Strengthening of the local land management in Serbia

Transcription

1 Strengthening of the local land management in Serbia ANALYSIS OF EXISTING CONDITION AND DEVELOPMENTAL NEEDS FOR OFFICIAL REAL ESTATE APPRAISAL INFRASTRUCTURE IN THE REPUBLIC OF SERBIA Januar 2014 Professor Branko Božić, PhD in Geodesy Assistant Professor, Rajica Mihajlović, PhD in Geodesy University of Belgrade, Faculty of Civil Engineering

2 Study on behalf of the GIZ project Strengthening of the local land management in Serbia executed by: Ambero Consulting Icon Institute Representative Office Belgrade Kralja Milana Beograd, Srbija T belgrad@ambero.de

3 UNIVERSITY OF BELGRADE FACULTY OF CIVIL ENGINEERING ANALYSIS OF EXISTING CONDITION AND DEVELOPMENTAL NEEDS FOR OFFICIAL REAL ESTATE APPRAISAL INFRASTRUCTURE IN THE REPUBLIC OF SERBIA Authors: Professor Branko Božić, PhD in Geodesy Assistant Professor, Rajica Mihajlović, PhD in Geodesy Beograd, 2014

4 PROJECT CHARTER There is no complete or systematized infrastructure for quality and reliable valuation of real property in Serbia. This is further corroborated by the results of the analysis of certain legal regulations that are currently in force to regulate the scope of work and activities of state bodies, which, within their own respective remits, collect information, valuate and appraise real property. Such practice is contrary to the provisions of the INSPIRE Directive, Strategy for Development of National Infrastructure of Spatial Data in the Republic of Serbia and also contrary to numerous other best practice examples of legal regulation of activities on data collection and spatial database infrastructural maintenance. In compliance with the Serbian Law on State Survey and Cadastre from 2009, the task of establishing and development of the real estate mass appraisal was entrusted to the Republic Geodetic Authority; this system should be used for appraisal of the market value of individual real property assets in the territory of the Republic of Serbia. Contrary to such intended purpose of this system, and due to the current intensive development of the local self-governments, their position and role in drafting and providing for the budgetary resources have gradually gained in significance, due to the fact that these tasks are heavily dependent on the value of resources and capital available to these local self-governments. Local self-governments tasks and remit include property tax collection, and thus their role in the real property valuation is very significant, and active involvement from the part of the local selfgovernments is necessary in the real property appraisal process. In addition to the local self-governments, Tax Administration units are traditionally involved in real property valuation in this region, and thus the role of Tax Administration must be duly taken into account in any analysis of the future development of the real property valuation system. This Paper focuses on the analysis of the current situation and it is intended to initiate further efforts in development of the necessary infrastructure for quality valuation of real property in the Republic of Serbia. The main goal of this Paper is to provide conditions for improvement of the existing system for real property valuation, and its specific goals are as follows: To analyse the achieved level of development in the real property valuation system in the Republic of Serbia; To map the needs and all the relevant factors for sustainable development of the real property valuation system in the Republic of Serbia; and To draft proposals for improvements in the existing real property valuation system in the Republic of Serbia. To produce this Paper, it is necessary to collect relevant data for an analysis of the existing situation and to provide the infrastructure for quality valuation of real property in the Republic of Serbia, and also to analyse the activities of the relevant bodies, organizations and individuals in realization of their statutory and other obligations that require information on the value of real property as their starting point. During the discussions with potential system beneficiaries, information of significance for successful valuation of real property and beneficiaries priorities should be identified, along with their interest for participation in building and development of the necessary data infrastructure for immovable property. In cooperation with Ambero Consulting, information on best practice examples pertaining to 4 P a g e

5 the existing real property appraisal models in the developed European countries should be collected and all the aspects of importance for establishing of an efficacious appraisal system for a number of different users should be analysed. Based on the results of the analysis of the existing legal framework, development of the system for mass appraisal in the Republic Geodetic Authority, experiences from other countries and needs for the development of such system in the Republic of Serbia, lead partners tasked with drafting of this Paper will prepare a draft list of activities that need to be implemented in future to establish and sustainably develop the infrastructure for quality valuation of real property in the Republic of Serbia. In Belgrade, on January 28, 2014 INVESTOR FOREWORD Relevant papers from conferences and symposia from around the world, pertinent printed works and literature and other sources available to the Authors were used in drafting of this Paper as sources of information. In addition to the above listed authors, significant assistance in preparation of certain parts of this Paper were provided by the young associates and teaching assistants of the Faculty, Mr Mladen Šoškić, Ms Dragana Milićević and Mr Nenad Višnjevac. The Authors wish to express their special gratitude for precious information on activities realized so far in the development of the mass appraisal model to the officials of the Republic Geodetic Authority, who provided valuable and relevant information. Two special workshops dealing with analysis of the prevailing conditions were especially valuable for this team, along with the study visit to Germany, where the Authors got an opportunity to learn about the experiences of the German colleagues in this field. During the study visit and after it, during the meetings with the representatives of the Tax Administration, Republic Geodetic Authority, local self-governments, National Bank of Serbia and Ministry of Civil Engineering and Spatial Planning, valuable information and experiences in functioning of the existing mechanisms for real property valuation and importance of establishing of a consolidated and transparent system for broadest official needs were obtained. The Authors of this Paper are especially grateful to the Ambero Consulting Company and to Mr Christoph Jochheim-Wirtz, Project Manager, because he recognized the importance and provided support to the initiatives and efforts aimed at collecting necessary information and knowledge in the field of the real property valuation, which were invaluable in drafting of this Paper. In Belgrade, on December 15, 2013 AUTHORS 5 P a g e

6 TABLE OF CONTENTS PROJECT CHART... 4 FOREWORD... 5 GLOSSARY OF TERMS INTRODUCTION REAL PROPERTY VALUATION IN THE REPUBLIC OF SERBIA LEGAL FRAMEWORK Real Property Valuation, Valuation Methods and Market Value Legal Framework for Real Property Valuation in the Republic of Serbia General Comments on the Existing Legal Framework for Property Valuation System REAL PROPERTY MARKET AND REAL PROPERTY VALUATION SYSTEM IN SERBIA Current Condition of the Real Property Market in Serbia Makroeconomic Indicators Residential Real Property Market Office Property Market Retail Market (Shopping Malls) Industrial and Logistics Real Property Market Scope of Work of the Republic Geodetic Authority Real Estate Cadastre Utility Lines Cadastre National Infrastructure for Geospatial Information Central Mortgage Register Real Property Appraisal Scope of Work of the Tax Administration Appraisal Procedure for Confiscated Property Procedure for Determining Tax on Conveyance of Absolute Rights Procedure for Determining Tax on Inheritance and Gifts Procedure for Detemining Equitable Compensation for Expropriated Property Scope of Work of the Local Self-Government Units Procedure for Determining Property Tax Procedure for Determining Compensation for Conversion of Rights Valuers Associations National Association of Valuers or Serbia - NUPS Serbian Association of Valuers Association of Court Experts National Mortgage Insurance Corporation Real Estate Agencies P a g e

7 4. OVERVIEW OF BEST PRACTICE EXAMPLES IN REAL PROPERTY VALUATION SYSTEMS Introduction to Best Practice Examples in Real Property Valuation Legal Regulations Valuers Profiles Eligibility Criteria for Professional Valuers Real Property Appraisal Standards Applied Valuation Methods Beneficiaries of Real PropertyAppraisals IAAO STANDARD FOR MASS REAL ESTATE APPRAISAL An Overview of IAAO Standards for Mass Real Estate Appraisal Market Value Collection and Maintenance of Characteristical Real Property Data Real Property Valuation Valuation Model Testing, Quality Assurance and Appraisal Explanation Valuation System Management Other International Valuers Organizations and Standards International Valuers Association Standards International Valuation Standars Council Standards TEGoVA Standards RICS Standards PROPOSAL FOR FURTHER DEVELOPMENT OF THE REAL PROPERTY MASS APPRAISAL SYSTEM IN THE REPUBLIC OF SERBIA Basic Proposals for Furhter Development of the Real Property Mass Appraisal System Organizational Framework for Real Property Valuation System in Serbia Organization and Management of Real Property Valuation System Quality Control in Real Property Valuation System Real Property Database Market Database CAMA and GIS Integraion in Mass Appraisal Model CONCLUSIONS LITERATURE APPENDICES APPENDIX 1: Classification of Real Property Market and Grouping of Real Properties in Specific Markets (in compliance with the Draft RGA Rules, 2012) APPENDIX 2: Real Estate Types, subtypes and codes (in compliance with the Draft RGA Rules, 2012) APPENDIX 3: Elements Used in Quality Assessment of Facilities (Rulebook on method for determining property tax base for real property title, RS Official Gazette, No. 38/2001, 45/2004 and 27/2011) P a g e

8 GLOSSARY OF TERMS Assessment Cycle: Legally prescribed valuation reassessment period. Generally speaking, real property reappraisal period ranges from one to ten years. Assessment Date: Date on which the real property features are assessed for appraisal. Calibration: Assessment of coefficients (parameters) used in the real property Mass Appraisal Model. Capitalization Rate: Parameter used to translate the appraisal of income that the real property is expected to generate into its present market value; ratio of the real property net operating income and its market value. Class: A set of concepts defined by their common attributes. (1) In property tax, real property is classified as residential, agricultural, industrial, etc. (2) In valuation of buildings, buildings can be classified based on their building style, quality of construction or construction type. (3) In statistics, class is a predefined data interval for further analysis. Comparable Sales; Comparables: (1) Real properties that are recently sold, featuring characteristics similar to those of the real property in the appraisal process. The selling price and the physical, functional and logical characteristics of each property are compared to the characteristics of the real property in the appraisal process. (2) The term comparables is sometimes used to relate an asset to the rent or lease amount that is comparable with the lease paid for the real property that is being appraised. Computer-Assisted Mass Appraisal CAMA: Electronic, statistical analysis-based real property appraisal system used in mass appraisal approach. Cost: Price paid to acquire a commodity or a service; generally used instrument in assessment of direct or indirect expenses incurred in acquiring commodities or services. Cost Approach in property valuation: (1) One of three main approaches used in real property valuation that is based on the principle of substitution, according to which a properly informed buyer would not have to pay more than someone would have to pay to build an equivalent property. The Cost Approach is based on the price of a newly built property, less any decrease in value due to depreciation, plus the value of land. (2) In Cost Approach real property appraisal, property price is equal to the price of substitution or reproduction of the property in question, less depreciation, plus the appraised value of land that is most commonly obtained by applying the Comparable Sales Approach. 8 P a g e

9 Discount Rate: Investment return rate, rate used by the investor to discount the future income (profit) to determine its present value. Income Approach in property valuation: Property valuation concept based on the income produced by the real property during its economic lifespan. This approach turns capitalization that translates the anticipated profit from property ownership into assessment of the current value of such profit. Level of Appraisal: Ratio of average value of real property appraised to its market value. Level of appraisal is used for mass appraisal quality assessment. Level of Assessment; Assessment Ratio: Ratio of the total appraised value of a property to its market value. Level of assessment is used for mass appraisal quality assessment. Market: (1) Specific facility used by persons buying and selling commodities to realize their respective interests in trade transactions. (2) Place where buyers and sellers convene for the sale of a certain commodity. Market Adjustment Factors: Factors of influence on the offer and demand ratio, which are indispensable elements in real property appraisal according to the Cost Appraisal approach. Market adjustment factors are applied to each class of real property in a zone, and these factors are specified based on an analysis of the ratio of estimated to realized prices. Complete data on building costs, prevailing conditions in the financial market and depreciation costs, minimise the needs for any special price adjustment factors. Market Analysis: Research on the existing market conditions in the market for specific real estate type. Market Value: (1) The most commonly used measure of the real property value. Market value comprises of the economic and legal components. It is the most probable price (presented as a monetary amount) that a property will sell for in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: buyer and seller are typically motivated; both parties are well informed or well advised; a reasonable time is allowed for exposure to the open market (as defined by USPAP). (2) The estimated amount for which the asset should exchange on the valuation date between a willing buyer and a willing seller in an arm s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. (as defined by TEGoVA). Mass Appraisal: Process of valuation performed on a group of real property assets as of a specific date, by using the standard appraisal methods, relevant data on the real property assets and statistical testing methodology. Mass Appraisal Model: 9 P a g e

10 Mathematical relation (expression) of the offer to demand ratio in a certain market. Model Calibration: Procedure used to determine the importance of individual factors influence on the market value of a real property. Model Specification: Formal establishing of an appraisal model (mathematical equation comprising of the key parameters of significance for the value of appraised property) on the basis of data analysis and assessment theory. Open Market: Free market in which transactions between buyers and sellers are performed according to some clear rules of competition. Standardized (Indicative) Market Value: Standardized market value (or simply the indicative value ) is, pursuant to the Article 194 of the German Federal Building Code, defined as property value on a specified appraisal date, which is achieved in an ordinary transaction under normal conditions on the fair market and taking into account the actual, prevailing legal conditions and current features, general conditions and location of the property or other facility that is subject to appraisal, while excluding any other special or personal circumstances (a note by the Authors: by its nature, this is among the market value categories, but is, according to the methodology of its establishing, based on the valuers experiences as well, and is in fact an averaged market value under the given conditions.) Sales Comparison Approach in property valuation: Property valuation approach used to appraise or valuate real property based on the similar sales transactions performed in the real property market. Valuation: (1) Process of appraisal of the market, investment, insurance or some other relevant and specified value of the real property in question, as of a specified moment in time (date). (2) Process or task of estimating or setting the value of; appraisal of value that is most commonly the market value. Valuation Date: Specified moment in time to which the real property value (appraisal) is related. Valuation Model: Textual description or mathematical expression used to describe the relation between the estimated value and factors influencing the offer and demand ratio. Value: (3) Measure of interest and wish of a potential buyer to purchase a specific object (real property). (4) Current measure of significance of the future benefit from ownership of a real property or any other personal property asset. (5) Assessment of the valuation process. (6) Any number from minus infinity to plus infinity. 10 P a g e

