further urban planning and construction reforms.


Key Information on Serbia
Official Name Republic of Serbia
Form of State Democratic Republic
Political Structure President Unicameral assembly with 250 seats
Area 88,361 km2
Population 7,440,769 (without Kosovo)
South East Europe, central part of the Balkan
Geographic
Peninsula, at the intersection of Pan European
Position
Corridors No. 10 and No. 7
In the east, Serbia borders Bulgaria, in the
northeast–Romania, in the north–Hungary, in
Border the west–Croatia and Bosnia and Herzegovina,
in the southwest–Montenegro, and in the
south–Albania and Macedonia
Temperate continental, with monthly average
Climate temperatures ranging between 0.7°C in January
and 17.5°C in July
Official Language Serbian
Main Religion Christian Orthodox
Other Religions Roman Catholic, Islamic, Jewish, Protestant
Major Cities Belgrade: 1,576,000 Novi Sad: 298,000 Nis: 250,000
Currency Dinar (RSD)
GDP (2006) $31.630 bn
GDP pc (2006) $4,199
Time Zone Central European Time (GMT + 01:00)
Internet Domain .rs (.yu valid until 2011)


Why Invest in the Real Estate Industry in Serbia
Competitive Tax System
Serbia’s tax regime is highly conducive to doing business.
Corporate profit tax is the second lowest in Europe, while
VAT, salary tax, and social insurance contributions are among
the most competitive ones in Central and Eastern Europe. In
addition, businesses in the country can take advantage of a
broad range of tax incentives.
Upward FDI Trend
An FDI stock in Serbia totaled $8.9 bln between 2001 and
2006. An all-time record inflow of foreign capital last year
reached $4.387 billion. Ongoing substantial legislative
reforms–repeatedly commended by the World Bank and
other international institutions–aim to further facilitate
doing business in the country thereby triggering future
investment boom.

Principal Tax Rates and Tax Incentives Net FDI (USD mln)
Standard rate – 18% 2006 4,387
VAT
Lower rate – 8%
2005 1,550
Corporate Profit Tax Uniform rate – 10%
2004 966
20% (for dividends, shares in profits, royal-
Withholding Tax ties, interest income, capital gains, lease 2003 1,360
payments for real estate, and other assets) 2002 475
Salaries – 12% 2001 165
Personal Income Tax
Other income – 20%
Source: National Bank of Serbia
10% (for annual income above 5 average
Annual Income Tax
annual salaries)

Social Insurance Pension and disability insurance – 11%

Health insurance – 6.15%
Contributions
Unemployment insurance – 0.75%
A 10-year corporate profit tax holiday for
investment over €7.5 mln and 100 employees
Corporate profit tax credit of 20% of the fixed
assets investment
Carrying forward of losses over a period up
to 10 years
Accelerated depreciation of fixed assets
Salary tax base deduction in the fixed
Tax Incentives amount of RSD 5,000 (app. € 60)
Salary tax exemptions for employees under
30 and over 45 years
Social insurance contributions exemptions
for employees under 30 and over 45 years
Annual income tax deductions up to 50% of
the taxable income
Customs-free imports of equipment based
on foreign investment


Strong Macroeconomic Performance
In recent years, Serbia has been among Europe’s fastest
growing economies. Over the past three years, GDP growth
averaged 6.8% with the forecast of 7% for the coming years.
GDP per capita of $4,199 is coupled with rapid banking loans
expansion to fuel skyrocketing local demand.
Inflation in 2006 returned to single digits standing at
6.6%, while further reductions are projected for the coming
years. Macroeconomic stability is also reflected in a state
budget surplus for 2006, providing room for an unprec-
edented €1.7 bln national infrastructure development plan.
Booming Market Potential
In Serbia, there is strong demand in the office, residential,
and retail market. As a result of robust economic growth and
strong FDI forecast, demand for quality office space is ex-
pected to pick up considerably. Likewise, a residential market
is forecast to experience a sharp upward trend due to a steady
increase in household income and a wide availability of mort-
gage loans at continuously decreasing interest rates. Further-
more, yields in the real estate sector tend to be higher than
in other CEE countries, amounting to 9% in the office market,
4%-7 in the residential market, and 5%-6 in the retail market.

GDP Growth Rate Class A Office Space Yields (2006)

2007** 7%
City Cap Rate/Initial Yield
2006* 5.8%
Belgrade 9.0%
2005 6.2%
Sofia 7.2%-9.0
2004 8.4%
Zagreb 6.0%-9.0
2003 2.5%
Bucharest 7.0%
2002 4.2%
Bratislava 6.0%
2001 4.8%
Prague 5.5%
* Estimation, ** Forecast Source: Colliers International, Serbia
Source: Statistical Office of the Republic of Serbia

Low Overhead Costs

One of the key advantages of doing business in Serbia com-
pared to other CEE countries are lower operating costs. Labor
costs in Serbia are comparable to those in EU membership can-
didate countries in the region, while standing at merely 40% of
their level in Eastern Europe EU countries. In addition, electricity,
gas, and other utilities are available at very favorable prices.

