SURVEY OF LAND AND REAL ESTATE TRANSACTIONS IN THE RUSSIAN FEDERATION REGIONAL REPORT: NOVGOROD OBLAST

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Foreign Investment Advisory Service, a joint service of the International Finance Corporation and the World Bank Project is co-financed by the European Union in the framework of the Policy Advice Programme SURVEY OF LAND AND REAL ESTATE TRANSACTIONS IN THE RUSSIAN FEDERATION REGIONAL REPORT: NOVGOROD OBLAST May

2 The project has also received financial support from the Swiss State Secretariat for Economic Affairs (seco). The Report was drafted for FIAS by marketing agency Media Navigator, (located in Nizhny Novgorod), on the basis of their analysis of survey data from 15 Subjects of the Russian Federation. Disclaimer (EU) This publication has been produced with the financial assistance of the European Union. The contents of this publication are the sole responsibility of its authors and can in no way be taken to reflect the views of the European Union. Disclaimer (FIAS) The Organizations (i.e. IBRD and IFC), through FIAS, have used their best efforts in the time available to provide high quality services hereunder and have relied on information provided to them by a wide range of other sources. However they do not make any representations or warranties regarding the completeness or accuracy of the information included this report, or the results which would be achieved by following its recommendations. 2

3 TABLE OF CONTENTS 1. INTRODUCTION EXECUTIVE SUMMARY REGIONAL SAMPLING PROCEDURE BY PROCEDURE SUMMARY Procedure no.1: Leasing a land plot, which is currently state or municipal property, for construction with preliminary agreement on the object location Procedures no.2a and 2B: Obtaining ownership rights on a land plot (2A) or Leasing a land plot (2B) which is currently state or municipal property for construction during tenders without preliminary agreement on the object location, during auctions or tenders Procedures no.3a and 3B: Obtaining ownership rights on land plots that are currently state or municipal property with premises, buildings or constructions which are private property (3A) or Leasing land plots with premises, buildings or constructions which are private property (3B) Procedure no.4: Leasing a real estate object without the procedure of tender (including for targeted use) Procedure no.5: Leasing a real estate object, which is currently the municipal property, during tenders (auctions) Procedure no.6: Transferring a premise (building) from the residential use to non-residential one Procedures no.7a and 7B: State registration of a purchase and sale transaction on real estate acquired in the secondary market (7A) and State registration of a lease agreement concluded in the secondary market for a term exceeding 1 year (7B) Procedure no.8: Transferring a land plot from one category to another, changing the designated use of a land plot Procedure no.9: Privatization of a real estate object (building, structure, premise), which is currently municipal property ALL PROCEDURE FIGURES Time and cost comparison over all procedures Practice of unofficial payments, donations to funds and additional burdens Characteristics most important in saving time

4 1. INTRODUCTION The survey was conducted in 15 regions of Russia: Irkutsk, Nizhniy Novgorod, Novosibirsk, Rostov, Perm, Sakhalin, Kaliningrad, Leningrad, Moscow, Sverdlovsk, Tomsk and Novgorod Oblasts, Khabarovsk Krai and the cities of Saint Petersburg and Moscow. Research methodology required legal analysis and survey. Legal analysis is based on publicly available (Federal and Municipal) legal acts and in depth interviews with experts for obtaining more specific information about the locating procedures under investigation in each particular region. The legal analysis results are gathered in templates, which describe major stages for any of surveyed procedures in any of surveyed regions (sequence of stages, necessary documents, government authorities, organizations involved in every stages, official time and cost limits for obtaining documents). These templates become a base for comparison with real practice, reflected in surveyed companies responses and are available in Annex (tables 1-9). Survey required: business intermediaries survey (on the basis of BIS companies interviews) and administrative and regulatory costs survey (on the basis of ARCS companies interviews). BIS - legal entities and sole proprietors providing intermediary services for locating procedures ARCS - legal entities and sole proprietors that attempted, underwent or completed locating procedures in 24 4