11 1. INTRODUCTION Real property valuation is increasingly recognized as a necessary and indispensable resource for efficacious real property management and handling of numerous societal needs by the government authorities. For successful real property valuation, it is necessary to have an updated, accurate and complete database of spatial and market data that will, by relying on the computer technologies and adequate software solutions, provide the necessary infrastructure for reliable real property valuation. Real property appraisal is performed for various purposes, starting from property taxation, urban land consolidation, expropriation, tax on transfer of absolute rights, tax on inheritance and gifts, fees in title conversion, drafting of the land use policy, to applications for mortgage loans, and so on. Official character as a characteristic of the valuation data is reflected in creation of all the legal and technical preconditions for efficacious and reliable valuation of real estate in a transparent manner that will provide for the best possible solutions for the requirements of a developing real estate market. In theory and in practice, real estate appraisal is developed through two different approaches that are at the same time basically closely interconnected. Namely, the real estate appraisal is performed either for individual property assets (individual property valuation, single property valuation) or for an aggregate or mass of property assets (mass valuation, mass appraisal, etc.). Both the approaches are firmly grounded, and the choice of one or the other depends on a number of different factors or circumstances, and on the very nature of the appraisal. In both the cases, it is necessary to achieve full agreement from all the interested parties and also to provide for the necessary conditions for successful and transparent implementation of individual activities. Depending on the specific purpose of the appraisal, both the approaches have some advantages and downsides, and in practice it is even possible to combine the two approaches. If the motivation for establishing and development of the real estate appraisal system lies in meeting the needs of the taxation system, individual appraisal would be inefficient judging from the aspect of its time-bound requirements, and also to a certain degree because it can be deemed to be insufficiently objective, hardly applicable in simultaneous appraisal of a larger number of real estate assets, but also due to the substantial costs related to individual real estate appraisal. On the other hand, the mass appraisal approach also has some deficiencies. It does not take into account effects of all the features of individual properties, as opposed to the individual real estate appraisal, and the mass appraisal additionally depends on the amount of individual pieces of data and on their potential for practical use. However, the issue concerning the above mentioned deficiencies can be resolved by upgrading the information system of the Real Estate Cadastre and the fact is that specific characteristics of the individual real properties are not always of critical importance; owing to this, the social component of the real estate appraisal is significantly minimized and the development of taxation policy is facilitated. In either case, there is a complex system that comprises of: - The system elements, - Functions, - Phases, and - Their mutual relations. 11 P a g e

12 System elements include human resources, policy, technology, data and processes. Policies and processes in every country, and in Serbia as well, should be legitimate and based on law and legal regulations. Legal bases of the system should provide for environment that is assessable and that relies on responsibility and efficient organization of persons in charge of individual functions. The legal framework of the system comprises of laws, by-laws and court Decisions. Prerequisites of the legal, organizational and financial nature are necessary for policy implementation. Functional part of this system has three principal tasks: 1) to identify and link persons holding title deeds to on the real property assets; 2) to appraise the real property, and 3) to register the appraisal performed for individual real property assets. In order to achieve the objectives of a fair and equitable real estate appraisal policy, it is necessary to provide for good planning, complete and accurate data based on which adequate appraisal system will be applied to produce reliable and accurate information on market value of real estate assets. This process does not include only the appraisal of value, but such appraisal must be verified by using the standardized quality assessment procedures. Persons holding rights on real estate assets also need to agree with the appraisal results, and such persons must be provided with the right to information and objection, or with the right to appeal against the preliminary real estate appraisal of the value of their property. The role of the persons holding title to real estate is very important for the development of a sustainable real estate appraisal system, to achieve transparency of all the procedures and public availability of data and information at any given moment. Responsibilities of the persons in charge of the real estate appraisal stem from the importance of the fair and just relations with all the citizens, and also from their obligation to abide by the relevant technical standards. Successive nature of the real estate appraisal system is related to its users and it is commonly reflected in the time-related dynamics of individual processes. Certain systems (such as, for example, the tax system) are dynamic categories and are commonly carried out in annual cycles, despite the fact that the appraisal periods often take longer. Dynamic and cyclic nature of this system adds to its complexity, and requires extremely high level of organization and strict compliance from the part of all its participants, and their strict compliance with different procedures and legal regulations. Property valuation system cannot function in isolation, and it is by its nature interconnected with other systems. Its strong connections with clients and people in leading positions in certain fields are necessary. Is it important internally, within the system, and between different systems as well. Such connection is natural and often bidirectional. If observed from one aspect, you are the payer of taxes and/or dues, and if observed from the other aspect, you are the beneficiary of (budget) funding. Other than its connection with the taxpayers, it is important to mention here the link between the property valuation system with the cadastre, urban planning, spatial planning, agents of the developmental function of the agricultural and construction land, real estate agencies, banking sector, and so on. The objective of this Paper is to present the existing legal regulations pertaining to the real estate appraisal, achieved developmental level, requirements and current overview of real estate appraisal in the Republic of Serbia, to describe the examples of best practice and international standards in real estate appraisal, and in addition to this, to propose some 12 P a g e

13 measures aimed at improvements in the existing real estate appraisal system in the Republic of Serbia. After the introductory, general indicators of the characteristics and scope of the real property market in the Republic of Serbia, legal framework for organization, individual remits and statutory obligations of government authorities and institutions in collection and use of spatial data and information are described. In the third Chapter, activities carried out so far and the achieved level of development in the real property market and in the real estate appraisal system are presented, within the individual remits of the government authorities, public services and privately owned associations and individuals. Activities of the Republic Geodetic Authority, Tax Administration, local self-governments, National Mortgage Insurance Corporation, Valuers Associations and real estate agencies are presented in great detail. In the fourth Chapter, examples of best practices from a number of European states are presented, in which the legal prerequisites for system development, main system actors, certification methods and organization of their valuation systems are analysed. In the fifth Chapter, activities and standards of the international valuers association - the IAAO, are described, and in particular the context and content of the IAAO Standards for mass appraisal, as well as the activities of the IVSC, TEGoVA and RICS organizations aimed at realization of policy objectives for the development of the appraisal standards. The aim of presenting the IAAO Standards for mass appraisal is to point out to the complexity and all-inclusiveness of the approach to building of a transparent and reliable appraisal system, and also to the importance of systematic and all-inclusive approach in all its developmental stages. It is especially important to point out to the interest of the broader community and the importance of quality control for all the processes and data in building and maintenance of the property valuation system. In the sixth Chapter, based on the overview of the existing situation and activities, processes and organization of data collection and real property valuation, remits of individual state-owned and privately-owned services and associations, and based on the overview of the complexity of the content of international standards and experiences of the developed European countries, some general directions of the future development of the real property valuation system in the Republic of Serbia are presented. In the Conclusion, the importance of efficiency and rational approach and importance of building of a consolidated property valuation system with clear allocation of individual remits and tasks among the public services, their respective roles, specific organizational features and potentials for collection, maintenance and use of spatial and other data required in the process of development of infrastructure and system of real property valuation in the Republic of Serbia are specifically pointed out. 13 P a g e

14 2. REAL PROPERTY VALUATION IN THE REPUBLIC OF SERBIA LEGAL FRAMEWORK 2.1. Real Property Valuation, Appraisal Methods and Market Value Real property value is the aggregate of all the benefits, or the amount of revenues that the real property asset in question may produce and it is most commonly presented as a monetary amount. Real estate appraisal is careful assessment (forecast) of its value based on the experiences, established standards, collected information on the real estate asset itself, its location, title deeds, market standing, etc. There are numerous instances in which real property valuation is required. Real property can be appraised individually or aggregately. Miss real estate appraisal is defined as systematic appraisal of a group (a larger number of individual) real estate assets on a certain date, by using standardized procedures (collection, verification and classification of the key physical, legal and market characteristics on the real estate assets) and mathematical statistics methods; individual real estate appraisal is, on the other hand, the appraisal of individual real estate assets. In both the appraisal methods, a valuer relies on the available information and experience to perform the appraisal, and in addition to this, the valuer assesses the influence of individual key characteristics of the real property asset on its value. Three basic methods (approaches) are most commonly used in appraisal practice: sales comparison method, costs method and revenues capitalization method. The legal acts and by-laws most commonly rely on the market value of the real property as its value category; in individual legal acts, however, market value of the real property is defined in different manners, and different valuation methodologies are used for its calculation. Thus, for example, according to the provisions of the Rulebook on method for determining the market value of the real property (RS Official Gazette, No. 5/92), the real property market value is determined by using the average property market price as presented in m 2, useful surface area and age of the property as the principal factors, and property location and quality as the corrective elements in property market value calculation. According to the provisions of the Rulebook for determining property tax base for real property title deeds (RS Official Gazette, No. 38/01, 45/04 and 27/11), real property market value is determined based on the average market price of a square meter of the new facility, which is calculated as the average achieved price in sales transactions over the year preceding the year for which the property market value is determined and for which the property tax is paid, according to data collected by the republic body in charge of statistical data. According to the provisions of the Law on Expropriation (RS Official Gazette, No. 53/95, FRY Official Gazette, No. 16/01 Decision of the Federal Constitutional Court and RS Official Gazette, No. 20/09 and 55/13 Constitutional Court Decision), the real property market value is to be determined within the broader context of determining the equitable compensation for expropriated agricultural and construction land, residential building, apartment or an office facility. In cases of vineyards and orchards, both the 14 P a g e

15 proceeds and the investment amount are taken into account. In forest complexes, property value is defined based on the value of the forest assortments, timber sales point and production costs, to which the value of land is added. In the Manual for determining the value of confiscated real property (RS Official Gazette, No. 80/02, 61/05, 61/07, 20/09, 72/09, 53/10, 101/11 and 2/12), real property market value is determined based on data delivered by the Restitution Agency, and it is calculated by using the same method as that used in the procedure for determining the tax base for conveyance of absolute rights. Market value is reconciled as of the confiscation date, against the real property value as of the appraisal date and it is determined based on the realized sales transactions with real properties of similar characteristics, by applying the relevant corrective factors. According to the provisions of the Regulation on conditions, criteria and method of exercising the right to conversion of the right to use into the ownership right... (RS Official Gazette, No. 67/11 and 20/12), the real property market value is to be determined per m 2 of the gross developed construction surface area of the facility, in compliance with the urban planning documents in force (relevant local self-government unit), and so on. The above mentioned examples are only a part of the collection of legal regulations that are indicative of different officials and different methodology for determining the market value of the real property, depending on the valuation purpose and without a consolidated or shared strategy, valuation criteria, officials, key parameters or appraisal method. The above listed, as well as numerous other examples and experiences in this field, are indicative of the necessity to come up with a consolidated systemic solution. In the following Chapter, the most important laws will be briefly presented, which directly and/or indirectly contribute to creation of necessary conditions for property valuation, or which, in some manner, pertain to the responsibilities and organization of its realization Legal Framework for Real Estate Appraisal in the Republic of Serbia Citizens of Serbia have constitutional right to accurate, complete and timely information on issues of public importance and right to access to information kept by the government authorities and organizations holding authorizations to perform public functions (Article 51, RS Constitution, RS Official Gazette, No. 98/06). Due to the fact that the real property valuation is among the statutory obligations of the relevant government authorities within their legally prescribed remits, every piece of data used for property valuation is data of public importance and it must be made available to the general public. Directly and/or indirectly, and with different levels of details, a significant number of laws and by-laws place the real property valuation in the broader context of official obligations and necessities. Real property appraisal in the Republic of Serbia came into public focus in 2002, with the initial stages of mortgage market development. Owing to this, as much as 70% of all the court experts holding the licence issued by the RS Ministry of Justice are now working in this sector precisely. Tax Administration and local self-governments are legally obliged to perform real property appraisal for the purposes of property taxation, conveyance of absolute rights or for taxation of inheritance and gifts, and traditionally, in compliance with a certain number of other laws and regulations, property valuation is also performed for some other purposes. Pursuant to the provisions of the Law on State Survey and Cadastre (2009), real property valuation is defined as determining of the market value of real property assets registered in the Real Estate Cadastre ; in addition to this, this Law takes exclusive account of and/or implies the use of the mass appraisal approach in property 15 P a g e

16 valuation, and of the Republic Geodetic Authority as the party responsible for property valuation in Serbia. Provisions of the Law on Ministries (RS Official Gazette, No. 72/12) specify individual Ministries remits and tasks of keeping of electronic records on personal data, domicile, residence, citizens identification cards, passports (Ministry of Interior), tasks pertaining to tax policy, proprietary rights, expropriation (Ministry of Finance and Economy) 1, tasks pertaining to urban planning, spatial planning and construction (Ministry of Construction and Urban Planning), state administration tasks pertaining to legislation and state administration system (Ministry of Justice and State Administration), and the similar, which are merely an illustration of significant interconnections between individual legal acts and organizations for seamless and efficacious performance of individual social functions. Equally significant and deserving of attention are other government line Ministries that are of vital importance for orderly functioning of state administration bodies, agricultural development and use of agricultural land, efficacious traffic or statistical analysis of current conditions in different fields of economy and their developmental trends (Statistical Office of the Republic of Serbia, Republic Geodetic Authority, and other bodies). Provisions of the Law on Local Self-Government (RS Official Gazette, No. 129/2007) vest authority for a broad scope of powers and remits of relevance for functioning of the real property valuation system with the local self-governments. Local self-governments pass the construction land development program on the local level, perform tasks related to construction land development and use, determine the amount of fees for construction land development and use, manage municipal property, employ publicly owned resources, take care of these resources and work to strengthen and/or augment them, and determine the rates for municipal budget revenues, as well as the method and criteria for determining amounts of local duties and fees. Local self-government units have all the features of legal entities and they manage their own property. Law on Ratification of European Charter on Local Self-Government (RS Official Gazette International Agreements, No. 70/2007) was adopted to ratify the European Charter on Local Self-Government, according to which local self-government stands for the right and ability of the local authorities to, within the limitation of the law, manage affairs and govern the substantial part of public affairs under their responsibility, and in the interest of local population. According to the Law, a portion and if possible all the funds for financing the activities of the local self-government units are to be provided from the collection of local taxes and dues, the amount of which should be determined by the local selfgovernment units. Law on Local Self-Government Financing (RS Official Gazette, No. 62/06 and 77/11) regulates provision of funding for the local self-government units for realization of their own tasks and for the tasks that are entrusted to these self-government units. Among the source 1 Tax Administration, as a state administration unit within the Ministry, is responsible for expert tax-related tasks and state administration tasks pertaining specifically to: registration and keeping of the consolidated register of tax payers; determining taxes; tax control; regular and forced collection of taxes and fees; detection of tax crime and perpetrators thereof; implementation of international treaties on avoidance of double taxation; integrated tax information system; tax accounting, as well as other activities prescribed by the law. 16 P a g e