Total Monthly Labor Costs in 2005 (EUR)

Serbia 363
Slovakia 700
Poland 818
Croatia 844
Hungary 944
Czech Republic 954
Source: EUROSTAT, Croatian Bureau of Statistics, Statistical Office the Republic of Serbia


An Overview of the Real Estate Industry
Basic Industry Indicators Employment and Salaries
The industry employed 39,489 staff in September 2006.
GDP The qualification structure is dominated by high school
In the official statistics, the real estate industry output and university-degree holders, accounting for 36.94% and
is covered under a broader category, comprising other 27.48% of total industry employment respectively. They
activities not related to real estate (e.g. leasing, R&D). As are followed by qualified workers with a 10.43% share,
a result, the below figures represent an approximation of while other categories make up a lesser portion of the
the recent trends in the sector. real estate labor force.
According to the latest data available, 2004 GDP in the In 2006, average monthly net salaries amounted to €491,
industry gained 2.0% against the previous year. With GDP while total costs per employee averaged €849. However, a
of around €1.1 bln, the industry accounted for 7.8% of the sharp increase in labor costs was heavily due to local curren-
total economic output. cy appreciation against euro. Over the same period, average
monthly net salaries in RSD grew by 5.91% in real terms.
Companies
In September 2006, there were 365 companies in the real
estate industry, encompassing the following sectors: Average Monthly Salaries (EUR)
• Real Estate Development,
• Real Estate Trade, 2004 2005 2006
• Real Estate Renting, Total costs 734 730 849
• Real Estate Agencies,
Net salary 424 422 491
• Real Estate Management.
Source: Statistical Office of the Republic of Serbia

Total Number of Companies by Sectors (September 2006) Employment by Qualifications (September 2006)

Real Estate Agencies Real Estate University Qualified Elementary

Development school

112 10,850
Real Estate
Renting 4,117
High
58
school 2,646
130 14,587 2,406
44 2-year
21 college

2,132
Real Estate Management Real Estate Trade Highly qualified 1,343 Semi-qualified 1,408 Unqualified
Source: Statistical Office of the Republic of Serbia Source: Statistical Office of the Republic of Serbia


Office Market Trends
The following market overview was prepared by the
Colliers International office in Serbia. At present, their
reports cover the Belgrade office market trends only.
Supply
The total supply of speculative office space in Belgrade
has increased by 40% since the end of 2005, bringing
total speculative office inventory of Class A and Class B
office space to nearly 270,000 sqm. Compared to the Class
B market segment, the growth in Class A inventory was
significantly higher in 2006 and currently totals around
145,000 sqm.
munication and IT companies, along with the expansion
and market positioning of existing banks. Demand for
small and medium size premises remains robust.
Forecast
As a result of the continuing economic recovery in
Serbia, the supply of office space is expected to remain
robust during 2007. Along with the expected increase
in demand, more and more office projects are being an-
nounced for the coming years.
Selected Office Buildings to Be Delivered in 2007
Building Name Location Area (sqm)

Office yield in Belgrade was roughly 9% in 2006- 19 Avenue CBD 18,000

higher than in other CEE countries Airport City Belgrade Broad Center 17,000

Urban (re)development in the downtown city area re-
mains on a low side with New Belgrade being the primary
choice for new office development. During the past year,
New Belgrade alone accounted for almost 90% of new
Class A and 80% of Class B developments.
Vacancy Rates
The Class A vacancy rate for multi-tenant/speculative de-
velopments is 9%, while the overall Class A and B vacancy
rate in Belgrade is 11.7%. The slight increase in 2006 com-
pared to the previous year is the result of several lease
expirations and the continuing increase in overall market
inventory. Available Class A and B office space for rent at
the end of the year totaled slightly over 20,000 sqm.
Grawe CBD 11,400
Belgrade Office Park Broad Center 8,000
Source: Colliers International, Serbia
Rental Rates
The actual average weighted rent for Class A office space
recorded a 7.5% decrease over the last year. The most
expensive Class A space in the city is still in the central
portion of New Belgrade, where the average net rent is
€22/sqm/month. Class B office buildings command rents
between €11 and €17/sqm/month, depending on the
building age, location, parking availability, and other
amenities. Converted space averages €10/sqm/motnh.

Class A Vacancy Rates in Belgrade (End 2006) Average Rental Prices for Class A Premises in Belgrade (EUR/sqm/month)
CBD 7,0% 2006 18
Broad Center 13,5% 2005 20
Total Market 9% 2004 21
Source: Colliers International, Serbia 2003 22
2002 23
Demand
2001 25
During the past year, demand for high-quality office
space was driven by financial and legal services, telecom- Source: Colliers International, Serbia


Residential Market Trends ments in Belgrade took place in 2002, at which time Belgrade’s
residential inventory was 553,307 units (33,935,224 sqm) with
The following market overview was prepared by the an average unit size of 61 sqm.
Colliers International office in Serbia. At present, their re- Residential construction has remained balanced in terms
ports cover the Belgrade residential market trends only. of unit types in recent years. The breakdown of apartments
in terms of size reveals that 2-bedroom apartments make up
Sales Supply 32% of the supply, making this the most popular size; other
The residential market in Serbia began its recovery after the sizes (Studio & I BR, 3 BR, and 4 BR or more) make up almost
political and economic changes in 2000. The period between equal shares of the remaining stock.
2001 and 2005 marked the beginning of the new residential
development cycle, especially in major cities such as Belgrade, Belgrade Residential Construction
Novi Sad, and Nis. In spite of the large increase in residential
2006 10,000
inventory recorded during this period, capital investments are
yet to occur on the construction scene. 2005 7,000
2004 5,000
Belgrade yields for mid-end category apartments vary 2003 3,000
between 4% and 5%, whereas for high-end apartments 2002 2,000
their level is between 6% and 7%
Source: Colliers International, Serbia
Construction of multi-family homes has increased by roughly
50% every year since 2003, underpinned by the strong market Sales Demand
demand. The most recent detailed study of residential apart- As a result of the general supply increase and an expansion
of housing credit options, the residential market has seen
a further increase in sales demand. With only a slight differ-
ence in price levels of old and new middle-class apartments,
many potential buyers are focused on new buildings that offer
quality finishes and facilities appropriate for today’s lifestyle.
Smaller apartment sizes are in the strongest demand.