5 The following nine basic locating procedures were studied: Procedure no. 1 Procedure no. 2A and 2B Procedure no. 3A and 3B Procedure no. 4 Procedure no. 5 Procedure no. 6 Procedure no. 7A and 7B Procedure no. 8 Procedure no. 9 Obtaining (by lease) a land plot, which is currently state or municipal property, for construction on, with a preliminary agreement on the object location. Obtaining (by purchase (2A) or lease (2B)) a land plot, which is currently state or municipal property for construction on, without a preliminary agreement on the object location, during auctions or tenders. Obtaining ownership (3A) or lease (3B) rights on land plots that are currently state or municipal property, with premises, buildings or constructions, which are private property. Lease of a real estate object (premise, building or construction) which is currently municipal property, without the procedure of tender (including purposive appointment cases). Lease of a real estate object (premise, building or construction) which is currently the municipal property during tenders or auctions. Transferring a premise (building) from the residential use to non-residential one. State registration of rights on real estate and real estate transactions (in the cases of (7A) buying or selling a real estate object (land plot, building or premise) in the secondary market, (7B) drawing a contract of a real estate object (land plot, building or premise) lease for the term of more than 12 months in the secondary market). Transferring a land plot from one category into another, changing designated use of a land plot. Privatization of a real estate object (building or premise) which is currently municipal property. 5

6 2. EXECUTIVE SUMMARY In Novgorod region, the analysis of the land and real estate procedures leads to the following conclusions: 1. Among the land and real estate procedures under consideration, the vast majority of the BIS 1 and ARCS 2 companies tried to pass the procedures aimed at obtaining rights on land plots. Among them, most companies tried to pass the procedure Obtaining ownership or lease rights on land plots that are currently state or municipal property, with premises, buildings or constructions, which are private property (3). In passing this procedure, the companies mainly targeted at leasing rights on land plots, as opposed to the ownership rights. The most of surveyed companies, which completed procedures, related to the real estate, completed the procedure of Transferring a premise (building) from the residential use to non-residential one. During the survey there were no companies found that had tried to pass the following procedures: a. Obtaining (lease or ownership rights on) a land plot, which is currently state or municipal property for construction on, without a preliminary agreement on the object location, during auctions or tenders; b. Lease of a real estate object (premise, building or construction) which is currently the municipal property during tenders or auctions; c. Transferring a land plot from one category into another, changing designated use of a land plot. 2. According to obtained results, the largest time and money costs were incurred by the ARCS companies when passing the procedure of Transferring a premise (building) from the residential use to non-residential one (6). Also, this procedure is characterized by the mot frequent use of unofficial payments. The least amount of time and money costs is incurred by the ARCS companies in passing the procedure Lease of a real estate object (premise, building or construction) which is currently municipal property, without the procedure of tender (including purposive appointment cases) (4). 3. It is difficult to point out the most expensive and the longest procedure for BIS companies because of insufficient data obtained from the BIS companies. 4. Most procedures are characterized by a low level of unofficial payments and additional payments, such as sponsorship, payments to the non-public funds and various burdens. The BIS companies use additional payments most rarely. 5. BIS companies reported that time costs required to pass the procedures Obtaining ownership or lease rights on land plots that are currently state or municipal property, with premises, buildings or constructions, which are private property and Transferring a premise (building) from the residential use to nonresidential one increased in 24 as compared to 23. Official payments increased for all procedures under consideration, most significantly for the procedures that require the largest costs. 1 legal entities and sole proprietors providing intermediary services for locating procedures 2 legal entities and sole proprietors that attempted, underwent or completed locating procedures in 24 6

7 6. Low corruption level detected in passing the procedures under inquiry can be referred to as one of the causes why the negative phenomena detected in the activities of the authorities are mostly bureaucratic. This is also confirmed by the fact that the BIS companies think the time costs required to pass the procedures could be reduced due to mature personal relations with the personnel of the authorities, as opposed to the client s willingness to make additional payments. 7. According to the survey results, number of stages for some procedures (Procedures no.1 and 6) varies between different municipalities under investigation in Novgorod Oblast (See charts 2.1). It s noteworthy that these procedures are ones from the most expensive and lasting procedures according to the general results in the 15 surveyed regions. The highest number of stages for these procedures was registered in Velikiy Novgorod City. In Novgorod Oblast the least defined procedure from the point of view of time expenses is Procedure no. 2 and the least defined procedure from the point of view of financial costs is Procedure no. 8. Chart 2.1 Share of stages in each procedure which have legislatively defined time and financial costs 34. TIME, % NUMBER OF STAGES COST, % Procedure 1 Procedure Procedure Procedure Procedure Procedure Procedure Procedure Procedure 9_ Procedure 9_ Procedure 9_ Procedure 9_ Defined and specified Defined and not specified Not defined Defined and specified Defined and not specified Not defined 3 Defined and specified means that precise amount of time and cost limits is established (even if document is for free) Defined and not specified means that it is known that the payment (or time limit) is fixed, but its precise amount has not been established Not defined means that the fact of payment necessity (or time limit existence) is not fixed in publicly available legislation 4 Number of stages for some procedures varies between different municipalities under investigation in Novgorod Oblast. Thus, Procedure no.1 requires 1 stages in Borovichi district, 11 stages in Novgorod district and 23 stages in Velikiy Novgorod City. Procedure no. 6 requires 7 stages in Borovichi and Novgorod districts and 9 stages in Velikiy Novgorod City. Share of stages which have legislatively defined time and costs are presented in average for three surveyed municipal formations. 7