17 revenues are the property taxes and rent and utilization fees collected from the publicly owned real property, which are, to a significant degree related to real property valuation. Property Tax Law (RS Official Gazette, No. 26/2001, FRY Official Gazette, No. 42/2002 FCC Decision and RS Official Gazette, No. 80/2002, 80/2002 other law, 135/2004, 61/2007, 5/2009, 101/2010, 24/2011, 78/2011 and 57/2012 CC Decision and 47/13) regulates the legal basis for collection of property taxes, and specifically the taxation of: - property right, or title of land of more than 1,000 m 2 ; - lease on a dwelling or residential building introduced for the benefit of physical persons, in compliance with the law regulating housing, or social housing, or in compliance with the law regulating refugee status, for a period longer than one year or for an indefinite period of time; - right to use construction land of more than 1,000 m 2, in compliance with the law regulating the legal utilization of construction land; - right to use publicly owned real estate by the holders of rights to use, in compliance with the law regulating public property; - use of publicly owned real estate by the persons using the real estate, in compliance with the law regulating public property; - actual possession of real estate where the holder of property right is not known or not specified; - actual possession of publicly owned real estate, with no legal grounds; and - actual possession and use of real estate on the basis of an agreement on financial lease. Within the meaning of this Law, the real property is to be understood to include land (construction, agricultural, forests and other), residential, business and other buildings, apartments, business premises, garages and other (above the ground level and underground ones) construction facilities, and/or parts thereof (hereinafter: facilities). Tax is paid on the real estate, and pursuant to the Law, tax payers include the following legal and physical persons in the Republic of Serbia: - Holders of rights on real estate; - Persons using the publicly owned real estate; - Real estate holders; and - Real estate lessees. The Law defines the value of real estate for taxpayers that do not keep books as the real estate property tax base. The real estate value is to be determined by the local selfgovernment unit s body in charge of determining, collection and control of the source revenues of the local self-government unit, based on: 1) the useful area, and 2) average price per square metre of corresponding real estate in the zone in which the real estate is located. The useful land area is its total area, and the useful area of a facility is the sum of floor areas in between the interior sides of exterior facility walls (excluding the surface areas of the balconies, terraces, loggia, adapted attic spaces and shared spaces in indivisibly owned by all the owners of the economically divisible entities within one facility). The Law defines zones as parts of the local self-government unit s territory that the relevant local self-government unit s body can determine by passing a Decision, separately for 17 P a g e

18 individual settlements according to the settlement type (rural, urban) and outside of the settlements or jointly for several settlements and outside of settlements, according to the number and level of utilities and public facilities, traffic lines that connect such zone to the central parts of the local self-government unit and/or to the working zones and other available resources in the settlement. Each local self-government unit is to determine no less than two zones in its territory. Average price of corresponding real properties in individual zones in the territory of a local self-government unit is to be determined by local self-government units, which need to pass a separate document for this purpose, based on the prices achieved in transactions (by taking in account no less than three separate transactions) involving corresponding real properties in different zones or based on an average of the average prices achieved in the bordering zones (in cases where there has been no transactions realized in the zone in question, as a median of no less than three transactions). Law on Real Estate Transactions (RS Official Gazette, No. 42/98 and 111/2009), defines the pre-emption right and the notion of transaction in the following manner: 1) transfer of title on real estate from one to another person, with or without financial consideration, 2) transfer of right to use the publicly owned real property from one to another holder of the right to use the publicly owned real property, and 3) transfer of rights related to disposal of the socially owned real property from one to another holder of rights attached to the socially owned real property. The Law specifies the term Real Property Sales Agreement and the statutory obligation to conclude such an Agreement in writing, which must be signed by the contractual parties and officially stamped in a Court. In compliance with the Law, Courts keep special records on Agreements on transactions involving real property and deliver one copy of such Agreements to the body in charge of determining and collection of public revenues (within 10 days from the signatures stamping date date when the Court Decision becomes final). The Law uses the term market value of the real property and defines this term as the price achieved in the free market at the time when the Sales Agreement is concluded in the place where the real property is located or in its immediate vicinity. In addition to the above, pursuant to this Law, transfer of title on a building automatically involves transfer of title on the land on which the building is located, as well as the title on the land that is used for the regular use of such building. Similarly, in cases of transfer of title on a building constructed on the land on which the holder of title on the building has no title, but only the right to use, their right to use the land on which the building is located shall be transferred as well, just like the title on the land for the regular use of the building. Law on Tax Procedure and Tax Administration (RS Official Gazette, No. 80/2002, 84/ corrigendum, 23/ corrigendum, 70/2003, 55/2004, 61/2005, 85/2005 other law, 62/2006 other law, 63/2006 corrigendum of other law, 61/2007, 20/2009, 72/2009 other law, 53/2010, 101/2011, 2/2012 corrigendum, and 93/2012 and 47/2013) authorizes the Tax Administration to manage the tax procedures of the first and of the second instance, to keep the consolidated Register of Taxpayers and to be in charge of tax accounting, to assess the market value of real property exclusively in the tax base calculation procedure that was regulated by the tax law and to be in charge of determining, collection and control of taxes that are within the remit of Tax Administration. With the aim 18 P a g e

19 to identify the taxpayers, Tax Administration assigns Tax Identification Numbers (TINs) to individual physical persons, entrepreneurs, legal persons and registered business units of non-resident legal persons. By filing a tax return, taxpayer delivers their tax report to the Tax Administration on their income/revenues, expenditures, profit, property, sales of goods and services and other transactions of significance for determination of taxes, which is of great importance from the aspect of gathering information from the real estate market that is to be used in the assessment procedure. Law on State Survey and Cadastre (RS Official Gazette, No. 72/09 and 18/10,...) regulates professional tasks and state administration tasks pertaining to state survey, Real Estate Cadastre, Utility Lines Cadastre, basic geodetic works, address register, topographic and cartographic services, appraisal of real property, geodetic and cadastre information system, National infrastructure for geo-spatial data and geodetic works in engineering and technical fields. Pursuant to this Law, the remit of the Republic Geodetic Authority includes the following tasks: establishing, updating and maintenance of the Real Estate Cadastre, survey of utility lines, establishing and maintenance of Utility Lines Cadastre, Address Register, maintenance of Spatial Units Register, cadastre classification and rating of land, cadastre revenues calculation, evaluation and keeping of the Real Estate Cadastre, keeping of records on state survey, Real Estate Cadastre, Utility Lines Cadastre and topographic and cartographic services, participation in establishing and maintenance of the National Infrastructure for Geo-Spatial Data, etc. Pursuant to this Law, the Real Estate Cadastre is defined as the main and public register of real estate and real rights to such real estate, in which real estate, real rights (title, joint tenancy and tenancy-incommon, right to use, easement, etc.) is registered based on geodetic surveys, private and public titles; registration of encumbrances and encumbrances. The following is registered in the Real Estate Cadastre: land (cadastral parcels of agricultural, forest, construction and other types of land), ground and underground facilities, special parts of facilities that make up an entire construction structure (apartment, business facilities, garage and others). Sets of geospatial and other data on real estate and real rights on such real estate make up the database of the Real Estate Cadastre, which specifically contain data on: land parcels; facilities; individual facilities parts and holders of real rights to real estate. Within the Real Estate Cadastre database, data of the Address Register and Spatial Units Register are kept. Cadastre plan in digital and/or analogue form is issued from the Real Estate Cadastre database, for one or more land parcels. In addition to the Real Estate Cadastre, the Utility Lines Cadastre has been introduced as a special register, which is the main register of utility lines and real rights to such utility lines. The Utility Lines Cadastre database is a set of geospatial and other data on utility lines, real rights to such utility lines and holders of such real rights, and it specifically contains the following thematic units: water supply network, sewers and drainage network; distant heating network, electricity lines network, telecommunications lines network, oil pipelines network, gas pipelines network and shared utility lines facilities. This Law has put the Authority in charge of appraisal of real estate that includes determining of the market value of the real estate registered in the Real Estate Cadastre. Real estate market value, within the meaning of this Law, is value determined by applying procedures and methods of mass real estate appraisal, which result in a general appraisal 19 P a g e

20 of real estate that would additionally serve as a basis for determining the value of individual real estate. Within the meaning of the Law, the general appraisal implies determining adequate appraisal model for different types of immovable property. The model should be determined once in three years at a minimum, and prior to determining the final appraisal model, interim data obtained from the general appraisal need to be delivered by the Authority to the local self-government in charge of the region in question for consideration, 30 days from the general appraisal at the latest. Pursuant to the Law, the Republic Geodetic Authority is to publish interim data on its web page. The real estate value calculated in the above manner, together with the appraisal date, should be registered in the Real Estate Cadastre database. Pursuant to the Law, records must be kept on the market value of the real estate in question and on data from the relevant Sales Agreements and Lease Agreements during the appraisal procedure, which the relevant bodies tasked with stamping of such Agreements must deliver to the Republic Geodetic Authority. In addition to the statutory obligation to deliver the concluded real estate Agreements, the Law specifies the statutory obligation for the local self-government units in charge of determining, collection and control of property taxes to additionally deliver data kept in their respective records for to the Authority. From the aspect of records keeping and preparations for appraisal of spatial elements, it is very important to note the legally prescribed obligation for this Authority to establish and maintain the geodetic and cadastre information system as a part of the National Infrastructure for Geospatial Data (NIGD). This system should include data and data services for basic geodetic works, Real Estate Cadastre, Address Register, Spatial Units Register, Geographic Names Register, Cadastre of utility lines and topographic and cartographic data, as well as other types of data. The GEOSRBIJA web portal of the National Infrastructure for Geospatial Data contains metadata, services and sets of geodata: - Of the geodetic and cadastre information system, - On environmental protection, - On spatial and planning documents, - On traffic and telecommunications networks, - On mineral resources and energy sources, - On water regime, - On protected immovable cultural heritage, - On spaces of significance for development of tourism and on tourist resorts, - On geology, geophysics, meteorology, agriculture and pedology, - On demographics and health, and - On industrial and production facilities. NIGD pertains to digital geodata and corresponding geodata services for the Republic of Serbia territory, which are managed by: - The state administration bodies; - Local self-government bodies; - Public enterprises; - Legal persons entrusted with geodata management; - Legal persons that use the NIGG data and services and those that provide public services based on such geodata. 20 P a g e

21 Law on Mortgage (RS Official Gazette, No. 115/2005) regulates liens against property by means of establishing a central mortgage records. Mortgage, as the conveyance of interest on real property with a security for repayment of money borrowed, authorizes the creditor to collect the money owed to them in cases where debtor has failed to repay their mature and due debts. The Law has defined eligible security instruments, criteria and requirements for concluding mortgage agreement, method of determining of the market value of the real property and registration of mortgage in the central mortgage records, which is, pursuant to this Law, kept by the Republic Geodetic Authority. Law on Official Statistics (RS Official Gazette, No. 104/09) prescribes the scope of work and remit of the Statistical Office of the Republic of Serbia, which include the obligation to conduct census to collect very important and detailed data on households, economy, population, agriculture, construction, etc. Law on Court Experts (RS Official Gazette, No. 40/2010) regulates professional and eligibility criteria for court experts, from the procedures for appointment and discharge of court experts, their rights and obligations, to the court experts tasks. In addition to individual court experts, the Law has envisaged the option to provide expert opinion for certain fields of expertise by public bodies, scientific and professional institutions (schools, institutes, etc.). Court experts are appointed and discharged by the Minister of Justice; this Ministry is responsible for keeping of the Court Experts Register in the electronic form that is publicly available on the web page of this Ministry. Candidates for Court Expert position need to substantiate their expertise and practical experiences in selected areas of expertise by their published professional or scientific works, proof of participation in congresses organized by the professional associations of court experts, as well as by providing Opinions or Recommendations by Courts or other state bodies, professional associations, scientific and other institutions or legal entities that employed candidate for court expert position, or by those to which he/she provided professional services. A candidate for court expert holding scientific titles is not required to provide the above listed proof. Law on Privatization (RS Official Gazette, No. 38/2001, 18/2003, 45/2005, 123/2007, 123/2007 other law and 30/2010) regulates criteria and procedure for transfer of ownership on social and state-owned capital. Privatization Agency sells property and controls the privatization process, appraises the capital or assets, etc. Methodology used in determining the value of capital and assets is prescribed by Serbian Government. Law on Notary Public (RS Official Gazette, No. 31/2011, 85/2012 and 19/2013) transfers a portion of official duties to notary public service that is to contribute to legal security or certainty of transactions, to alleviate the load of work for Courts and administration bodies and provide for faster and simple exercising of citizens rights. Public notary title will bear the authority of a public office title. Pursuant to the Law, notary public service remit includes stamping and drafting of testaments and other statements of will, issuing of documents and copies thereof, verification of signatures and copies of documents, deeds, translations or certificates, keeping of original copies of personal and other documents entrusted to them, keeping of money and/or other valuables, public verification of facts and provision of advisory services to their clients. Law on Expropriation (RS Official Gazette, No. 53/95, FRY Official Gazette, No. 16/2001 FCC and RS Official Gazette, No. 20/2009 and 55/2013 CC) prescribes that the 21 P a g e