Rental Supply
Over the past year, the rental supply of high-quality units in
Belgrade continued its growth. The supply was mostly con-
centrated in the areas of New Belgrade, Dedinje, Vracar, and
downtown, comprising mostly 2- and 3-bedroom units.

Rental Levels
With a slight decrease noticed on a yearly level, the average
prime rent in Belgrade is €11/sqm/month as of the end of 2006.
In the most prominent areas of Vracar, Dedinje, and Senjak,
rental levels showed a slight decrease in light of the continually
growing supply of quality apartments in those areas. Demand
for rental apartments in New Belgrade has increased along
with the supply over the last few years, keeping rental rates
steady. Only in rare cases are the most luxurious, large furnished


apartments able to achieve rents from €17 to €19/sqm/month.
These apartments are most often situated in the green areas
of Dedinje or Senjak featuring beautiful yards or in downtown
close to the pedestrian zone–Knez Mihailova Street.
Average Rental Rates in Belgrade in 2006 (EUR/sqm/month)
New Belgrade
Vracar
Stari Grad
Dedinje
Source: Colliers International, Serbia
Price Levels
The Statistical Office reported a price increase of 5% in the
first six months of 2006 compared to 2005 levels. The recorded
growth can be mostly attributed to constantly improving
credit conditions, which keeps residential demand at a high
level. Price levels are expected to continue increasing until
large-scale developments start to appear on the market.
Including both mid-end and high-end category apart-
ments, the sales prices have recorded the following ranges:
€1,650-2,500/sqm in Dedinje (Belgrade’s residential area),
€1,500-2,400/sqm in Stari Grad and Vracar (downtown Bel-
grade), and €1,300-2,100/sqm in New Belgrade.
Rental Demand
Rental demand for high-quality apartments and housing
units remained steady in 2006. Demand continues to be
driven by embassy staff and personnel of international
companies and organizations. The most desired apartment
unit sizes range from 100-120 sqm with New Belgrade and
10 downtown being the most preferred areas.
12
11
Retail Market Trends
11
The following market overview was prepared by
the Colliers International office in Serbia.
Supply
The most concentrated retail concepts are still to be found
along high-street locations and within the expanding
network of retail warehousing. Numerous shopping malls
are under construction or in the planning phase. The city of
Belgrade continues to be the main investment destination,
followed by the second largest city–Novi Sad.

Gross Sales Prices of New Apartments in Belgrade in 2006 (EUR/sqm)

New Belgrade
1,400
1,900
Vracar
1,700
2,200
Stari Grad
1,700
2,200
Dedinje
1,600
2,300

Mid-end High-end
Source: Colliers International, Serbia


 projects scheduled for opening, predominantly in the capi-
tal city. New projects will be located in both downtown
and suburban locations.

High Streets
High streets of Serbian major cities are still the most
desired way of entering the market. The biggest expansion
in today’s high street market is coming from international
banks. Among the international fashion retailers, Zara
entered the Belgrade and Novi Sad markets in 2006. In the
coming years, high streets of Belgrade are expected to ex-
perience an increase in retail opportunities because of the
asset disposal of several state-owned companies.

Shopping Malls
In 2006, the supply of modern shopping malls in Serbia
remained limited with less than 30,000 sqm of leasable
space existing in the capital. Over the past year, the market
situation improved slightly with the opening of two shop-
ping malls–one in Belgrade and another one in Novi Sad.
Concerning other parts of Serbia, only major cities feature
shopping centers, which are mostly of smaller sizes and
out-of-date.
Retail Warehousing
The retail warehousing market in Serbia developed rapidly
and was among the best performing market sectors in 2006.
The existing international retailers Metro (Germany), Agrokor
(Croatia), Mercator and Merkur (Slovenia), Interex (France),
and Veropoulos (Greece) steadily expand their networks.
In 2006, the focus extended beyond Belgrade to other
large Serbian centers, such as Nis, Novi Sad, and Kraguje-
vac. At the end of 2006, the capital saw two major open-
ings–Serbian Delta launched the largest cash-and-carry
facility in the Balkans (18,000 sqm on the route towards
the Belgrade Airport), while Croatian Idea opened another
hypermarket of 12,500 sqm in New Belgrade.
Retail Warehouse Developments
Name Year of Entrance No. of Outlets
Rodic MB 1998 6
Mercator 2002 3

Yields for retail units in Belgrade’s high-street locations Interex 2004 4

are in the range of 6%-7% Tempo 2004 4

In 2007/2008, the next mall scheduled for comple- Merkur 2005 1

tion is DeltaCity 67, which will bring an additional 30,000 METRO Cash&Carry 2005 5
sqm of gross leasable area to the capital. In Novi Sad, two
Super Vero 2005 2
shopping malls are in the pipeline to bring approximately
45,000 sqm of GLA to the city. In the mid term, develop- Agrokor 2006 2
ment is expected to continue at a rising pace with various Source: Colliers International, Serbia

10
 Two major events that marked 2006 are the merger be-
tween Delta and Agrokor, which is due to conclude in 2009
and is to enable further investment in local and regional
markets, and the acquisition of local Rodic company by
Slovenian Mercator.