8 3. REGIONAL SAMPLING For the purposes of carrying out the survey, sampling quotas were fixed and included 1 BIS and 1 ARCS questionnaires. The achieved sample size in Novgorod Oblast was 1 ARCS and 25 BIS. One BIS company could be interviewed about several procedures. Sources of information used to identify the potential respondents were: Goskomstat, and Public sources of information (e.g. yellow pages). The reason why the latter was used was unavailability of information about all companies in Goskomstat database and time/cost effectiveness. Once a complete list of potential respondents was compiled, respondents were contacted according to random key 5. See Table 3.1 for the most important statistics covering the screening and interviewing, as well as the duration of work, and Table 3.2 for the distribution of interviews in various procedures. Table 3.1 Statistics on the field work BIS ARCS Companies in the database, number Phone calls, number Companies interviewed, number 14 1 Number of meetings as a percentage of phone calls made 24,6 24 Questionnaires, number 25 1 Refusal-rate as share of refusal phone calls from total number of phone calls, % 24,6 24,4 Duration of an average interview, minutes Duration of the whole fieldwork, working days 36 The analysis of time and cost expenses for the procedure, on the whole, is based only on those companies, which completed all of procedure s stages independently and which have completed the procedure as by the survey date. The main reasons for this approach are as follows: 1. The time and cost expenses of those, which have not completed the procedure, are not correct to be compared with the costs of those, which have completed it. 2. A company, which involved any intermediaries (or which has been involved in case of BIS companies) at certain stages of the procedures, may be ignorant of certain specific amounts of official, unofficial and total costs for completing of the procedure. For example, there is a possibility of an ARCS company, which has involved 5 A random number generator was used to specify the sequence for BIS companies. A sampling step was used to specify the sequence for ARCS companies. The sampling step for ARCS respondents was determined as the quotient of the total number of the units in the general population by 5. 8

9 intermediaries at one of the stages not being able to single out the amount of the official, unofficial and mediator payments out of the total amount. A BIS company, which has participated at several stages of the procedure, may be not informed of the total amount of expenses for completing the whole procedure and also of the amount of unofficial payments made by the client on its own. Document analysis and estimation of authorities are based on all respondents responses. Table 3.2 Number of companies interviewed for each procedures, counts BIS ARCS 1. Leasing a land plot, which is currently state or municipal property, for construction with preliminary agreement on the object location A. Obtaining ownership rights on a land plot, which is currently state or municipal property, during tenders for construction without preliminary agreement on the object location 2B. Leasing a land plot, which is currently state or municipal property, for construction during tenders without preliminary agreement on the object location 3A. Obtaining ownership rights on land plots that are currently state or municipal property with buildings (structures, installations) owned the company 3B. Leasing land plots that are currently state or municipal property with buildings (structures, installations) owned by the company 4. Leasing a real estate object without the procedure of tender (including by purposive appointment) 5. Leasing a real estate object, which is municipal property, during tenders (auctions) 6. Transferring a premise (building) from the residential use to nonresidential one 7A. State registration of a purchase and sale transaction on real estate acquired in the secondary market 7B. State registration of a lease agreement concluded in the secondary market for a term exceeding 1 year 8. Transferring a land plot from one category to another, changing the designated use of a land plot 9. Privatization of a real estate object (building, structure, premise), which is currently municipal property