22 expropriation beneficiary is entitled to use the real property in compliance with the justification used to effectuate expropriation. In the event of real property expropriation, the Law requires compensation corresponding to the market value of the expropriated property at the time when the first-instance decision on compensation is passed. Pursuant to the Law, other forms of compensation to the former property owner are envisaged, but in any case compensation of corresponding value to the expropriated property must be determined. Pursuant to this Law, market value of expropriated property is to be determined by the body in charge of determining the taxes on transfer of absolute rights. Law on Territorial Organization of the Republic of Serbia (RS Official Gazette, No. 129/2007), regulates the borders used to distinguish territorial units in the Republic of Serbia. These territorial units are made up of individual Cadastral Municipalities. Borders of the Cadastre Municipalities at the outskirts of a territorial unit are at the same time the borders of these territorial units. Law on Spatial Units Register (RS Official Gazette, No. 19/89 and RS Official Gazette, No. 53/93 other law, 67/93 other law, 48/94 other law) introduces automatized registration of spatial units (statistical district, settlement, city/town, Cadastral Municipality, local community ( mesna zajednica in Serbian), Municipality, associations of Municipalities, inter-municipal regional associations, urban community, City of Belgrade, Autonomous Province, Republic, state border area, national park, cadastral district, area characterized with specific pollution and area of joint interest for the Republic of Serbia in compliance with the law, or in compliance with spatial plan and duty free zone the borders of which are, as a rule, defined by the relevant statistical districts). Pursuant to this Law, the Statistical Office of the Republic of Serbia was tasked with maintenance of this Register, and information contained in the Register are entered in topographic maps of 1:25000 and larger scales, geodetic plans, photo maps of 1:10000 and larger scale, which is the responsibility of the RGA. Information contained in the Register, except for the information classified as the state, military, official or business secret, are publicly available. Law on State Administration (RS Official Gazette, No. 79/2005, 101/2007 and 95/2010), regulates the organization and remits of individual Departments of the central administration bodies. State administration is made up of Ministries, Ministry bodies and special organizations. According to this Law, certain tasks can be assigned to the Autonomous Provinces, Municipalities, Cities/Towns and to the City of Belgrade, public enterprises, institutions, agencies, etc. The Law also defines the remits of individual bodies in the legislative procedure for passing of by-laws and their respective roles in adjudication of administrative matters and in the adoption of administrative acts. Administrative Districts were established to attend to the state administration matters that need to be attended or resolved out of the seats of the state administration bodies. Any disputes arising between the state bodies concerning their respective remits or jurisdictions are to be resolved by the Government. Law on the Elements of Property Law Relations (SFRY Official Gazette, No. 6/80 of February 8, 1980, 36/90 of June 29, 1990 and SRY Official Gazette, No. 29 of June 26, 1996) specifies the rights to movable and immovable property, holders of rights to the entire and/or special parts of such property, acquiring of rights and termination of rights to immovable property. 22 P a g e

23 Law on Planning and Construction (RS Official Gazette, No. 72/09, 81/09, 64/10 and 24/11) regulates conditions and method of spatial planning, construction land and construction of buildings. According to this Law, all the spatial planning documents are to be recorded in the Central Register of Spatial Planning Documents that is maintained by the relevant Ministry in charge of spatial and urban planning (the Republic Agency for Spatial Planning), as well as the rights to access to such documents by the interested parties in the online electronic form thereof. The Law prescribed the obligation to establish the market value of the public land on the occasion of any leasing thereof and on the occasion of the conversion of the right to use to the ownership right on any construction land, in addition to the fees for expropriation of line infrastructural facilities. Articles 109a to 110 of the Law regulate urban land consolidation. Appraisal of the market value of land and facilities in the implementation of urban land consolidation procedure is necessary, albeit not directly prescribed by the Law. Law on Property Restitution and Compensation (Republic of Serbia Official Gazette, No. 72/11) regulates the conditions, method and procedure for restitution of expropriated property and compensation for expropriated property, which was expropriated in the territory of the Republic of Serbia pursuant to the legislation on agricultural reform, nаtionаlizаtion, property sequestration and other legal regulations, on the basis of official acts on nationalization that were passed after March 9, 1945 from the physical and from certain legal persons and then transferred to general socially owned, state owned, socially owned or cooperative property (hereinafter: property restitution). The basis for calculation of compensation for expropriated real property is equivalent to the value of real property as determined by the relevant body, in compliance with this Law, presented in Euros, by using the official middle exchange rate of the National Bank of Serbia as of the valuation date. Upon request by the Agency for Restitution, the relevant body shall determine the value of the real property by applying the procedure corresponding to the procedure for calculation of tax base for tax on transfer of absolute rights, in compliance with the Law. In addition to the afore mentioned legal regulation, other laws should be mentioned here as well that at least touch upon the issues of land title or use, and which shall not be dealt in greater detail in this Paper. These laws are as follows: - Law on Public Property (RS Official Gazette, No. 72/11), - Law on Assets Owned by the Republic of Serbia (Republic of Serbia Official Gazette, No. 53/95, 3/96, 54/96, 32/97 and 101/05), - Law on Property Restitution to Churches and Religious Communities (Republic of Serbia Official Gazette, No. 42/06), - Law on Transformation of Socially Owned Property on Agricultural Land into Other Property Types (RS Official Gazette, No. 49/92, 54/96 and 62/2006 other laws), - Law on Special Requirements for Registration of Property Rights on facilities built without a construction permit (RS Official Gazette, No. 25/13), - Law on National Mortgage Insurance Corporation, and other laws. In addition to the laws, there is a number of by-laws, the most important of which shall be listed here, and specifically: Regulation on requirements, criteria and method of 23 P a g e

24 exercising of right to conversion of the right to use into the ownership right with compensation, and on method of establishing of market value of construction land and compensation amount based on conversion of right to use into the ownership right with compensation (RS Official Gazette, No. 67/11), due to the substantial significance of this by-law for legal regulation of property management on the local selfgovernment units level. Pursuant to the provisions of this Regulation, application for registration of public property rights with a corresponding fee in the procedure for conversion of rights is to be submitted to the relevant local self-government unit s body dealing with the legal aspects of proprietary rights with relevant territorial jurisdiction over the construction land in question, which is to pass the said Decision. The registration fee amount is determined based on the market value of the land in question at the time of the conversion of rights, reduced by the amount of actual costs of acquisition of the right to use the land in question (providing that such costs were incurred by September 11, 2009 at the latest). Monetary profit made based on the conversion of rights is to be equally divided and paid into the restitution fund (50%) and local self-government budget (50%) respectively. It is important to mention here the recently adopted Regulation on criteria for acquisition and appropriation of immovable property by direct arrangement, lease of public property and procedures of public bidding and open call for written offers (Republic of Serbia Official Gazette, No. 24/12), which was adopted in compliance with the Article 35 of the Law on Public Property. This Regulation regulates criteria for acquisition and appropriation of immovable property and lease of property of holders of public property rights in the procedure of public bidding or through an Open Call for written offers, as well as the criteria and procedure of acquisition and appropriation of immovable property and lease of publicly owned property of the holders of public property rights through direct arrangement. Regulation on criteria and method for local self-government appropriation or lease of construction land at price lower than its market value, or for rent or without any remuneration (RS Official Gazette, No. 13/2010) should be mentioned here as well, in addition to the Regulation on methodology for appraisal of capital and assets (RS Official Gazette, No. 45/2001, 45/2002) and Regulation on nomenclature and statistical territorial units (RS Official Gazette, No. 109/09 and 46/10). Among the adopted Rules of significance for immovable property appraisal the most important are the following: Rules on method for determination of market value of immovable property (RS Official Gazette, No. 38/2001, 45/2004 and 27/2011), Rules on method for determining property tax base for immovable property rights (RS Official Gazette, No. 38/01, 45/04 and 27/11), Rules on method for electronic tax return filing (RS Official Gazette, No. 18/12), and Rules on informative tax return (RS Official Gazette, No. 117/2012, 118/2012 corrigendum, and 16/2013). Among the adopted Guidelines, two should be mentioned here, and specifically: Guidelines on procedure and method for determination of absolute rights transfer tax, passed by the Tax Administration in compliance with the Law on Taxation and Tax Administration (RS Official Gazette, No. 80/02, 84/02, 23/03, 70/03, 55/04, 61/05 85/05, 62/06, 61/07 and 20/09), and Guidelines for appraisal of appropriated immovable property (RS Official Gazette, No. 80/2002, 61/2005, 61/07, 20/09, 72/09, 53/10, 101/11 24 P a g e

25 and 2/12), passed by the Tax Administration in compliance with the Law on Restitution and Compensation (RS Official Gazette, No. 72/2011). Legal and regulatory framework is indisputably supported by a number of the so-called sectorial legal acts, the titles of which are specific to each individual local self-government unit, and specifically: Decision on Construction Land, Decision on determining of construction land development fee (regulating division of the urban construction land into specific zones as well), Decision on local utility duties, Decision on property tax rate, Decision on granting lease and use of municipally/city/town owned business premises, etc. With the aim to present a complete overview of the legal and other frameworks related to the activities in which spatial data is used, a number of strategic level documents should be noted here as well, and specifically, these are as follows: Strategy for Development of Information Society in the Republic of Serbia by 2020 (RS Official Gazette, No. 51/10), Strategy for Establishing Infrastructure for Spatial Data in the Republic of Serbia in , Strategy for Development of e-administration in the Republic of Serbia in (RS Official Gazette, No. 83/09, 5/10), INSPIRE Directive (Directive 2007/2/EC of the European Parliament and Council of March 14, 2007), etc General Comments on the Existing Legal Framework for Functioning of the Real Property Appraisal System Based on an analysis of the content of the above listed normative and planning documents, numerous instances of overlapping and inconsistencies are evident, which highlight the need for homogenization and clear division of remits, with clear systematic approach to the issues of public interest, which by all means include the real property appraisal system, which is in turn the necessary prerequisite for the successful regulation and functioning of the government bodies and economy as a whole. The perceived inconsistencies can be systematized in a number of general notes, and specifically: - Appraisal of real property market value is necessary and of utmost importance for the central government; - In the Republic of Serbia, with the existing legal framework, the main holders of real estate appraisal tasks are as follows: the Tax Administration, Republic Geodetic Authority, local self-government, court experts and valuers holding certificates on international appraising standards; - The law does not regulate or specify obligations, nor does it provide for the necessary prerequisites for cooperation between the main holders of the real estate appraisal on compiling and maintenance of a consolidated records on data of significance for real estate appraisal and distribution of such data to the users thereof, and thus data is duplicated, collected by using different methods and used for different needs; - No prerequisites or technical conditions have been provided for downloading or exchange of spatial data from different sources in a consistent manner, or for the distribution of such data to the authorized users thereof; and - There is no regulated free access to spatial data as a resource of public importance. 25 P a g e

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27 3. REAL ESTATE MARKET AND REAL ESTATE APPRAISAL SYSTEM IN SERBIA Analysis of the real estate market is a constituent part of the real estate appraisal procedure and no successful or objective real estate appraisal can be performed without it. Judging by the available indicators, this element has, until the present day, not been given adequate importance in Serbia. Specifically, market analysis is still predominantly performed by foreign consultancies, while the majority of domestic professionals and valuers in Serbia tend to rely on characteristic information from the Real Estate Cadastre, information on prices of construction of new facilities or on information on yield and revenues in cases of agricultural or forest land. In this Chapter, basic indicators of the real estate market in Serbia are presented (for the first six months of 2013), by using the official data as the starting point (provided by the NBS, Republic of Serbia Statistical Office, etc.). After a short analysis of the market for the real estate in the most attractive locations, the subsections 3.2, 3.3, 3.4, 3.5, 3.6 and 3.7 provide detailed information on respective remits and activities of individual state and privately owned services and Agencies with scope of work that among other things include the real estate appraisal tasks Current Condition of the Real Property Market in Serbia Selected pieces of data from the Reports published by consultancies dealing with the real property issues in the first six months of 2013 were used as the source of data on the real property market in Serbia. It should be noted here that there are also some other sources of data and that due consideration should be given to all of these sources of information if we aim to create a transparent real property market in the Republic of Serbia Macroeconomic Indicators According to data provided by the EBRD and EU Commission, a growth in gross domestic product (BDP) by approximately 1.9% to 2.2% is expected in Serbia in Unfortunately, the same estimates also read that the unemployment rate is expected to grow or remain at the same level at best. Reason for this certainly lies in the announced restructuring and privatization of the remaining state-owned enterprises. Domestic experts for economic issues are even more optimistic about Serbian BDP, and some of them expect BDP growth of up to 3%, primarily due to a slightly faster recovery of industrial production. Table : General macroeconomic indicators (Source: Republic of Serbia Statistical Office) Population Households Employment Levels Year Source Belgrade Serbia Census Census Census Census Census Census P a g e

28 2012 mid 2013 Average Income (May) In 2012, industrial production dropped by approximately 2.9%, and it is expected to recover and even achieve slow growth in 2013, primarily owing to the automobile industry and production of oil and oil derivatives. Table : Macroeconomic indicators (Source: Ministry of Finance - NBS) forecasts BDP (in EUR billion) BDP per capita (in EUR) Annual BDP fluctuation in % CPI (consumer price index) annual fluctuation in % NB average reference rate Export (in EUR mil) Import (in EUR mil) Public debt levels Foreign debt ratio to BDP Current account (in % of BDP) Population (in mil.) Unemployment rate in % Inflation rate in % RSD median exchange rate to EUR According to the Republic of Serbia Statistical Office data, consumer prices in May 2013 remained at the same level as before, while the annual inflation rate dropped and, according to a Report issued by the NBS, returns to the one digit level of 9.9%. According to the forecasts of the NBS experts, annual inflation rate will continue to fall to the acceptable threshold of approximately 7.5%, which is considered to come as the result of the latest monetary policy measures, new agricultural season, a decrease in total liabilities and latest measures aimed at fiscal consolidation. Unemployment rate in Serbia is quite high and is currently at the level of 24%. Total number of unemployed persons in January 2013 amounted to approximately 1,716,499, which is by approximately 0.4% lower than in the previous month, and according to the data issued by the Serbian Chamber of Commerce, it was by approximately 1.3% lower than in the same period one year ago. Average net salaries remained among the lowest salaries in this region and according to the statistical reports, average net salary in Serbia in May 2013 amounted to EUR 363, which is by 10.1% less than in April 2013; in June 2013, average net salary amount saw some growth and it amounted to EUR 389. In the first quarter of 2013, average monthly household budget amounted to EUR P a g e