Demand
As Serbia’s macroeconomic recovery maintains a strong
pace, accompanied by increasing purchasing power of the
population, the country is experiencing a rising interest
from international retailers and a consequently higher
level of market activities. New and existing retailers are
expressing a strong interest in both high-street locations
and new shopping centers.
The traditional high-street areas in Serbian major cities
have witnessed demand primarily from well-known chains
of fashion goods, fast food restaurants, and financial in-
stitutions. The increasing demand is expected to continue
through the following period.

Rental Rates
The limited availability of space in the Serbian market
coupled with rising interest from various retailers is keep-
ing rental rates high for both high streets and shopping
centers. In light of present and anticipated market condi-
tions, there is a low probability of a decline in rental rates FDI in the Real Estate Industry
in the next few years. While the retail rents for the top capi-
tal locations reach levels between €50-150/sqm/month, Growing investment opportunities for international real estate
secondary locations along the most prominent boulevards developers in Serbia have been reflected in recent FDI figures.
cost between €20-50sqm/month. With the exception of The total value of their projects in 2005 reached merely $14.6
the anchor tenants, net rents within new shopping centers million, while in 2006 they amounted to $90.6 million.
vary between €20-60sqm/month. International developers are led by Israeli investors–Africa-
Israel Corporation and Tidhar Group top the list with the €120
million first business park in Serbia, awarded by OECD as the
largest Greenfield investment in South East Europe in 2005. They
Retail Rental Levels in Belgrade (2006) are followed by GTC International’s projects totaling €58 million
Location Rental Levels (EUR/sqm/month) and Austrian Hypo Alpe-Adria-Consultants pledging to invest
€66 million by 2009. In addition, TriGranit Corporation is to start
Shopping Centers 20-60
large-scale construction works estimated at €170 million upon fi-
High Streets 50-150 nalizing the negotiations with the Government, whereas another
Israeli company–Engel Group is expected to start the construc-
Secondary Streets 20-50
tion of its €160 million residential and business complex in fall
Hypermarkets/Supermarkets 7-12 2007. Other key players in the local market are Austrian Raiffeisen
Source: Colliers International, Serbia evolution and Uniqa Real Estate Project Construction Company.

11
 Mr. Gili Dekel

Africa-Israel Corporation/Tidhar Group in Serbia

CEO, Airport City Belgrade

Why did you decide to start a busi-

ness in Serbia?
Airport City Belgrade (ACB) is owned
by Africa-Israel Corporation and Tidhar
Group, one of Israel’s most success-
ful construction companies. I came
to Serbia around four years ago to
explore real estate business oppor-
tunities, already having in mind the
introduction of something different
from the standard office building. De-
velopers normally identify a piece of
land, acquire it, build on it, and then
lease or sell the property. However,
our approach is to build a complete
modern business and residential
complex beyond the boundaries of
the city center. Airport City Belgrade is
currently the biggest real estate devel-
opment in Belgrade with the first two
buildings of around 20,000 sqm deliv-
ered in 2006 and another two of the
same area to be completed in 2007.
Altogether, it is a 120,000 sqm plot of
land–the largest piece of land owned
by a private company in Belgrade.
Prior to arrival in Serbia, our com-
pany had completed developments
in Russia, Ukraine, Czech Republic,
Poland, and Hungary. We chose
Belgrade after a thorough research
of all other major sites in the region.
Apart from Ljubljana, which is already
well developed, our research included
cities, such as Skopje, Zagreb, and
Sarajevo. Among those cities, Belgrade
seemed an apparent priority with its
1.5 million population, strong eco-
nomic growth, rapid internationaliza-
tion of business activities, and a highly
developed construction industry. I

12
would also like to emphasize that Serbia boasts skilled and
capable people and we are very satisfied with our Serbian
staff performance and cooperation with local construction
companies.

What are your current and future projects in the country?

Our development is situated in the part of the city called
New Belgrade, in the close vicinity of the International
E-75 Highway. Due to the lack of parking space and traffic
congestion, an increasing number of local companies are
now shifting their headquarters from the old part of the
city to New Belgrade. I am confident that our company will
be strong enough to face the rising competition in New
Belgrade and erect a competitive real estate development,
not only in terms of standards, but also in terms of pricing.
One of the advantages of the Airport City Belgrade devel-
opment is its largest ratio of parking space in Belgrade.
We believe that in the future Serbian economy will ex-
perience steady growth, and the number of cars per 1,000
people will increase significantly. Our customers will be
mostly foreign companies coming to Serbia that appreci-
ate Class A office space, the right environment for their
employees, and know the advantages of being located out
of the city center. We are very optimistic about the future
growth prospects, otherwise we would not be ready to
invest €120 million in Serbia.

How do you perceive the business climate in Serbia?

Investors look for performance enhancement possibili-
ties, and I see Serbia in terms of the future profit. At the
moment, one can get better deals than those available in
Serbia but conditions will certainly get better. Therefore, in-
vestors with long-term orientation could benefit well from
great opportunities in this market.

13
Acquiring Construction Land
Land Classification

In Serbia, land is classified into two categories:

• construction land,
• agricultural land.
Construction land is the land on which structures have
been built and the land that serves for the regular use of
these structures, as well as the land that is designated by
the corresponding plan for the construction of structures
and their regular use.
Construction land can be:
• public construction land,
• other construction land.
Public construction land is the land on which public
structures of common interest (roads, schools, hospitals,
infrastructure, etc) have been built, as well as the land des-
ignated for the construction of such structures. This kind of
construction land is exclusively in state property.
Other construction land is not classified as public con-
struction land, and, as such, it is designated for the con-
struction of other structures–residential, offices, industrial
facilities, etc. Other construction land is transferable and can
be found in all types of ownership.