10 4. PROCEDURE BY PROCEDURE SUMMARY 4.1. Procedure no.1: Leasing a land plot, which is currently state or municipal property, for construction with preliminary agreement on the object location When going through Procedure no.1 (i.e. conclusion of a lease) the applicant must pass through 1 to 23 stages and collect 17 to 76 documents, depending on the municipal formation of Novgorod region (See Annex 1, table 1). Since maximum time-limits for 8 stages of this procedure are not determined by legislation, there are no standard time-limits for completion of the whole procedure either (See chart 2.1). Then, similar uncertainty regarding the official cost is to be faced with, as for 6-1 stages it is not legislatively determined whether an official charge shall be collected therefore, and for 1-6 stages the amount of official payments is either not established or depends on the object in question and its specifications. The ARCS respondents reported duration of this procedure to be 149 days on average, and official payments to be 8 13 rubles on average. There is no sufficient data regarding both duration and official payments was collected from BIS companies. Under Procedure no.1, about a quarter of ARCS companies reported occurrence of unofficial payments. The same number of the respondents reported sponsorship or payments to non-governmental funds. Nevertheless, the current indicators for Procedure no.1 are on the whole moderate in comparison with the 15 surveyed regions. The respondents could not name the most problematic document. Each respondent gave their own answer. Taking into consideration the obtained results, we can conclude that difficulties under Procedure no.1 appear at different stages and are not systematical. Evaluating activities of the authorities, all BIS companies and 14% of ARCS ones reported that the most problematic and time-wasting body was City (District) Administration. All BIS companies agreed. The most wide-spread negative fact of the authorities was Need of redundant agreements (approvals). 1

11 4.2. Procedures no.2a and 2B: Obtaining ownership rights on a land plot (2A) or Leasing a land plot (2B) which is currently state or municipal property for construction during tenders without preliminary agreement on the object location, during auctions or tenders When going through Procedure no.2 (i.e. acquisition of land or conclusion of a lease) the applicant must pass through 5 stages and collect 1 documents (See Annex 1, table 2). There are no standard time-limits for completing this procedure since for 4 of 5 stages of the procedure no maximum time-limits for completion thereof are determined by legislation (See chart 2.1). The amount of official expenses when going through the procedure may not exceed 1,5 rubles for legal entities and 15 rubles for individuals. During the research no ARCS or BIS companies, completed the Procedure no.2 in 24, were surveyed in Novgorod Oblast Procedures no.3a and 3B: Obtaining ownership rights on land plots that are currently state or municipal property with premises, buildings or constructions which are private property (3A) or Leasing land plots with premises, buildings or constructions which are private property (3B) When going through Procedure no.3 (i.e. acquisition of land or conclusion of a lease) the applicant must pass through 15 stages and collect 23 to 26 documents, depending on the municipal formation (See Annex 1, table 3). There are no standard time-limits for completing this procedure since for 2 or 3 of total 15 stages of the procedure no maximum time-limits for completion thereof are determined by legislation (See chart 2.1). There is similar uncertainty regarding the official cost. For 11 of 15 stages it is not determined by legislation whether an official charge shall be collected therefore, and for 2 of 15 stages the amount of official payments is either not established or depends on the certain object s specifications. The data collected from respondents supports this premise about uncertainty. The respondents reported duration of this procedure to be not less than 3 days for BIS companies and 15 days on average for ARCS companies. The respondents reported official payments to be not less than 3 4 rubles for BIS companies and rubles on average for ARCS companies. The practice of making unofficial payments is almost not reported under Procedure no.3. No BIS companies resorted to any kind of additional payments at any procedural stage. Note that this is the usual practice of completing Procedure no.3, according to BIS companies opinion. The share of ARCS companies, which resorted to unofficial payments, is different from zero, yet it is insignificant and amounts only to 9% of the surveyed companies. The respondents failed to express a certain opinion regarding the most problematic document. There can be noted 3% of BIS companies, which pointed out Ordinance by the Municipal Administration on sale of a land plot on 11