29 Residential Real Property Market In mid-2013, mild short-term stabilization of the real estate market was expected to take place, primarily due to the EU announcement of the launch of the negotiation process on Serbian membership. According to the latest data of the National Mortgage Insurance Corporation (NMIC), by mid-2013, the sales of family apartments grew by 14% compared with the same period of the previous year. Banks continued to offer and sell family apartments of their insolvent clients, and some banks chose to provide refinancing services for such indebted clients. The gap between the average monthly rent amount and the average monthly credit rate remains on the level of approximately EUR 100 in favour of the rent. As for the available offers in the residential real property market, the largest housing project in Belgrade is still the Stepa Stepanović housing project with its 38 facilities and more than 4,000 family apartments with approximately 1,600 families living in them until now. Owing to the role that the public authorities played, prices per square meter of these apartments range from (VAT included VAT amount is paid back to the citizens who purchase their first property for residential purposes) EUR 1,250 to EUR 1,290. In addition to this, 150 housing units in the largest housing project in Novi Beograd, PSP Farman's West65, were completed in May More than 80% of these apartments has been sold so far, and the most sought after ones were the three rooms apartment with the total floor area ranging from 70 m 2 and 75 m 2, costing between EUR 1,850 and EUR 1,970 per square metre (VAT included). Construction works on the residential and business housing project in Blok 67a in Novi Beograd area are expected to begin in the last quarter of Deka Inzenjering Company has planned to construct six residential buildings with 861 family apartments (studio apartments) and one business building, in the total area of 3.6 ha in the area lying in between the Jurija Gagarina Street and Omladinskih Brigada Street. In the first phase of these construction works, three residential buildings will be built with the total of 296 apartments with surface area ranging from 25 m 2 to 145 m 2 and with gross total developed area of approximately m 2. By mid-2014, two residential buildings in Banjica Housing Project (Paunov breg) are expected to be completed with the total gross developed area of 9,000 m 2 and 107 family apartments with surface area ranging from 35 m 2 to 90 m 2. This Housing Project includes a smaller commercial centre of approximately 1,800 m 2. Investor for this Housing Project is the CPI Group. Near the Danube River bank, a housing complex called Dunavska terasa is currently being built, financed by the Aramont Company. This mixed purpose housing complex houses 270 residential units, 162 business apartments, 54 offices and 93 shops that are all for sale. In addition to the above mentioned, the housing project Dr Ivan Ribar in Blok 72 in Novi Beograd area should be mentioned among the larger scale construction projects, with the total of 768 residential units and gross developed area of 37,000 m 2 and prices per square metre from EUR 1,290, which are expected to be completed by the end of this year. Padina housing project located in Vladimira Vlahovića Street in Voždovac, with the total of 153 residential units and gross developed area of 7,500 m 2 and price per square metre 29 P a g e

30 from EUR 1,290, it is expected to be completed by the end of 2013, and the same deadline has been set for completion of 80 residential units in the residential housing project in Vračar in Belgrade. After a mild rise in selling prices for residential real property (of the studio apartment type) in the beginning of 2012, real estate prices are currently exhibiting a downward trend in all regions in Serbia. In 2013, selling prices are expected to remain at the same level in all parts of Serbia except in Belgrade, where the prices are expected to see a modest upward trend. Rent for residential real property in Serbia range from EUR 2 to EUR 5 per square metre on the monthly level, depending on the location of the real property from the City centre. In Belgrade, the mild downward trend in rents continues, compared to the rent levels in Average monthly rent range from EUR 4 to EUR 11 per square metre, depending on the real property location, size and year of construction. In , rent is expected to remain on the same level Business Real Property Market In comparison with 2012, rent of office (business) premises of the A and B class remained at approximately the same level in this year as well. In the central parts of Belgrade, average monthly rent for the real property of the A class range from EUR 13 to EUR 15 per square metre, and from EUR 11 to EUR 12 per square metre for the real property in the class B. In the broader Belgrade area, rent of the business premises of the class A range from EUR 8 to EUR 10 per m 2, and from EUR 7 to EUR 9 per square metre for the business premises in the class B. In other cities and towns in this region, rents remain the lowest. Due to the low level of leasing activities, owners tend to offer certain benefits for the tenants, such as postponed payment and free of charge parking spots. Net revenues or profit for the investors has remained at approximately the same level and it ranges from 9% to 9.5%. As for the offer of free spaces in Belgrade, there has been an evident downward trend in the free space rate over the last years, and it is currently at the level of 14%, which is expected to drop further over the next period, due to the low investors interest for such space Retail Market The term retail market includes facilities in which goods and services intended for the final users are offered for sale. Over the first quarter of 2013, total demand for the spaces for such facilities has grown, primarily due to the opening of new shopping malls. Merkur International Company has brought in new tenants in the gallery level of their Shopping Centar (Shopping Mall) in Karaburma in Belgrade; in March of 2013, some new clients, such as C&A, Takko, Deichmann, Big Bang, Sport Vision and Lavirint, joined the existing tenants. With a few newly built smaller shops, this project is an example of a mixed retail point for different categories of goods and services for the final users. The Station Shopping Mall in Voždovac in Belgrade was opened in April 2013; it houses 120 shops of the total surface area of 28,000 m 2 and total gross developed area of 75,000 m 2, with two levels designated for parking area with the total capacity of 800 parking spots. The third floor is reserved for a wellness centre and it has a spacious terrace that is used 30 P a g e

31 as a belvedere structure. At the top of this building, a football stadium is situated. This investment amounted to the total of EUR 50 million. Once it is completed, the shopping mall of the A type a large size shopping centre in Novi Sad will have a useful floor area of approximately 40,000 m 2 and it will house a variety of smaller facilities for a large number of different purposes. Aviv Arlon opened the next stage of the Aviv Park in Pančevo in June 2013, with the total floor area of 22,000 m 2 of gross surface area that has so far been completely filled and used. The Israeli IBC Company has started to work on the development of its first Power Centre One Retail Park Project in Zemun, Belgrade. Construction works were initiated in June 2013, and its opening has been scheduled for May The total useful surface area of this Centre will be approximately 25,000 m 2, and this investment will amount to EUR 20 million. Plaza Centres Company has started to prepare the terrain for construction of a Shopping Mall in Belgrade (in Višnjička Banja) with 45,000 m 2 of useful surface area; the construction works on this Mall are expected to be completed by the end of Outside of the Belgrade area, the Pluto Capital Company has planned to construct a Retail Park in the town of Leskovac, with the total useful surface area of 6,500 m 2, while the Israeli BIG CEE Company has planned to open their Retail Park Big Centre in the town of Šabac, with 10,000 m 2 of useful surface area. As for the demand for the real property of this type, some research works have showed that there is a mild upward trend, especially in the central urban zones, and a significant number of companies has turned their attention to the shopping centres through their new projects aimed at the construction of the shopping centres and retail parks types of facilities. A significant number of vendors have abandoned their former locations to move in some cheaper ones. As for the market of the street type, there has been an evident lack of unused sites, both in Belgrade and in other cities and towns in Serbia. Thus, for example, a domestic fast food chain constantly looks for the new spaces for their facilities. Among the new brand names in the domestic market, Desigual, Milavitsa, Bilitzki wool&more and H&M should be mentioned. When compared with 2012, the rent level for facilities of this type is somewhat lower and it ranges from EUR 50 to EUR 80 per square metre on the monthly level. As for the so called secondary sites, the rent is on a much lower level, and thus the monthly rent ranges from EUR 15 to EUR 60 per square metre, while in the case of the Retail Parks the monthly rent range from EUR 7 to EUR 30 per square metre, depending on the size and location of the shop. Renting of facilities of this type brings the profit of 9-10% to the investor in cases of the warehouses; investors profit in cases of the shopping mall is 9%, and in cases of the street shops such profit can amount to 7% and more Industrial and Logistics Real Estate Market In Serbian market, the Gorenje Company made an investment of EUR 21 million in its second factory in the town of Valjevo, with approximately 20,000 m 2 gross surface area and approximately 300 employees. The Albon Company built an industrial facility of 6,500 m 2 in 31 P a g e

32 the industrial zone in the town of Ruma which is used for the production of tools used in the spare parts production for the automobile Company Ford. The total worth of this investment is EUR 7.5 million, and the Company hired 200 people. Danish Company Grundfos opened its factory of 25,000 m 2 with 100 employees in the town of Nova Pazova and according to its plans for Factory expansion, it will employ 350 workers by the end of In the town of Pećinci, in June this year a factory producing Bosch products was opened with the useful area of 22,000 m 2 in the first phase and with the useful area of 19,000 m 2 in the second phase and with approximately 60,000 m 2 of gross surface area once it is completed. This investment is worth EUR 70 million, and the factory is expected to be finally completed by 2019; by the end of 2016, the factory is expected to employ a workforce of 620 people. The industrial zone in the town of Ruma is also of special importance for investors. Adriana Tex built a part of the plant of 1,000 m 2 for sanitary and bathroom equipment for the Calzedonia Company and they announced a new plant of 5,000 m 2 in which another 500 workers will be employed by the end of this year. The Czech Company Mitas, the producer of automobile tires, hires a workforce of 550 in a surface area of 10,000 m 2 and it has plans to hire another 225 workers. The Belgrade-based Company Insert, which produces footwear for Chanel, Christian Dior, Prada, Valentino, Sergio Rossi and other companies, acquired the license to construct a factory of 4,500 m 2 in the town of Ruma, with the total investment worth EUR 1.5 millions in which it has planned to hire 190 workers. Geox plans to build a factory worth EUR 15 million in the town of Vranje in which it will employ 1,250 workers over the next two years. Swarovski has announced that it will build a factory in the town of Subotica in the last quarter of 2013, and Johnson Electric, a producer in the automobile industry, has announced its plans to build a factory in the City of Niš. Delhaize obtained construction permit to build its logistics centre worth EUR 25 million, in two phases, of the total of 50,000 m 2 surface area in which it has planned to hire 500 workers. Rent for facilities of this type situated in the primary logistics/industrial zones in Belgrade, Novi Beograd and Zemun range from EUR 4 to EUR 5 per square metre for the class A real estate; for the facilities in the class B, rent amounts to EUR 3/m 2. In the populated areas nearer to Belgrade (Šimanovci, Dobanovci, Krnješevci, Pećinci, etc.), the rent ranges from EUR 3 to EUR 4 per square metre. In Novi Sad, Niš, Kragujevac, Užice and Čačak, the rent ranges from EUR 2 to EUR 2.5 per square metre, and it is even lower in the smaller towns (with population below 100,000), where it amounts to EUR per square metre. 32 P a g e

33 Figure : Size of commercial real estate in m 2 /1,000 inhabitants in the cities in this region ( Scope of Work of the Republic Geodetic Authority The Republic Geodetic Authority is carrying out the tasks related to state survey, Real Estate Cadastre and registration of real estate rights, Utility Lines Cadastre, topographic and cartographic products, geodetic and cadastre information system, as well as other tasks of importance for state survey and Real Estate Cadastre in the Republic of Serbia. Real Estate Cadastre and Utility Lines Cadastre as the spatial public Real Estate and Utilities Registers are the basis for the Geospatial Data Infrastructure. This is additionally corroborated through the examples from a large number of countries internationally. It is precisely due to such reasons that it is necessary to have an updated cadastre that has to be maintained in compliance with the Law and relevant legal regulations, in a uniform manner on the national level Real Estate Cadastre The Real Estate Cadastre is the primary and public Register of the real estate and real rights attached to such real estate in the Republic of Serbia. Real Estate Cadastre database is a set of geospatial and other data on real property and real rights attached to the real property, and specifically, it contains data on: land parcels (land), facilities (buildings and other facilities) and on special parts of facilities (apartments and business facilities, garages and garage parking spaces, and so on). Address Register data and Spatial Units Register data is maintained in the Real Estate Cadastre database as well. The Real Estate Cadastre additionally contains cadastral plans in which the real property 2 CBRE (NYSE: CBG) leading real estate Company internationally with the registered seat in Los Angeles, with 37,000 employees and more than 300 offices in more than 50 countries. 33 P a g e

34 and spatial units boundaries are presented as spatial data, along with all the elements of the Address Register. The Republic Geodetic Authority translates the cadastral plans into digital (vector) form and thus more than 50% of the Serbian territory has been processed so far. Information on holders of title to real property that were registered in the Real Estate Cadastre was collected on the occasion of making and maintenance of the Real Estate Cadastre and it includes information on all the legal (companies) and physical persons (citizens). However, in compliance with the Law, the Citizens Register is to be maintained by the Ministry of Interior in their digital databases, and the Companies Register (register of legal entities) is to be maintained by the Serbian Business Registers Agency. These two Registers are not directly connected or harmonized. The Register is maintained as a consolidated, central and electronic database in which entrepreneurs, companies, cooperative societies and associations of cooperative societies, public companies, foreign companies branches and representative offices, as well as other organization forms are registered with the Serbian Business Registers Agency. Data on persons holding titles on real property in the Real Estate Cadastre is not harmonized and it has not been directly connected with the Register of Citizens or with the Company Register. This fact creates significant harmonization problems whenever a change in date needs to be implemented, such as an address modification, etc. Database for KnWeb Information Service is the central database of the Real Estate Cadastre of the Republic of Serbia that was created by downloading data on real property that is maintained by the Real Estate Cadastre services of the Republic Geodetic Authority. This service is publicly accessible at the following web address: (Figure ). This database is searchable by the land parcel identifier number in the given Municipality and Cadastral Municipality, and/or alternatively, by the real property addresses (street name and house number within a Municipality). 34 P a g e