Construction land may be used as developed or non-de-

veloped land. Developed construction land is the land im-
proved with structures which are constructed and intended
for permanent use.
Non-developed construction land is land on which:
• No structures are erected;
• Existing structures were constructed contrary to the law;
• Temporary structures exist.
Agricultural land is subdivided into:
• cultivable,
• uncultivable.
Cultivable agricultural land encompasses fields, gardens, or-
chards, vineyards and grazing fields. A cultivable land user has the
obligation to till the soil or use it in accordance with its purpose.
Non-cultivable land encompasses all other unlisted types
of agricultural land.

14
 Leasing Municipality Land

Other construction land under state ownership can be leased

for up to 99 years under conditions prescribed only by the
municipal authorities. The land is leased through either public
bidding or a public tender.
The duration of a leasing contract is being determined
based on the land area, purpose, depreciation period etc. Be-
fore the expiry of the leasing period, a lessor and a leasee can
extend the contract period by a mutual agreement.
The right of use can be obtained through a direct bargain
between the municipality in question and the interested party
in the following cases:
• Construction of structures for the purpose of carry-
ing out activities of state administration and agencies,
administration and agencies of autonomous provinces
and of units of local self-government, and organizations
in charge of public services who operate with state funds
and assets, as well as other state-owned structures;
• Leasing the land to an owner of a structure who has con-
structed that structure without a building permit, for the
purposes of obtaining construction permission, if erect-
ing such an object is in accordance with the provisions of
the urban plan;
• Correction of boundaries of adjacent cadastral or con-
struction parcels.

Agricultural land can be re-classified, i.e. it can be convert-

ed into construction land.
Other construction land can be acquired in the following ways:
• By leasing land–for the period of up to 99 years with a
possibility of extension through a public bidding proce-
dure (for land under 10,000 sqm) or a tender procedure
(for building structures over 10,000 sqm);
• By obtaining the “right to use“ land–by acquiring a legally
built structure, an investor acquires the “right to use” land
under that structure with a possibility to build new premis-
es of even greater area, according to the master plan;
• By acquiring land through the conversion of agricultural
land into construction land–by acquiring agricultural
land under private ownership with a possibility of con-
version into construction land, an investor acquires the
right to build a construction.

15
Apart from the land fee, pad only once, the user continuously
pays a fee for land use, as a type of rental fee. The fee for using
developed public construction land and other construction
land in state property is paid by the owner of the structure. As
an exception, when the object or a part of it is leased, the fee
is paid by the lessee of the object or part thereof. The fee for
the use of non-developed public construction land and other
construction land in state property is to be paid by the user.
The amount of the fee is determined depending on the scope
and degree of the property’s development, its location, access
to amenities, transportation connections to the local or city
center, business areas, etc.

Most building land can be leased from a municipality

for up to 99 years with a possibility of extension. A land
fee averages from €10 to €60 per sqm

The land fee varies heavily at the local level. There is an

increasing number of municipalities offering building land
for lease free-of-charge, while e.g. in Belgrade’s prime areas
the fees can run up to €100/sqm. On average, the fee ranges
between €10 and €60 per sqm.
All city plots are under the state property regime. Even
though the land itself is public, the structures built on it are
private. A person, who owns real estate built on a city plot,
automatically enjoys an exclusive “right-of-use” of the plot.
Upon the sale of premises, all the rights on the land under the
premises and the land that serves for the regular use of the
premises are transferred as well.

Acquiring the Right to Use Land

As opposed to long term lease (up to 99 years), the Law on
Planning and Construction introduced the “right to use” land
granted for an indefinite period of time, based on either:
• The ownership of a building on urban land in accordance
with the urban plan;
• The intention to construct a building on urban land (the
“right to use” is related to the ownership of a building
located on urban land entitling users to permanently use
the land for as long as they own the building).
The “right to use” is irrevocable and permanently “attached”
to the ownership of a building located on a particular land

16
lot–it is acquired, transferred and ter-
minated automatically with acquisition,
transfer or termination of ownership of
the building.
The “right to use” can only be acquired
from previous holders of that right,
including privatization. An investor may
acquire the “right to use” on a plot of
building land from the party who was
initially allocated the “right to use” for a
sole use or may enter a joint venture with
the original holder of the “right to use”.
In addition to the costs of acquiring
the construction designated for decon-
struction, as well as the costs of acquiring
companies through privatization, an
investor is obliged to pay the fee for the
development of other construction land.

Conversion of Agricultural Land

A plot of agricultural land may be con-
verted into construction land with the
consent of the competent bodies and
the payment of a fee for a change of the
land use, if approved. For a change of
the land use, an investor must submit
a formal application containing the fol-
lowing: information on the current and
intended use of the land in question; a
certificate of the title or the right of use;
and an extract from the detailed urban
plan detailing the possibility of obtain-
ing a building permit.
By acquiring privately owned agri-
cultural land with a possibility of the
conversion into urban construction
land, an investor also acquires the right
to build structures on it.
Apart from paying the market price
of land, an investor is also liable for the
fee for converting agricultural land into
construction land and the fee for the de-
velopment of public construction land.