12 terms of ownership; possibly, it is due to the fact that processing this document requires record-high time costs under this procedure (on average 64 days). According to BIS companies, the authority, causing most problems and simultaneously wasting most of the time is City (District) Administration. However, taking into account that the main negative phenomenon in the activities of this and other government agencies is queues, as well as considering almost total lack of any additional payments, there can be reasoned that all problems are caused by bureaucratic attitude of the official bodies Procedure no.4: Leasing a real estate object without the procedure of tender (including for targeted use) When going through Procedure no.4 (i.e. conclusion of a tenancy agreement) the applicant must pass through 6 stages and collect 9 to 13 documents, depending on the municipal formation of Novgorod region (See Annex 1, table 4). There are no standard time-limits for completing this procedure since for 3 or 4 of 6 stages of the procedure no maximum time-limits for completion thereof are determined by legislation (See chart 2.1). There is similar uncertainty regarding the official cost. In Velikiy Novgorod for 1 stage the amount of official payment depends on the certain object s specifications, for 1 more stage it is not determined whether an official charge shall be collected at all. In the Town of Borovichi and Novgorod district for 5 of 6 stages it is not determined by legislation whether an official charge shall be collected therefore. No BIS companies, which completed Procedure no. 4, were interviewed. The ARCS respondents reported duration of this procedure to be 72 days on average and official payments to be between 4 and 13 rubles. According to the results of the research, Procedure no.4 is rather simple and isn t characterized by any administrative barriers. The share of the ARCS companies using the practice of unofficial payments makes up 17%. As many companies reported sponsorship and there are 8% which reported presence of additional burdens. Possibly, simplicity of the procedure explains the fact that, in the course of the research, none of the surveyed BIS companies passed this procedure. As the research discovered none of BIS companies completed Procedure no.4 in 24, it seems to be impossible to define the most problematic document. Due to reasons it s rather difficult to define the most problematic authority. ARCS companies only had an opportunity to evaluate the authority that wasted the most time. In this case, the majority of the respondents said that there wasn't such occurrence or just found difficulty in answering. 12

13 4.5. Procedure no.5: Leasing a real estate object, which is currently the municipal property, during tenders (auctions) When going through Procedure no.5 (i.e. conclusion of tenancy agreement) the applicant must pass through 5 stages and collect 18 documents (See Annex 1, table 5). There are no standard time-limits for completing this procedure since for 2 of 5 stages of the procedure no maximum time-limits for completion thereof are determined by legislation (See chart 2.1). The amount of official payments for the whole procedure is 1,8 rubles for legal entities and 35 rubles for individuals. During the research no ARCS or BIS companies, completed the Procedure no.5 in 24, were interviewed in Novgorod Oblast Procedure no.6: Transferring a premise (building) from the residential use to non-residential one When going through Procedure no.6 (i.e. transfer of premises from housing to non-housing stock) the applicant must pass through 7 to 9 stages and collect 12 to 29 documents, depending on the municipal formation of Novgorod region (See Annex 1, table 6). There are no standard time-limits for completing this procedure since for 4-6 stages of the procedure no maximum time-limits for completion thereof are determined by legislation (See chart 2.1). There is similar uncertainty regarding the official cost. For 3-5 stages it is not determined by legislation whether an official charge shall be collected therefore, and for the other stages the amount of official payments is either not established or depends on the certain object s specifications. The respondents reported duration of this procedure to be between 3 and 18 days on average for BIS companies and 221 days on average for ARCS companies. The respondents reported official payments to be not less than 1 rubles for BIS companies and between 2 and 5 rubles for ARCS companies. Occurrence of unofficial payments while passing the Procedure no.6 was reported by 38% ARCS companies and about a quarter of BIS companies. It s also interesting to mention that the maximal reported amount of unofficial payment was fixed during the shortest stage of the procedure obtaining Technical statement by the organization maintaining the residential house (premise). The respondents couldn t come to agreement about the most problematic document. One can mention Preliminary conclusion by the Interservice Commission and Application with the package of documents whose obtaining takes the greatest amount of time (on average 27 and 4 days accordingly). A half of BIS companies reported that there was no the most problematic authority. A half of ARCS companies and a third of BIS companies said the same concerning authorities wasting the most time. So we can suppose that 13