35 Figure : KnWeb Database Spatial Units Register is the main public register that contains spatial units borderlines, names and unique registration numbers of the spatial units in compliance with the Law. Spatial units included in this Register are as follows: statistical district, settlement, cadastral municipality, local community ( mesna zajednica in Serbian), Municipality, city/town, administrative district, the City of Belgrade, Autonomous Province, Republic of Serbia. Spatial Units Register is a GIS oriented database integrated in the National Infrastructure of Spatial Data, which is used to identify the existing, newly established and revoked spatial units in a standardized manner. Address Register is the main and public register of house numbers and street names and squares in populated places that is, in compliance with the law, maintained by the Republic Geodetic Authority. Address Register functions include identification of house numbers for residential and business buildings and for the construction land parcels as well; marking of buildings and construction land parcels with house numbers and marking of populated places, streets and squares; and maintenance of data on house numbers, streets and squares. In 2003, the Republic Geodetic Authority developed a GIS application the Address Register, as the software application for records maintenance on house numbers, street names and squares, which is, parallel with other computer programs (applications) used for maintenance of Address Register as a constituent part of the Real Estate Cadastre Utility Lines Cadastre Utility Lines Cadastre is the main register of utility lines and real rights attached to these lines. The Utility Lines Cadastre database contain a set of geospatial and other data on 35 P a g e

36 utility lines, real rights attached to these utility lines, as well as on holders of such real rights, which are categorized in the following thematic units: 1) Water supply network; 2) Sewers and drains network; 3) Distance heating network; 4) Electrical grid; 5) Telecommunications network; 6) Oil pipelines network; 7) Gas pipelines network; 8) Shared facilities for utility lines. Information on holders of rights to utility lines was collected during the process of establishing and maintenance of the Utility Lines Cadastre and Real Estate Cadastre and it includes information on all the legal (business entities) and physical persons (citizens). With the adoption of the Law on State Survey and Cadastre in 2009, utility cadastre was defined as the main register on utility lines and real rights to such utility lines that in addition to the spatial presentation of positions of utility lines and data on basic characteristics of such utility lines provides for the registration of title (ownership rights) and other real rights to the utility lines. In 1997, when initial experiences were gathered from the production of digital cadastral plans in GIS environment, the Republic Geodetic Authority initiated the digitalization procedure for translation of the analogue cadastral plans of the utility lines into the digital utility lines plans National Infrastructure for Geospatial Data The Republic Geodetic Authority, with the support from Statens kartverk, the Norwegian Mapping Authority responsible for cadastre and cartography, produced GEOSRBIJA, the first Serbian geoportal (Figure ), as a facility for exchange of spatial data and services between relevant institutions gathered within the National Spatial Data Infrastructure (NIGP). The Initial Geoportal provides access to the Metadata and Map Browsers with search and view options for a set of metadata, sets of spatial data, as well as the online services for professional users and for the broadest public. To access the Initial Geoportal, the users need to have Internet access and a web browser (Internet Explorer or Mozilla Firefox) installed on their computers. The Initial Geoportal is available online, at The Geoportal currently offers certain publicly available sets of spatial data kept by the Republic Geodetic Authority, such as the data on administrative units, statistical units, addresses, cadastral land parcels, Basic National Map, Ortophoto Map and certain Thematic Maps for some territorial areas. The Geoportal additionally contains a selection of spatial data from other state institutions, such as the Statistical Office of the Republic of Serbia, Republic Hydrometeorological Service of Serbia, Seismological Survey of Serbia, Municipality of Pančevo, Environmental Protection Agency and Republic of Serbia Ministry of Defence. As the result of their successful cooperation, broadest public is now provided with the access to geoinformation pertaining to the demographics, type of land, hydrographics, climatology, seismology, as well as to some examples of topographic maps of different scales. 36 P a g e

37 Figure : Homepage of the GEOSRBIJA web portal Graphic data of the Real Estate Cadastre pertaining to the cadastral parcels, facilities and names are searchable on the Geoportаl for individual regions in which the digital cadastral plans have been put to official use. At the moment, data for 1,094 cadastral municipalities and parts of cadastral municipalities has been published, which includes the total of 3,642,073 cadastral parcels and 1,050,073 buildings. In addition to these, the names of individual tracts, water bodies and facilities are published Central Mortgage Register Central Mortgage Register (CMR) is the central consolidated public database in which mortgages entered in the relevant registers are registered, to facilitate search and to centrally collect information on mortgages. Database of the Central Mortgage Register was established in compliance with the Articles 57 and 58 of the Law on Mortgage (RS Official Gazette, No. 115/05), by means of taking over the existing data from the Real Estate Cadastre and by entering the existing data provided from the land books and intabulation books. The Central Mortgage Register is publicly available, it is kept by the Republic Geodetic Authority and it is available at: Mortgage is not to be registered in the Central Mortgage Register, but it should represent a central register of all mortgages registered in registers. The Central Mortgage Register is actually collecting data from the above mentioned sources in a consolidated database. As such, it contains data that is used for records searching purposes only, and data is registered in this database from the form or from the local offices of the Republic Geodetic Authority. The Central Mortgage Register is a public record. Everyone having Internet access can search the Central Mortgage Register and thus access data on mortgages and mortgaged real estate Real Estate Appraisal Pursuant to the Article 149 of the Law on State Survey and Cadastre (RS Official Gazette, No. 79/09 and 18/10), the Republic Geodetic Authority was authorized to determine the market value of the real estate assets by using the mass appraisal procedures. Mass real estate appraisal includes general valuation of the real estate and 37 P a g e

38 determining the value of individual real estate asset based on data used for the general real estate appraisal. The general real estate appraisal includes determining the appraisal model for different types of real estate assets. The Law authorizes the Republic Geodetic Authority to determine the appraisal model for different real estate assets, once every three years; in doing this, the Authority is legally obliged to cooperate with the local selfgovernment in acquiring the opinions, prior to the official registration of the real estate value in the database of the Real Estate Cadastre. The local self-government unit is obliged to deliver their opinion on the proposed model to the Republic Geodetic Authority within 30 days and after that, it should use the completed appraisal as the tax base. Interim appraisal data, pursuant to the Law, is to be published by the Authority on its website. With the aim to realize their statutory obligations, the Authority initiated their activities on establishing records of the real estate market prices and based on data from the Sales Agreement and from the Rent Agreements, which is provided from the relevant bodies tasked with the stamping of these Agreement, the Authority has created the Register of Real Estate Transactions, in which, in addition to the data from the Real Estate Sales Agreements, the Real Estate Cadastre data is entered. In addition to this, pursuant to the Draft Rules on Real Estate Appraisal (which is in the process of official adoption since 2012), another method for collection of data on real estate has been provided for by using a Questionnaire, which would be completed on the occasion of registration of real estate title deeds. In compliance with its statutory authorizations and available resources, the Authority has undertaken all the measures and activities on organization and realization of its obligations in this field. Numerous meetings and seminars of preparatory and introductory nature were organized, in which best practice examples from the countries with notable results in development of the mass appraisal system (such as Slovenia, Sweden, etc.) were analysed. Within its present organizational structure, a special organizational unit for mass appraisal was established to perform the planning tasks and to organize activities necessary in the real estate appraisal procedure. Due to the pioneering nature of their efforts, in addition to the expert ones, numerous other organizational and technical preparatory activities needed to be realized to allow for the launch and development of a completely new system. At the time when the work on the development of the property appraisal system was initiated, an increase in the number of transactions on the real estate market was recorded in Serbia, which in amounted to approximately 770,000 transactions or more than 250,000 transactions annually. The Draft Rules of Real Estate Appraisal describes and explains in greater detail the achieved level of activities and lists further activities in that direction. The Draft Rules has included the basic processes in the mass appraisal system, and specifically: - Collection of data and database maintenance 1 st Phase, - Data analysis and processing 2 nd Phase, - Specification and modelling 3 rd Phase, and - Valuation 4 th Phase. 38 P a g e

39 In the Draft Rules, the descriptions of individual above listed Phases do not contain the same level of details, but the Draft Rules certainly provide good basis for further improvements. In the first Phase of the Draft Rules, real estate assets are classified according to their different types (classes) and subtypes. Three primary types and a number of subtypes of the real estate assets have been defined (Table ). Table : Classification of Real Estate Assets (Draft Rules, RGA 2012) Real Estate Types Real Estate Subtypes Land Construction Agricultural Forest Other Facilities Residential - House - Seasonal house - Residential house with several apartments Garages Business facilities - For providing business services - Tourist - Hospitality industry - Trade - Sports and recreation - Other Industrial facilities and warehouses - Light industries - Tank, grain tank and warehouse - Other Agricultural facilities - For storage of agricultural products - For agricultural production - Other Special purpose facilities - Gas station - Heavy industries - For electricity generation - For exploitation of mineral resources - Special purpose agricultural facilities - Other facilities Special parts of facilities Apartment Garage space - Garage room - Garage spot Business facilities - For which no business activity has been specified - Shop - Office Industrial facilities 39 P a g e

40 - Warehouses - Facilities used for industrial production Other - Other parts of a residential building - Other parts of a non-residential building Codes, identical to those from the Real Estate Cadastre, have been assigned to each type and subtype of the real estate assets. Real estate types, subtypes and codes (in compliance with the Draft Rules of the RGA, 2012) are presented in Appendix 2. Pursuant to the Draft Rules, collected data should include: - Data from the Real Estate Cadastre, - Market data, and - Data from the Real Estate Transaction Registration Questionnaire. The Real Estate Cadastre data (Table ) are stored in the database of the Real Estate Cadastre and it can be downloaded by using the relevant web application. Table : Data from the Real Estate Cadastre database that are to be included in the Real Estate Transactions Register (Draft Rules, RGA 2012) 1. Real estate surface area 2. Use 3. Intended use of the land and business facilities 4. Number of floors of a facility (underground, on the ground floor, above ground and in the loft) 5. Structure of the special part of the facility (number of rooms) 6. Encumbrances Real estate market data (Table ) is entered in the Real Estate Transactions Register. Data is entered by using a web application, upon receipt of a copy of the stamped Sales Agreement or Lease Agreement from the body authorized to stamp agreements or other documents, which is the legal basis for the transactions involving the real estate asset. Data is to be entered by the internal units of the Authority, and in case of any incomplete identification of legal persons or in cases of incomplete data, data control and entering is performed by the Authority unit in charge of the mass real estate appraisal. Table : Data downloaded from the Sales/Lease Agreement to the Transactions Register Name and seat of the body that stamped the agreement or passed some other public Basic data on transaction/lease or document on document delineating the Agreement stamp number or public document transaction number Agreement stamp date or public document date Agreement conclusion date Transaction type Legal entity type (physical or legal person) Data on legal entities that are the Name and surname, unique citizen s identification number or name and registration number of the legal person 40 P a g e

41 parties in transactions/lease of the real estate Basic data on the real estate in the transaction Information on price/lease Physical person s place of residence/registered seat of the legal person Name, surname, passport number, place and country of residence (for foreigners) Note on the legal representative Type and subtype of the real estate (in compliance with the classification) Real estate identification - Land parcel (municipality, cadastral municipality, land parcel number and in case of construction land address) - Facility (municipality, cadastral municipality, land parcel number and address) - Special part of a facility (municipality, cadastral municipality, land parcel number and address) Real estate surface area in the transaction, presented in m 2 Data on the real estate part in the transaction Price/lease currency Total price/lease Unit price/lease Price/value of individual real estate asset in the real property market in cases where two or more real estate assets are exchanged in a single transaction that is specified in the executed transaction Agreement Questionnaires for real estate transaction registration (Table ) are to be completed by the legal entities, pursuant to the Draft Rules, when the application for registration of the change in person holding title/right on the real estate asset is submitted. Table : Data from the Questionnaire that is to be entered in the Real Estate Transactions Register Legal basis for the real estate transaction Land Construction Intended purpose of the land, construction permit, utilities, encumbrances and limitations, etc.; Agricultural Use of land, irrigation/drainage systems, encumbrances and limitations, etc.; Forests and Type of woods, irrigation/drainage system, forest land Other land encumbrances and limitations, and so on; Type of land, use of land, encumbrances and limitations, etc.; Facilities Residential Houses and seasonal houses year of construction, year of extension, year of аdаptаtion, construction stage, construction, type of house, heating system type, utilities, heating and cooling system, high quality 41 P a g e

42 Special part of a facility Garage Business facilities Industrial facility and warehouse Agricultural facility Special purpose facility Apartment interior, other amenities, encumbrances and limitations, etc.; Residential buildings with a number of apartments year of construction, year of extension, year of аdаptаtion, construction stage, construction, number of floors, number of apartments, elevator, heating system type, heating and cooling system, fire protection system, physical and technical security system, available utilities, high quality interior, encumbrances and limitations, and so on; Construction stage, encumbrances and limitations, and so on; Year of construction, year of extension, year of аdаptаtion, construction stage, construction, total number of building floors, number of special parts, elevator, heating system type, heating and cooling system, fire protection system, physical and technical security system, available utilities, encumbrances and limitations, high quality interior, other amenities, near-by location/micro location, location with special amenities, etc.; Year of construction, year of extension, year of аdаptаtion, construction stage, construction, heating system type, heating and cooling system, fire protection system, physical and technical security system, available utilities, encumbrances and limitations, floor height, distance between load-bearing walls, pollution reduction and natural resources saving system, near-by location/micro location, location with special amenities, etc.; Year of construction, year of extension, year of аdаptаtion, building phase, construction, heating and cooling system, fire protection system, available utilities, encumbrances and limitations, etc.; Year of construction, year of extension, year of аdаptаtion, building phase, construction, available utilities, fire protection system, encumbrances and limitations, near-by location/micro location, location with special amenities, etc.; Apartment information floor, balcony surface area, terrace surface area, loggia surface area, basement/cellar, year of renovation electrical and/or water supply installations, year of woodwork renovation, apartment layout, encumbrances and limitations, etc.; Information on residential building in which the apartment is located year of construction, year of extension, year of adaptation, building phase, building construction, elevator, total 42 P a g e