17
GTC International in Serbia working environment, but also facilities
such as a restaurant, bar, storage, and
underground garage.
Mr. Robert Snow What are your current and future proj- Other GTC International’s projects
Managing Director, GTC Serbia ects in the country? include GTC Square and Park Apartments.
GTC HOUSE is the first of GTC Interna- GTC Square is the newest innovative of-
Why did you decide to start a busi- tional’s investment in Serbia. The build- fice project located in New Belgrade with
ness in Serbia? ing–completed in April 2005– appeared ample parking space, an open interior
There are, of course, many reasons for as the long anticipated building, offer- courtyard overarched by translucent
entering a new market. Serbia present- ing Class A office facilities for leasing to catwalks, and an expansive and majestic
ed both a challenge and an opportuni- the leading international companies in atrium. Park Apartments is a top of the
ty for GTC. Firstly, as it is an emerging Belgrade. The modern building is fully range residential building, introducing a
market, one of the principle reasons equipped with all high-tech facilities, new concept of living, with 200 apart-
is that we perceived a large gap in the sophisticated telecommunications, and ments, 2-level underground parking, retail
real estate sector and a need for more elegant double height entrance lobby stores, fitness center, 24-hour reception
offices, hotels, shopping malls, and leading into a covered central atrium. desk, security services, maintenance ser-
quality mid-to-upper level residential Our new office project 19 Avenue will vices on the spot, and a video interphone.
buildings. Choosing to come here also consist of two 1st class office buildings
reflected our confidence that Serbia is with a unique design of 20,000 sqm. The How do you perceive the business
full of promise–everything exists here 19 Avenue will be completely equipped climate in Serbia?
in terms of opportunity, resources, with high-tech telecommunication This is a very exciting time to be doing
and skilled workers for the country to devices, offering not only exceptional business in Serbia. In the context of its
catch up to its more developed neigh-
bors in a short time.
The world of business buildings is
one which has a very long-term vision
of the future. The needs of today are
of critical importance but those of
tomorrow are paramount. GTC has
seen in Belgrade a vision of a major
European center of commerce, busi-
ness, industry, and transport. Belgrade
is in the very heart of the Balkans
and at the epicenter of all movement
throughout South East Europe. As the
importance of Belgrade grows, so too
will its requirements for office space
and business parks.

18
transition, Serbia has launched itself
A Construction Procedure
resolutely onto the path of joining the
rest of Europe in terms of its economy
and business. Foreign investment
continues to come into Serbia from
across the spectrum of industry sec-
tors: banking, telecommunications,
and, naturally, construction. Investors
continue to view Serbia not only as an
important investment destination in
itself, but as a gateway to the region,
as well. We at GTC are committed to
open and transparent business prac-
tices, and have been very encouraged
by the country’s efforts to align itself
with the best practices for business
development, as witnessed in the EU
and neighboring countries.
In short, we are very optimistic about
the business climate in Serbia and have
already experienced many of the ben-
efits of investing here.
An Assessment of Urban Conditions
This assessment is being done based on the extract from the
urban plan. The extract contains all requirements and data
necessary for the elaboration of a general project and particu-
larly for the development and building lines, as well as leveling
requirements. This document can be obtained within 8 days
from the date of submission of an application, on payment of
the actual costs of their issuance. It is issued by the competent
city/municipal authorities or the Ministry of Capital Investment.
In Belgrade, the extract and other documents for structures
with the area of up to 800 sqm can be obtained in the Depart-
ment for Property Rights Relations and Construction of the city
municipality where the structure is located. For structures over
800 sqm, necessary documents can be obtained in the Secre-
tariat for Urban Planning and Construction. In other cities and
municipalities in Serbia, the documentation is obtained in the
office of the city or municipality, where the structure is erected.
Lastly, for structures of national significance, the documents
are issued by the Ministry of Capital Investment.
Acquiring Construction Land
Construction land can be acquired by leasing land, obtain-
ing the “right to use” land or converting agricultural land into
construction land.
Obtaining a Construction Approval
Prior to the construction of a structure, a potential investor
is obliged to obtain a construction approval and prepare
the technical documentation for the construction (general
project, conceptual project, main project, execution project,
and as-built project).
As part of the application, the following should be submitted:
• An extract from the urban plan, not older than 6 months;
• A conceptual project, in compliance with the extract;
• An evidence of ownership, or leasehold rights to the
construction land, or property rights in an object, or the
right to use undeveloped construction land;
• The report on setting out the building plot and the
regulation protocol issued by the Republic Geodetic Au-
thority, including the appropriate copy of the plot plan;
• Other evidence required in the urban plan.
19
The construction approval is issued within 15 days from Construction
the date of submission of the application. The approval for
infrastructural works is issued by the Ministry of Capital Invest- Throughout the construction stage, the investor must have
ment, while the issuance of the approval for other structures is construction documents (if the main project does not contain
the responsibility of the city or municipality. details required for the construction process) and provide
The approval is not obligatory for the construction of auxil- supervision.
iary structures, nor is it necessary for adaptation or renovation
but it is required for the reconstruction of premises.
Upon obtaining the construction approval, the consulting
company will start elaborating other documents (e.g. main
project) for the investor, whereby technical inspection of the
design must be carried out by another licensed consultant.