14 barriers during passing of the procedure appear occasionally at its different stages by interacting with different authorities Procedures no.7a and 7B: State registration of a purchase and sale transaction on real estate acquired in the secondary market (7A) and State registration of a lease agreement concluded in the secondary market for a term exceeding 1 year (7B) When going through Procedure no.7 (registration of the right of lease or purchase of a real estate object) the applicant must pass through 3 stages and collect 5 to 6 documents (See Annex 1, table 7). There are no standard timelimits for completing this procedure since for 1 of 3 stages of the procedure no maximum time-limits for completion thereof are determined by legislation (See chart 2.1). There is similar uncertainty regarding the official cost. For 1 of 3 stages the amount of official payments legislatively depends on the certain object s specifications. For one stage no official payments are required. The respondents reported duration of this procedure to be 5 days on average for BIS companies and 92 days on average for ARCS companies. The BIS respondents reported official payments to be between 4 and 3 8 rubles. The ARCS companies reported official payments to be rubles on average. While passing the Procedure no.7 unofficial payments are practically absent. Only 13% of ARCS completed Procedure 7A reported occurrence of unofficial payments. The most part of the respondents chose the Land Plot Cadastral Plan (33% BIS and 23% ARCS) to be the most problematic document. Obtaining this document is characterized by the most time spent in comparison with other documents (on average 39 days). Most of BIS companies stated that the government body which established maximum problems is absent. 18% ARCS and 33% BIS companies called Justice institution for State Registration of Real Property Rights of the Novgorod Oblast as a government authority which wastes the most time. This makes it possible to conclude that there are no serious barriers for Procedure no.7 from the government bodies. 14

15 4.8. Procedure no.8: Transferring a land plot from one category to another, changing the designated use of a land plot When going through Procedure no.8 (transfer of land to a required category) the applicant must pass through 8 stages and collect 9 documents (See Annex 1, table 8). There are no standard time-limits for completing this procedure since for 5 of 8 stages of the procedure since no maximum time-limits for completion thereof are determined by legislation (See chart 2.1). There is similar uncertainty regarding the official cost. For 7 of 8 stages it is not determined by legislation whether an official charge shall be collected therefore, and for 1 of 8 stages no official payments are required. During the research no ARCS or BIS companies, completed the Procedure no.8 in 24, were interviewed in Novgorod Oblast Procedure no.9: Privatization of a real estate object (building, structure, premise), which is currently municipal property When going through Procedure no.9 (privatization of premises) the applicant must pass through 4 to 6 stages and collect 4 to 11 documents depending on the method of the procedure (See Annex 1, table 9). The standard time-limits also depend on the method of the procedure. For methods 1, 2 and 3 for one stage and for method 4 for two stages maximum time limits for completion thereof are not legislatively determined (See chart 2.1). The amount of official payments does not depend on the method of the procedure and may not exceed 1,5 rubles for legal entities and 15 rubles for individuals. There are no sufficient data obtained from respondents for any of the surveyed aspects for this procedure, because of insufficient number of respondents completed Procedure no

16 5. ALL PROCEDURE FIGURES 5.1. Time and cost comparison over all procedures Table 5.1 Time comparison over all procedures 1. Leasing a land plot for construction with preliminary agreement on the object location 2A. Obtaining ownership rights on a land plot during tenders for construction without preliminary agreement on the object location 2B. Leasing a land plot for construction during tenders without preliminary agreement on the object location 3A. Obtaining ownership rights on land plots that are currently municipal property with buildings (structures, installations) owned the company 3B. Leasing land plots with buildings (structures, installations) owned by the company 4. Leasing a real estate object without the procedure of tender (including by purposive appointment) 5. Leasing a real estate object, which is municipal property, during tenders (auctions) 6. Transferring a premise (building) from the residential use to non-residential one 7A. State registration of a purchase and sale transaction on real estate acquired in the secondary market 7B. State registration of a lease agreement concluded in the secondary market for a term exceeding 1 year 8. Transferring a land plot from one category to another, changing the designated use of a land plot 9. Privatization of a real estate object (building, structure, premise), which is currently municipal property Time 15 region average, days Time Novgorod Oblast, days BIS ARCS BIS ARCS Insuffici ent data n/a n/a n/a n/a Insuffici ent data No less than n/a n/a n/a From 9 to 54 From 3 to 18 From 14 to 9 Insuffici ent data n/a From 3 to 36 n/a n/a n/a 16

