GAZETTE REAL ESTATE FOCUS ON: THE IMPACT OF CHANGE ON INVESTMENT HOW IS POLITICAL, DEMOGRAPHIC AND LIFESTYLE CHANGE IMPACTING THE REAL ESTATE MARKET?

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1 ISSUE 28 REAL ESTATE GAZETTE GERMANY RECENT DEVELOPMENTS IN THE GERMAN DATA CENTER MARKET HUNGARY 3D LAND REGISTRY ARE WE THERE YET? NORWAY COULD CO-WORKING CHANGE THE REAL ESTATE OFFICE MARKET? SPAIN SMART CITIES IN SPAIN: NEW REAL ESTATE OPPORTUNITIES USA EB-5 FINANCING: THE OUTLOOK FOR 2017 AND BEYOND SWEDEN HOUSING CRISIS IN SWEDEN IS THE GOVERNMENT RISING TO THE CHALLENGE? FOCUS ON: THE IMPACT OF CHANGE ON INVESTMENT HOW IS POLITICAL, DEMOGRAPHIC AND LIFESTYLE CHANGE IMPACTING THE REAL ESTATE MARKET?

2 UKRAINE: ON TRACK TO BECOMING AN ATTRACTIVE INVESTMENT DESTINATION OLEG MILCHENKO, KYIV Situated between the European, Russian and Asian markets, Ukraine, with its highly qualified workforce and a number of inexpensive assets on offer, is an interesting prospect for investors, particularly those who are looking to invest in the manufacturing, agricultural and transport sectors. Despite the recent challenges caused by revolution and external military aggression, Ukraine continues to improve its business environment. In 2016 the Ukrainian economy grew by 2.3 per cent, according to the National Bank of Ukraine, the Bank noting that private investments were the driver for this increase. This indicates that Ukraine is creating new opportunities for prospective investors. Protection of property rights Poor protection of property rights in Ukraine has been an issue of concern for investors in past years. The previous system of recording information about registered titles and encumbrances in different registers (which had restricted access and no electronic administration) meant that registration of title could take several days and left the system open to abuse, especially in relation to hidden illegal takeovers of property. Recent changes implemented by the Ukrainian authorities, however, have significantly improved protection of title to real estate. 34 REAL ESTATE GAZETTE

3 First, the introduction of a new approach to registration of property rights. All proprietary rights to real estate must now be registered in the Register of Rights to Real Estate and Encumbrances, which is publicly available, making an independent title check possible. All notaries now have the same powers as state registrars, which has significantly simplified the procedure for state registration of property rights. Additionally, a completely new system for contesting unlawful registration has been implemented. The Ministry of Justice is now empowered to review claims of owners about illegal changes of record in the Register of Rights to Real Estate and to repeal those illegal changes. This allows immediate action to be taken without waiting for a court order. In October 2016, the new system of registration was strengthened furthered so that amendment of records in the Register without informing and obtaining the consent of the owners is prohibited. Second, there has been judicial reform. This was initiated by the Law of Ukraine On Amendments to the Constitution of Ukraine on Justice in June The current court system consists of courts of different jurisdictions (civil, commercial, administrative), where every jurisdiction has its own court of cassation. The Supreme Court of Ukraine may review decisions of the highest court of every jurisdiction to ensure consistent ISSUE

4 application of law in similar cases. However, the new law provides for a three-tier court system. It will include local courts, courts of appeal and the Supreme Court, unilaterally carrying out the functions of the court of cassation. This will ensure conformity in court practice and avoid conflicts between decisions of courts in different jurisdictions. In addition, the reform envisages a new, open and transparent procedure for appointing judges. Encouraging investments in infrastructure and state-owned property Being a country from the Soviet bloc, Ukraine has a number of state-owned enterprises, which require updating and substantial investment. The European Bank for Reconstruction and Development (EBRD) has noted that the Ukrainian economy will grow with the benefit of privatization. To boost the privatization process, the Ministry of Economic Development has already introduced a new core law on privatization, which was developed in co-operation with the EBRD and is based on best international privatization practices. The State Property Fund of Ukraine assumes that enactment of the new law will allow the state to complete its privatization plan by Operating as the sea gates of the USSR in the past, Ukraine inherited a significant number of sea and river ports, which are now the main route for Ukrainian exports. With 13 sea ports (with a capacity of about 232 million tons of cargo per year), Ukraine has the most significant infrastructure investments potential within Black Sea region. It is worth noting that the Ukrainian port sector has attracted a significant number of investments recently. In 2016 Bunge invested over USD 180 million into the development of a grain terminal in Port of Nikolayev. Private operator M.V. Cargo in Port of Yuzhniy recently attracted USD 74 million of loans from the EBRD and the International Finance Corporation (IFC), and about USD 100 million of private investment from Cargill. Some international private investors (such as DP World and NYK Line) are interested in concessions in Ukrainian ports. 36 REAL ESTATE GAZETTE

5 The current legal framework relating to concessions requires significant reforms. The Ministry of Infrastructure has already looked into such reforms, together with international advisers and three pilot concession projects are scheduled for the near future Port of Kherson, Olvia port (Nikolayev region), and Ro-Ro terminal in Port of Chornomorsk. Ukraine has one of the most developed railroad networks in Europe. This remains stateowned and requires significant investment for upgrading. The new draft law on railroad transport, which has already been registered in the Ukrainian parliament, aims to provide transparent conditions for investing in existing stateowned railroad infrastructure, development of private railroads and operating private rolling stock. Grain trader Louis Dreyfus and steel manufacturing giant ArcelorMittal have repeatedly expressed interest in investing in Ukrainian railroads. Reform of railroad regulation in Ukraine will open up opportunities for private investments in this sector. The Ukrainian Government also continues to implement best international practices in publicly funded projects. At the end of 2016 the Government adopted a decree prescribing the status of engineers in projects related to road construction. This initiative allows FIDIC contracts to be used in publicly funded road projects without conflicting with the Ukrainian law on the status of engineers. FIDIC contracts are also soon to be used in projects related to the reconstruction of state-owned port infrastructure. Conclusion All of the initiatives discussed in this article are focused on deregulation, combating excessive bureaucracy, providing equal, fair and transparent investment conditions, and protection for investors. It is fair to say then that Ukraine has been responding to the challenges it has faced, and positive results are already being seen. Direct investment in Ukraine continues to grow. This proves that Ukraine is on the right track to positioning itself as an attractive destination for potential investors. ISSUE