A Notice of the Start of Construction

After the completion of building documents, the investor

should select the contractor who will be responsible for the
whole building site and notify the city or municipality of the
start of works. The investor is obliged to provide the office in
charge of issuing the construction approval with the name of
the contractor, construction start date, and completion target
date within a period of 8 days before the construction starts.
Also, an investor must submit:
• a confirmed main project,
• a report on completed technical control,
• a construction approval,
• an evidence of payment of compensation for the devel-
opment of construction land, and
• an evidence that the administrative fee has been paid. In
addition, the investor must also report to the municipal-
ity office in charge of inspection that the construction of
the structure has started.
The investor can start construction works when the relevant
municipal department confirms the receipt of the notification
on the commencement of works. The receipt of documenta-
tion should be confirmed within 8 days provided the docu-
mentation is complete.
Prior to construction, the surveyor should set out the building
site, after which it will be possible to commence excavations for
the foundation. Upon the construction of the foundation, the
contractor should submit the geodetic survey of built-up founda-
tion, so that the competent body can inspect its conformity with
the main project. Within 3 days, if everything is in order, a written
certificate will be received and the works can be continued.

20
Technical Inspection
A technical inspection of a structure is
done upon the completion of construc-
tion, i.e. the completion of all the works
specified in the construction approval
and defined in the main project or
upon the completion of a part of the
structure for which an occupancy per-
mit may be issued.
Upon the submission of the investor’s
request for the technical inspection,
this assessment may also be carried out
simultaneously with the construction
process, if the verification of the actual
condition of certain parts of the struc-
ture is not possible after its completion.
The inspection includes the control
of compatibility of as-built conditions
with the construction approval and
technical documentation on the basis
of which the structure was constructed,
as well as with the technical regula-
tions and standards applicable to
certain trades or materials, equipment,
and installations.
Probation Occupancy
To ensure the suitability for the use
of a structure, an assessment and
verification of installations, devices,
machinery, stability or safety of
structure, devices and equipment for
environmental protection may take
place. If envisaged by the technical
documentation, the commission in
charge of a technical inspection may
propose to the relevant office to ap-
prove probation occupancy, provided
the conditions are met. The probation
period that cannot last longer than 1
year. Upon the expiration of a proba-
tion period, an investor is obliged to
submit the results of the probation
occupancy to the relevant office.
Obtaining an Occupancy Permit
To obtain an occupancy permit, the
investor must submit the main project
(with possible changes occurred during
construction) which is compatible with
the construction approval and the tech-
nical inspection of a structure.
The structure may be put in opera-
tion only upon obtaining the occupancy
permit. The office competent for issuing
the construction approval issues the
occupancy permit within 7 days from
the date of receiving the commission’s
findings which have established the
structure to be suitable for use.
Registration in the Cadastre
The final stage in the construction
process is the registration of a structure
in the Real Estate Cadastre, after the oc-
cupancy permit is obtained.
The process of establishing the Real
Estate Cadastre on the entire terri-
tory of Serbia is under way. By 2010, a
comprehensive system of tracking real
estate and real estate property rights
will replace the existing records on real
estate–the Land Cadastre and Land
Books. The project is aimed at boosting
the security of ownership and real es-
tate rights, while leading to a transpar-
ent and prosperous real estate market.
At present, the Real Estate Cadastre
covers 83% of cadastral municipalities,
with the Land Cadastre and Land Books
accounting for the remaining 17%.
The Real Estate Cadastre contains
the data on real estate, its shape and
position, surface area, form of use, land
fertility, cadastral income, real rights
and rights holders, as well as the data
on encumbrances and limitations.
Unlike the Real Estate Cadastre, the
Land Cadastre contains no data on real
estate property rights, featuring infor-
mation on plots and structures built
on land with respect to their position,
shape, area, type of land, land fertility,
class, cadastral income, and users.
Lastly, the Land Book is a public record
registering real estate (land and struc-
tures), real rights, encumbrances, and
limitations related to such real estate.
Once the unified Real Estate Cadas-
tre is introduced, registration of real
estate will be done in one place–with
a local office of the Republic Geodetic
Authority. Currently, the procedure is
handled by a competent court.
The Construction Procedure
Assessment of Urban Conditions
Acquiring Construction Land
Obtaining a Construction Approval
Notice of the Start of Construction
Construction
Technical Inspection of the Structure
Probation Occupancy
Obtaining an Occupancy Permit
Registration in the Real Estate Cadastre
21
 An Overview of Construction Loans
Banca Intesa Hypo Alpe-Adria-Bank Raiffeisenbank Volksbank
Interest Rate As agreed with client 5.5%-8.0% + EURIBOR n/a 5.0%-6.0% + EURIBOR
Depending on project value Up to €3 mln (local funds) or
Loan Limit From €500,000 Up to €45 mln
and construction period over €3 mln (international funds)
Repayment Depending on sale pace Up to 10 years Up to 10 years Depending on sale pace
Equal to construction and
Grace Period Equal to construction period 1-2 years project implementation Equal to construction period
period
Loan amount up to 85% of Down payment from 25% to
Other Down payment from 30% to Down payment from 35% to
project value; available in 30%, establishment of new
Conditions 35%, clear ownership relations 40%
Belgrade and Novi Sad company
Source: Commercial banks

Financing Options
In response to the expanding market needs, project financ-
ing services are introduced by a growing number of local
commercial banks. As indicated in the table, loan conditions
tend to vary heavily and may be subject to the negotiations
with a specific client.
Based on the new Law on Mortgage, citizens are entitled to
purchase real estate while in a construction stage or upon its
completion. In the first case, banks will accept mortgage claim
as collateral, while the funds from sale of the real estate will
serve as collateral for loan repayment.
Real Estate Transfer
Real Estate Taxes
Real estate property in Serbia is subject to three
basic taxes:
• property tax,
• tax on transfer of title, and
• capital gain tax.
Property tax is payable by all legal entities and
individuals who own or have rights over real estate
located in Serbia. For a taxpayer who keeps books,
property tax on the rights to real estate is 0.40%
of the property’s book value, while for individuals
and entrepreneurs, the rates are progressive.
Tax on transfer of title over property is payable
by all legal entities and individuals who sell rights
in relation to real estate. The taxable base is the
price stated in the contract or the market value of
the property with the current tax rate set at 5%.
Capital gain is determined as the difference
between the sale price and purchase price of the
real estate. The applicable rates for legal entities
and individuals are 10% and 20%, respectively.
Capital gains can be offset against capital losses
occurring in the same period, and a capital loss
can be carried forward for a period of 10 years.