17 Table 5.2 Cost comparison over all procedures Cost 15 region average, rubles 1. Leasing a land plot for construction with preliminary agreement on the object location 2A. Obtaining ownership rights on a land plot during tenders for construction without preliminary agreement on the object location 2B. Leasing a land plot for construction during tenders without preliminary agreement on the object location 3A. Obtaining ownership rights on land plots that are currently municipal property with buildings (structures, installations) owned the company 3B. Leasing land plots with buildings (structures, installations) owned by the company 4. Leasing a real estate object without the procedure of tender (including by purposive appointment) 5. Leasing a real estate object, which is municipal property, during tenders (auctions) 6. Transferring a premise (building) from the residential use to non-residential one 7A. State registration of a purchase and sale transaction on real estate acquired in the secondary market 7B. State registration of a lease agreement concluded in the secondary market for a term exceeding 1 year 8. Transferring a land plot from one category to another, changing the designated use of a land plot 9. Privatization of a real estate object (building, structure, premise), which is currently municipal property Cost Novgorod Oblast, rubles BIS ARCS BIS ARCS Insufficient data n/a n/a n/a n/a Insufficient data No less than n/a From 3 to From 4 to n/a n/a No less than 4 No less than 5 From 4 to 1 Insufficient data n/a No less than 2 n/a n/a n/a As can be seen in Table 5.1, comparison with the national average from the point of view of time expenses is possible only for ARCS companies. Most of the procedures (Procedures no. 1, 3A, 3B, 6) in Novgorod oblast are less time consuming for ARCS respondents in comparison with the 15 surveyed regions on average. According to the survey results, there are no procedures which are more time consuming for ARCS respondents in Novgorod oblast in comparison with the 15 surveyed regions. Procedures no. 4 and 7A required from ARCS 17

18 companies in Novgorod oblast almost the same time, as in the 15 surveyed regions on average. As can be seen in Table 5.2, comparison with the national average from the point of view of total costs is possible only for ARCS companies. All procedures which could be compared with the national average (Procedures no. 1, 3B, 6, 7A) are less money-consuming for ARCS companies in compare with the national average. Looking at both time and cost, one can see that Procedures no. 1, 3B and 6 are both less time and cost consuming for ARCS companies in Novgorod oblast in compare with the national average. This fact could be explained by differences of the objects characteristics. Thus, for Procedure no.1 average size of land plot in Novgorod oblast is 3 times less than the average size of the land plot obtained during this procedure in the 15 surveyed regions on the whole. For Procedure no. 6 average size of premise or building in Novgorod oblast is 1.6 times less than the average size of premise or building for this procedure in the 15 surveyed regions on the whole. Another possible explanation could be a better practice of processing procedures related to land and real estate in Novgorod oblast Practice of unofficial payments, donations to funds and additional burdens Taking into consideration all procedures under survey, reported practice of unofficial payments is considerably low. On average unofficial payments were reported by only 4% of BIS and 17% of ARCS respondents for at least one stage while going through procedures under investigation. Nevertheless, the amount range of unofficial payments for the whole procedure is rather wide (from 1 rubles to 3 rubles). The highest reported amounts of unofficial payments were associated with the Procedure no. 3A. Most of the reported unofficial payments are in amounts up to 5 rubles (7% of reported amounts). Making donations to certain non-government funds was reported by 4% of BIS companies and 14% of ARCS companies. This practice is somewhat more frequent for ARCS companies in the case of Procedure no.1. For BIS companies it is difficult to single out one procedure which is characterized by more frequent practice of such payments in comparison with other procedures, because of insufficient number of respondents completed different procedures. The third reported semi official or unofficial financial burden is so called additional burdens. On average among all procedures only 4% of BIS and 3% of ARCS respondents on average reported being enforced to take these additional burdens. Occurrence of such burdens was reported only by ARCS companies which completed Procedures no. 1, 3B and 4 and by BIS companies which completed Procedure no

19 5.3. Characteristics most important in saving time As Table 5.3 suggests the most important factor that might save some time while going through procedures under survey is Administrative resource or special personal relations with officers of administrative bodies. Half of the respondents found it difficult to point out the factor that might save money while going through procedures. Those who had an opinion more often pointed out the factor of Administrative resource or special personal relations with officers of administrative bodies. Table 5.3 Characteristics, which are the most important for saving time, % Total Procedures Administrative resource or special personal relations with officers of administrative bodies Personal relations with private companies 8 2 Well known company Municipal (state) owner of the property is interested in a quick transaction Client knowledge of regulations guiding the procedure 4 17 Willingness of the client to make unofficial payment 4 33 Difficult to answer 4 1 Table 5.4 Characteristics, which are the most important for saving money, % Total Procedures Administrative resource or special personal relations with officers of administrative bodies Client knowledge of regulations guiding the procedure Small company 8 2 Well known company 4 33 Having former officials employed by your company 4 17 Municipal (state) owner of the property is interested in a quick transaction 4 17 Difficult to answer