43 Business facility Industrial facility Other facilities number of building floors, total number of apartments, utilities, heating system, heating and cooling system, fire protection system, physical and technical security system, high quality interior, etc. Information on business facility - floor, neighbourhood/micro location, location with special amenities, year of renovation of electrical and/or water supply installations, year of woodwork renovation, shop window, encumbrances and limitations, etc.; Information on building in which the business facility is located year of construction, year of extension, year of adaptation, building phase, building construction, elevator, total number of building floors, number of special building parts, utilities, heating system, heating and cooling system, fire protection system, physical and technical security system, high quality interior, etc. Information on industrial facility - floor, floor height, distance between load bearing walls, environmental protection and natural resources saving systems, immediate neighbourhood/micro location, special amenities, year of renovation of electrical and/or water supply installation, year of woodwork renovation, encumbrances and limitations; Information on building in which the industrial facility is located - year of construction, year of extension, year of аdаptаtion, building phase, building construction, utilities, heating system, heating and cooling system, fire protection system, physical and technical security system, etc. Floor, immediate neighbourhood/micro location, special amenities, year of renovation of electrical and/or water supply installations, year of woodwork renovation, encumbrances and limitations, etc. Year of construction, year of extension, year of adaptation, building phase, construction, elevator, total number of floors, number of apartments, utilities, heating system type, heating and cooling system, fire protection system, physical and technical security system, high quality interior, etc. Draft Rules provides for internal verification of the registered data that is to be carried out in the Republic Geodetic Authority and that is to include determining of representativeness of the registered data for real estate market analysis that is based on comparison of prices in individual transactions with achieved prices in transactions within the corresponding 43 P a g e

44 value zone. No clear-cut criteria have been set for data selection, and control would be carried out by means of direct on-site inspections, where adequate records would be made on each inspection. In addition to the above, pursuant to the Draft Rules, only the selected information from the Register is to made publicly available online, and specifically (in compliance with the Law on Personal Data Protection, RS Official Gazette, No. 97/08 and 104/09): - Type and subtype of the real estate asset in the real estate market, - Approximate location of the real estate asset in the real estate market, - Approximate transaction date, - Surface area of the real estate asset in the real estate market, - Price currency, and - Total price. Draft Rules provides a short description and method of analysis (statistical, graphic, and so on) and processing of collected information. Information would then be categorized in individual markets (Annex 1) and real estate assets in the real estate market would then be selected over a three years period preceding the year of the mass appraisal. Draft Rules provides for some sort of verification of the authenticity of prices based on information collected from the market; however, no criteria for such verification are provided for and there is no mention of any subsequent inclusion of further details on this specific issue. During the information processing process, information would be adjusted based on their specific dates, based on the price indices that would be produced annually, once every six months and quarterly, based on the average individual prices (per m 2 ) per individual market regions (regions with similar relative modification of prices over a specified period of time) on a specimen of a minimum of 50 transactions over a specified period of time. Draft Rules contains a description of the concept of modelling that is to be revised and published regularly, once every three years. This document provides for a separate register, the so-called Register of Models, in which the mass appraisal model should be defined, tested and adjusted. Models would include value zones, levels and tables with factors (parameters) for each individual market, which would be selected based on an analysis of the importance of the influence they exert on the price. The basis of each model is the characteristic real property that need to be specified on the national level, based on the adopted factors for respective real estate markets. Draft Rules contains definitions of value zones, levels and tables. Testing of models, according to the Draft Rules, should be carried out based on the most recent transactions in the relevant market, in the year of mass appraisal; the Draft Rules, however, does not provide further details of the quality assessment criteria, other than the recommendation that the relative measure of the assessed quality should be as close to one as possible. Once the model is tested, certain adjustments are envisaged to take place until the desired accuracy of the model is achieved, but there are no specific explanations regarding the accuracy levels. Once the model is adjusted, each property in the Real Estate Cadastre database is assigned its assessment result, corrected by using the corrective value index in the years in which no modelling is carried out (Corrective value index is calculated and updated annually, for individual real estate markets, as the ratio of transaction prices from the year in question and the adjusted appraisal values for the year in question). 44 P a g e

45 According to the data produced by the Authority, currently, there are more than 4,000 transactions involving real estate that were entered in the Register (this number does not include data required in the questionnaire), and the current trend is to employ additional resources to speed up entering of already prepared data. 3.3 Activities of the Tax Administration Based on its statutory remit, the activities of the Tax Administration are to a significant degree relevant for the real estate appraisal. The Guidelines for Appraisal of Expropriated Real Estate (2012) regulate activities that the organizational units of the Tax Administration need to take when acting upon requests for appraisal of the confiscated real estate submitted by the Agency for Restitution. The Law on Restitution and Compensation (RS Official Gazette, No. 72/2011) regulates the scope of work of the Tax Administration in the field of the real estate appraisal by means of the procedure used in determining the tax base for the tax on transfer of absolute rights. The legal basis for determining the value of the real estate in a procedure for determining the tax on transfer of absolute rights is, for the Tax Administration, provided in the Law on Property Taxes (RS Official Gazette, No. 26/01, 45/02, 80/02, 135/04, 61/07, 5/09, 101/10, 24/11, 78/11, 57/12- CC Decision and 47/13) and in the Guidelines on Procedure and Method for Determining Tax on Transfer of Absolute Rights (RS Official Gazette, No. 80/02, 84/02, 23/03, 70/03, 55/04, 61/05, 85/05, 62/06, 61/07 and 20/09). The Law on Expropriation ((RS Official Gazette, No. 53/95, FRY Official Gazette, No. 16/2001 FCC Decision and RS Official Gazette, No. 20/2009 and 55/2013 CC Decision)) specifies the remit of the Tax Administration in appraisal of expropriated property Appraisal Procedure for Confiscated Property The Agency delivers requests for property restitution to the relevant Tax Administration unit in charge or the territory in which the real estate is located, through the Central unit, its territorial units and through the unit for restitution of confiscated property. Confiscated real estate is appraised based on its condition as of the confiscation date (as registered in the Agency data), and based on its value as of the appraisal date. Appraisal of the market value of apartment, business premises and garages is performed based on data on real estate market value determined in a minimum of two final decisions passed by a relevant tax administration body in procedures aimed at determining the tax on transfer of absolute rights in transactions involving the same or the similar property located in the same city/town, municipality, zone of the same or in a near-by housing project, street or building, and in the procedure which was completed with a period of three months prior to the appraisal of the real estate in question. In case that there has been no comparable transactions completed during the said period, the nearest completed transactions will be taken for comparison. In case that the facility does not exist any more at the time of appraisal, its value shall be determined based on the same or based on the similar facilities. Appraisal of land is to be performed based on data on its market value determined in a minimum of two final tax administration bodies Decisions that were passed in procedures aimed at determining the tax on transfer of absolute rights in transactions involving the same or the similar land in the market in the same cadastral municipality, in a neighbouring cadastral parcel or in a cadastral parcel near-by, of the same or of the similar culture and class that are nearest to the time when the land is appraised. In case that the land was 45 P a g e

46 used for agricultural purposes on the confiscation date, and that it is classified as the construction land on the appraisal date, such land is to be appraised as the land used for construction purposes. The appraisal is to be performed by a committee in an on-site visit and within 30 days (from the date when the application was received) at the latest; the committee is then to produce a report on such on-site aimed at determining the real estate s market value. In such a procedure before the Tax Administration, Agency acts as a party in the procedure applying for the real estate appraisal Procedure for Determining Tax on Conveyance of Absolute Rights Procedure for determining tax on transfer of absolute rights is carried out by the Tax Administration in compliance with the Law on Property Tax and in compliance with the Guidelines on procedure and method for determining tax on transfer of absolute rights (RS Official Gazette, No. 80/02, 84/02, 23/03, 70/03, 55/04, 61/05, 85/05, 62/06, 61/07 and 20/09). Tax base is determined upon tax payer s application (in the PPI-4 form, within 30 days from the effective date of their tax liabilities) that contains the required data and technical documentation necessary for determining the tax amount (Sales Agreement or some other document stamped in a Court, proof of title, certificate issued from the Real Estate Cadastre and other pieces of data as required by the relevant tax administration office). Pursuant to the law, the body performing official authentication of contracting parties signatures that is used as the basis for the transfer of rights is obliged to deliver one copy of the Agreement to the relevant tax administration office within 10 days from the authentication date. The same deadline is prescribed for the notary public that is to deliver the Agreement or deed. In case that the transfer of rights has not been registered upon any basis, the relevant tax administration office shall, in compliance with the Law, deem the tax liability effective as of the date on which the relevant tax administration body was informed of such transfer (pursuant to the Article 29 of the Law). The onset of tax liability has been specified by the Law. Tax base for tax on transfer of absolute rights is the agreed price at the time when the tax liability is effective, providing that it is not lower than the real estate market value. Tax Payer Tax Return Relevant body tasked with Agreement stamping 30 days 10 days Relevant Tax Administration office Tax base Tax reliefs Decision 46 P a g e

47 Figure : Determining of tax on transfer of absolute rights and tax on inheritance and gifts In cases where the agreed price is lower than the real estate market value, the Tax Administration office shall, within 60 days, determine the market value of the real estate, by using on one of the following methods: - Appraisal without an on-site inspection, or - Appraisal involving an on-site inspection. In cases where the market value of a real estate is determined without an on-site inspection, Records is made on the determined real estate s market value, which is to be signed by the authorized person of the organizational unit of the Tax Administration that manages the procedure and by the party in such procedure (purchaser and vendor in real estate sales agreement). The real estate appraisal procedure that involves an on-site inspection is to be carried out by a committee of three members, which, prior to the appraisal, needs to provide data on construction land zones from the Construction Land Directorate (of the relevant local selfgovernment). On the occasion of the on-site inspection, the committee informs the contracting parties and inspects qualitative and quantitative characteristics of the real estate property; as for the relevant market data, the committee is to gather a minimum of two final Decisions passed by the relevant Tax Administration offices in the procedures aimed at determining the tax on transfer of absolute rights. After the inspection, Minutes is made and signed by the committee members and parties in the procedure. In cases of some special facilities (for example, those exceeding 2,000 m 2 ) the Tax Administration may engage a court expert or an expert service (if the case involves, for example, the military facilities). Tax rate on the transfer of absolute rights is 2.5% Procedure of Determining Tax on Inheritance and Gift Tax on inheritance and gift is regulated by the Law on Property Tax (RS Official Gazette, No. 26/01, 45/02 FCC, 80/02, 135/04, 61/07, 5/09, 101/10, 24/11, 78/11, 57/12 CC Decision and 47/13). Tax on inheritance and gift (and of the tax on property and tax on transfer of absolute rights) is determined based on data from the tax return, business records and books of the tax payers and based on other data available to the body in charge of determining, collection and control of taxes, which are of significance for determining the amount of tax liabilities. Tax base of the tax on inheritance is the market value of the inherited property, less debts, costs and other encumbrances that the taxpayer is to pay from the inherited property on the effective date of the tax liability. Tax base is determined by the relevant Tax Administration office. The tax liability runs from the effective date of the Decision on inheritance, effective date of the Gift Agreement, or in some other manner, in compliance with the Law. Tax rates range from 1.5% to 2.5%, depending on the order of succession, and the Law additionally regulates tax exemptions and tax credits Procedure of determining compensation for expropriated property Pursuant to the Law on Expropriation ((RS Official Gazette, No. 53/95, FRY Official Gazette, No. 16/2001 FCC Decision and RS Official Gazette, No. 20/2009 and 55/2013 CC Decision)), the value of expropriated property, the title on which is transferred to a single person or shared with another person for remuneration, and the value of 47 P a g e

48 expropriated facility, in case where the new proprietor or proprietors are instituted, is to be determined based on the current market value of such facilities as of the date when the new proprietor or proprietors are registered owner(s). The amount of compensation in cash for the expropriated real estate is to be determined in compliance with the current real estate market price, based on the prevailing circumstance at the time when the Agreement on Compensation is concluded, and, in case that no agreement has been reached, based on the prevailing circumstances at the time when the first instance court Decision on compensation amount is passed. Compensation for expropriated agricultural and construction land is to be determined in cash approximating the market price of such land, unless otherwise prescribed by the law. The real estate market price is to be appraised by the body in charge of determining taxes on the transfer of absolute rights on real property. Compensation for expropriated residential building, apartment or business premises is to be determined to approximate the market price of the real estate asset in question. The Law additionally regulates the option to reach an agreement on the compensation for expropriated real estate asset in some other form and corresponding to the amount of compensation for expropriated real estate, which is to be carried out by the relevant Municipal Administration upon proposal by the expropriation beneficiary Activities of Local Self-Government Scope of work of the local self-government bodies pertaining to the real estate appraisal were regulated by the Law on Property Tax (RS Official Gazette, No. 26/01, 45/02 FCC, 80/02, 135/04, 61/07, 5/09, 101/10, 24/11, 78/11, 57/12 CC Decision and 47/13), Law on Planning and Construction (RS Official Gazette, No. 72/2009, 81/2009, 64/2010, 24/2011, 121/2012, 42/2013 Constitutional Court Decision, 50/2013 Constitutional Court Decision, 54/2013 Constitutional Court Decision), Law on Agricultural Land (RS Official Gazette, No. 62/2006, 65/2008 other law and 41/2009), Rules on method for determining the tax base for property tax on title attached to real estate (RS Official Gazette, No. 38/01, 45/04 and 27/11) and by the Regulation on requirements, criteria and method for exercising the right to conversion of the right to use into the ownership right with compensation, as well as on method for determining the market value of construction land and compensation amount based on conversion of the right to use into the ownership right with compensation (RS Official Gazette, No. 67/11 and 20/12) Procedure for determining property tax Property tax on the basis of the title on real estate was regulated by the legal regulations (Law on Property Tax, RS Official Gazette, No. 26/01, 45/02 FCC, 80/02, 135/04, 61/07, 5/09, 101/10, 24/11, 78/11, 57/12 CC Decision and 47/13) and by-laws (Rules on method of determining the property tax base on title attached to real estate, RS Official Gazette, No. 38/01, 45/04 and 27/11). Property tax amount is determined based on data entered in tax return form, taxpayers business records and books and based on other pieces of data available to the body in charge of determining, collection and control of taxes, which are of relevance for determining of tax liability amount. For the property that a taxpayer acquired, started to use or discontinued the use of during the year in question, or for which the tax liability becomes effective or suspended on any other basis, the taxpayer is to file the tax return within 30 days from the effective date of any such event. The taxpayer that keeps their business books is obliged to file tax return with determined tax for that year by March 31 of each tax year at the latest, and the taxpayer that does not keep any business books 48 P a g e