22
 State Institutions Real Estate Providers
Relevant Contacts
Serbia Investment CB Richard Ellis
and Export Promotion Agency GENEX Business Center A407 6,
3, Vlajkoviceva St. 11000 Belgrade Vladimira Popovica St. 11070 Belgrade
Phone: +381 11 33 98 55 0 Phone: +381 11 22 23 64 7
Fax: +381 11 33 98 81 4 Fax: +381 11 22 23 64 6
e-mail: office@siepa.sr.gov.yu e-mail: dragan.radulovic@cbre.co.yu
www.siepa.sr.gov.yu www.cbre.co.yu

Office of the Prime Minister Colliers International Serbia

11, Nemanjina St. 11000 Belgrade 20, Blvd. Kneza Aleksandra Karadjordjevica
Phone: +381 11 36 17 71 9 11000 Belgrade
Fax: +381 11 36 17 60 9 Phone: +381 11 26 63 86 3
e-mail: predsednikvladesrbije@srbija.sr.gov.yu Fax: +381 11 36 74 53 8
e-mail: jovica.jakovac@colliers.com
Business Registration Agency www.colliers.com
5, Nikola Pasic Sq. 11000 Belgrade
Phone: +381 11 33 31 44 4 EC Harris
Fax: +381 11 33 3 1 41 0 87, Blvd. AVNOJ-a 11070 Belgrade
e-mail: registar@apr.sr.gov.yu Phone: +381 11 21 20 33 4
www.apr.sr.gov.yu Fax: +381 11 31 32 25 8
e-mail: sasa.trajkovic@echarris.com
National Bank of Serbia www.echarris.com
12, Kralja Petra St. 11000 Belgrade
Phone: +381 11 30 27 19 4 Forton
Fax: +381 11 30 27 39 4 5, Zmaj Jovina St. 11000 Belgrade
e-mail: kabinet@nbs.yu Phone: +381 11 26 35 43 2
www.nbs.yu Fax: +381 11 30 37 50 6
e-mail: nradovic@forton.bg
Statistical Office of the Republic of Serbia www.forton.bg
5, Milana Rakica St. 11000 Belgrade
Phone: +381 11 24 12 92 2 King Sturge
Fax: +381 11 24 11 26 0 6, Blvd. Mihajla Pupina, Usce Tower
e-mail: stat@statserb.sr.gov.yu 11070 Belgrade
www.statserb.sr.gov.yu Phone: +381 11 22 00 10 1
Fax: +381 11 22 00 10 2
Republic Geodetic Authority e-mail: srdjan.vujicic@kingsturge.com
39, Blvd. Vojvode Misica 11000 Belgrade www.kingsturge.com
Phone: +381 11 26 50 88 6
Fax: +381 11 26 51 076
e-mail: office@rgz.sr.gov.yu
www.rgz.sr.gov.yu

23
Serbia Investment and Export Promotion Agency (SIEPA)
is a governmental institution committed to successfully
helping foreign investors and buyers. Created as a one-stop-
information-shop, SIEPA has a mission is to support foreign
companies, seeking to set up or expand in Serbia and Serbian
producers when doing business internationally.
Key services offered to potential investors are free-of-charge
and readily available:
• Providing statistical and economic data, as well as infor-
mation on the investment-related legal framework;
• Linking companies to Greenfield and existing sites op-
portunities, including site visit organization;
• Assistance with registration, licenses, permits and other
documentation;
• Identifying local partners and suppliers;
• Presenting ready-to-invest projects.
Our assistance resulted in some of the largest recent investment
projects in Serbia. The list of SIEPA clients includes compa-
nies, like US Ball Corporation, Austrian Knauf, Japanese Japan
Tobacco International, as well as British Albon Engineering and
Bianca Alena with almost €400 million worth investment.
To help potential investors speed up the completion of their
projects, SIEPA networks with all FDI-related public and private
sector bodies, including ministries and other governmental
bodies, municipal authorities and local self-government, build-
ing land agencies, tax and customs authorities, statistical bu-
reaus, chambers of commerce, and the National Bank of Serbia.
SIEPA publications and materials on doing business in Serbia,
as well as detailed sector analyses and studies feature numer-
ous business opportunities in our country. They are available
in hard copy and can be downloaded from our web-site at
www.siepa.sr.gov.yu.
We would like to invite you to contact our expert staff ready in
assisting you and your business interests. Our services are tai-
lor-made to best match your company’s needs and requests.
Working with us is simple, safe and costs nothing.

24
Serbia Investment and
Export Promotion Agency

Vlajkovićeva 3
11000Belgrade
tel.: +381 11 3398 550

Real Estate Industry in Serbia

fax: +381 11 3398 814
office@siepa.sr.gov.yu
www.siepa.sr.gov.yu