49 is obliged to file their tax return by January 31 of the tax year in question at the latest in case of any changes on such property that may be of significance for the amount of their tax liability that have not been registered in their tax return. Pursuant to the Law, property tax is paid for the real estate in the territory of the Republic of Serbia, and specifically: on title/right of ownership, right to use, possession and leasing. Taxpayers are: physical persons, legal persons, subsidiaries and other organizational units of a foreign legal person, entrepreneurs and other persons keeping their books, in compliance with the Law. Property tax base is the real estate value and it is to be established by the local self-government unit body by applying the following elements: - Useful area, and - Average market price per square meter of corresponding real estate in the territory of the municipality concerned. Zones (a minimum of two zones) shall be defined based on availability of utilities, public facilities and transportation to the central part of the local self-government unit, as well as on any other available amenities in the housing project in question. Average prices per square metre is to be determined by the local self-government based on prices achieved in transactions (a minimum of three transactions) involving corresponding real estate in relevant zones, from January 1 till September 30 of the previous year. For the purpose of determining the tax base, real estate is categorized in the following groups: - Construction land, - Agricultural land, - Forest land, - Apartments, - Residential houses, - Business buildings and other construction facilities used to pursue a business activity, and - Garages and garage spots. Tax payer - Tax return State bodies (data of relevance for determining the tax base) Body in charge of Agreements stamping If a transaction is realized 30 days 15 days 10 days Local Self-Government Unit 49 P a g e Tax base determining - Useful surface area - Average price (zoning, determining the best equipped zone, coefficients, and tax rates) Decision

50 Figure : Passing of Decisions on Property Tax The base of property tax on real property of taxpayers that keep their business books and declare the value of the real property in their books in compliance with the international accounting standards shall be the fair value declared on the last day of the current business year. Pursuant to the Law, certain facilities for which business records and books are kept are exempt from the above rule and their value is to be determined in compliance with the business books (bookkeeping value). In cases of such facilities, if the tax liability is introduced for a tax payer during the course of the year, property tax base for that year is the real estate acquisition value; property tax base in the following years it is determined in compliance with the Law. To provide for an updated taxpayers list, calculation of tax base and of the property tax levied, as well as to monitor the collection of property tax, the Information system for Local Tax Administration offices, called the LPA, has been developed and installed by the Belgrade-based Mihajlo Pupin Institute in the majority of the local self-governments in Serbia. Design, development, implementation and maintenance of IS LPA in more than 130 Municipal Administration in Serbia have resulted in: - Complete and transparent compliance with the law, - Continuity and efficiency in determining and collection of taxes, - Increase in fiscal revenues in the Republic of Serbia, - Precise and quick decision making by the local self-governments on their economic development, - Uniformity of data on population and property, - Availability of data of interest for the relevant state bodies. The Web System was introduced as well the SmartPhone inquiry service for the end users (tax payers) to provide them with statements of their tax accounts on their mobile phones and this system includes specific components for: - Authentication and authorization of the Web System users, - Statement of total account balance with calculated interest on the tax payers accounts, - Additional information for payments of overdue debts. On the occasion of its initial establishing in 2007, data from the database on the physical persons, which was taken from the Ministry of Interior, was entered in the LPA in addition to the data on commercial persons (legal persons), which was taken from the Serbian Business Registers Agency; Ministry of Finance and its Tax Administration provided data on real estate and taxpayers from its databases of individual branch offices in charge of collection of taxes. Thus, the initial database of tax payers and their immovable property was established. Since then, the database is being maintained based on tax returns and also by collecting data on real estate, which was organized by the organizational units of 50 P a g e

51 Municipalities or of the City. It should be specifically noted here that data of the Republic Geodetic Authority were not taken until Figure : Borders of the zones used for property tax calculation and collection in the Municipality of Paracin Procedure for Determining Remuneration for Conversion of Rights Pursuant to the Law on Planning and Construction (RS Official Gazette, No. 72/2009, 81/2009, 64/2010, 24/2011, 121/2012, 42/2013 (Constitutional Court Decision), 50/2013 (Constitutional Court Decisions), 54/2013 Constitutional Court Decree) and pursuant to the Regulation on conditions, criteria and method of exercising rights to conversion of the right to use into title with compensation, as well as on the method for determining the market value of construction land and compensation amount for conversion of the right to use into title with compensation (RS Official Gazette, No. 67/11 and 20/12), application for registration of right attached to public property with compensation in the procedure for conversion of property rights is to be submitted to the local self-government unit s body in charge of proprietary relations on the territory in which the construction land in question is located, which passes the relevant Decision. The compensation amount is to be determined based on the market value of such land at the time of conversion of rights, reduced by the amount of actual costs of the acquisition of the right to use attached to the land in question (providing that such costs were incurred prior to November 11, 2009). 50% of the amount of money earned from the conversion of property rights is paid into the restitution fund, and the remaining 50% is to be paid into the local self-government s budget. The provisions of Law specified that the Serbian Government would prescribe the method for determining the market value of construction land, and the same right is, in some exceptional cases, conferred to the local self-government as well. The local self-government unit may pass an official document to determine the market value of the construction land in its territory for respective urban planning zones. Market value of construction land is presented per m 2 of the gross developed construction surface 51 P a g e

52 area of the facility that can be built on the site in question in compliance with the urban planning document in force. Pursuant to the Regulation, initial value used in determining the market value of the construction land is the amount of fee paid for development of the construction land multiplied by the relevant coefficient. Local self-government unit revises the determined market value of the construction land once a year and modifies it if necessary. Appraisal of the market value of the construction land is performed based on its purpose and on the maximum surface area of the facility built on such land, in compliance with the urban planning document in force, by comparing it with the market value of the construction land with the same purpose in the same or in a similar urban planning zone, as well as based on the level of utilities available on such land and other amenities and limitations of the construction land that is subject to property right conversion. Market value, pursuant to the Regulation, is to be appraised by the dedicated court expert for construction engineering, a company or some other legal entity registered to perform real estate appraisal, except in cases where the market value is determined based on an official document passed by the local self-government unit. The Regulation provisions additionally specify that a legal person with a minimum of one full-time employee holding an internationally recognized Appraisal Certificate may be hired in cases of facilities with gross constructed surface area exceeding m 2. In case that there has been no conveyance of the construction land over the past two years, the Regulation specifies that the following factors may be used to determine the construction land market value: 1) best accepted bid for lease in the construction land lease procedure in compliance with the Law; 2) market value determined in the relevant market of the right to use the construction land on the relevant market for the right to use, based on the legal solution provided in the Article 84 of the Law on Urban Planning and Construction (RS Official Gazette, No. 47/03, 34/06 and 39/09); 3) information acquired from the body in charge of determining tax on conveyance of absolute rights, and 4) other information available to the court expert or the person specified in the Article 12 of the said Regulation. The Regulation additionally provides for certain specific aspects of appraisal. Thus, for example, if the land that is subject to appraisal is developed or if there are facilities built on the land that is subject to appraisal in compliance with the law, and if the urban planning document in force allows for construction of facilities with other purposes and different surface areas, the market value of such land shall be appraised as the full value of u developed construction land in compliance with this Regulation, reduced by 15 to 35 EU/m 2, depending on the quality of construction of the existing facility. If the land that is subject to conversion of right was subject to industrial pollution, the market value of such land shall be appraised as the full value of construction land in compliance with the Regulation, reduced by the estimated costs of removal of industrial pollution. Reduction based on industrial pollution cannot exceed 10% of the estimated full value of the land in question. In addition to this, the Regulation provisions specify that the determined land value shall be valid for a period of two years, and following the two year s period a new appraisal is to be conducted. Court expert is to appraise the market value of the construction land parcel, and appraiser s report is to be delivered within 30 days from the delivery of all the documents required for appraisal. The Regulation provisions specify the obligation for all the relevant bodies to deliver information required for determining the conversion fee to the court expert within 52 P a g e

53 eight days from the delivery of his/her request for such information. The same obligation and deadline is prescribed for the relevant state bodies in cases where the market value is to be determined by the relevant official act of the local self-government unit. The Regulation provisions additionally specify that upon receipt of the expert evidence and opinion, a court hearing is to be scheduled, to which parties in the proceedings are to be invited. Maximum deadline for hearing scheduling is eight days Association of Valuers National Association of Valuers of Serbia - NUPS National Serbian Association of Valuers, NUPS, is an Association of property assessors in Serbia. It was established towards the end of 2006 in Belgrade, as a non-partisan, nongovernmental and non-for-profit citizens association that is to work in public interest and that is to promote the significance of their profession, real estate appraisal method and techniques, capital and equipment. Being a European Union accession candidate country, harmonization of Serbian appraisal standards with the international appraisal standards is a part of the Serbian EU integration process. It is the intention of the NUPS to educate the valuers in compliance with the international and domestic standards, and to then also certify the valuers. This Association is a member of the International Valuation Standards Committee (IVSC). The aim and the task of the Association are as follows: - To gather experts working on appraisal in order to promote their profession and to protect their professional interests; - To organize an independent professional system capable of valuating property and capital; - To define and promote professional standards and best practices in compliance with the legal regulations; - To facilitate and speed up the performance of the valuation tasks in Serbia; - To facilitate exchange of ideas, opinions and information among valuers; - To promote ethical rules and interests of this profession; - To organize and initiate actions related to the valuation tasks; - To provide for continuous education and certification of valuers; - To create a new field in their professional activity, to create the basis for its growth and development in a transition economy; - To contribute to the development of market economy and creation of free, efficacious and fair real estate market; - To create and promote the relations between the professionals working with the real estate, capital and equipment and the state institutions. It is the task of NUPS to support the valuators of real property, capital and equipment in their efforts in acquiring professional competencies and skills, and to verify the calculation of market value that they responsibly and accountably performed by complying with the highest professional standards; NUPS will guarantee full compliance of such standards with the criteria and requirements of the international standards the International Valuation Standards (IVS). NUPS represents the opinions of its members in their efforts to strengthen and ratify the basic principles of valuators profession and practice in compliance with the rules of the Code of Ethics. In November 2013, NUPS issued the National Standard for Real Estate Appraisal. 53 P a g e

54 Serbian Association of Valuers Serbian Association of Valuers was established in July 2011 and unfortunately, there is no official information on their work. The constitutive Assembly meeting was held, the Initiative Committee was set up and the Statute of the Association was adopted. The Association announced that it would work on education of its members and on issuing of valuers certificates for appraisal of real estate, capital and property. In April 2013, this Association published Appraisal Standard that is a translation of the eighth edition of the International Valuation Standards Committee Standard (IVSC) Association of Court Experts Work of court experts was regulated by the Law on Court Experts. Court experts establish their Associations, based on the territorial organization principle, and the largest associations include the Association of Court Experts of Belgrade, Association of Court Experts of Vojvodina, Association of Court Experts of Novi Sad and Association of Court Experts of Niš. The Association of Court Experts of Belgrade is a full member of TEGoVA, European Group of Valuers Associations (since 2011). Professional services of the Association of Court Experts of Belgrade include the following: - Calculation of Dinar value from 1946 to date; - Appraisal of the market value of patents and trademarks; - Appraisal of the market value of bankruptcy debtors assets; - Appraisal of land, movable and immovable property; - Technical inspection of construction facilities; - Technical control of innovation projects; - Legalization of construction facilities; and - Consultancy services and business support services. There are approximately 5,500 registered court experts in Serbia today, 3,000 of which are registered in Belgrade. Special criteria for appointment of court experts (in addition to the statutory, general eligibility criteria for public administration employees) are as follows: - Graduate from the second degree university studies in the relevant field (university study course of the Bachelor Master degree, specialized university study course, specialized professional study course), or a graduate of the basic study course, for a specific field of court expert work; - A minimum of five years of professional experience in a relevant field; - Expert knowledge and practical experiences in a specific field of court expert work; and - Candidate must be worthy of pursuit of the court expert profession National Mortgage Insurance Corporation After having collected information on achieved market prices in the residential real estate market in Serbia for seven years, the National Mortgage Insurance Corporation (NMIC) has created a database, which is now used to assess and predict price trends for residential real estate and to present data on real estate index price - DOMex. When providing insurance for home loans, NMIC gains access to information about achieved market values of residential real estate apartments and houses in the entire 54 P a g e

55 territory of Serbia and thus has at its disposal information about the type of the real property, its surface area, Municipality in which the real property is located, as well as the date of the transaction. Thus, this is information related to the achieved prices; set of information that the NMIC uses for calculation of DOMex is somewhat narrower than the set of information on all the realized sales transactions in Serbia. DOMex is a unique indicator of price trends per m 2 of residential real estate in different regions, territories and Municipalities in Serbia, and it provides information to the general public about the residential real estate market. DOMex for a specific period (month, quarter or year) is obtained by comparing the average price of all the prices per m 2 achieved during the given period in a given territory (region, territory or Municipality) with the average value of all the prices per m 2 realized in the basic period in the territory in questions. By comparing the individual DOMex indices per specified periods for a same territory, trends in prices of residential real estate per m 2 can be monitored, presented as a trend in percentages, and so on. Based on DOMex and other information, conclusions can be drawn about numerous features of the real estate market in Serbia, such as the lack of flexibility in prices compared against the number of realized transactions. Figure : Diagram showing the number of residential properties in the real property market per individual regions 55 P a g e

56 Figure : DOMex values per individual regions Figure : Average price of apartments per m 2, per individual regions 56 P a g e

57 Annual Quarter Total 2,272 2,357 2,422 2,508 1,782 2,078 2,347 1,877 1,218 1,592 1,875 1,752 1,403 1,813 Belgrade Region , Belgrade area , Belgrade Belgrade-Barajevo Belgrade Vozdovac Belgrade-Vracar Belgrade-Grocka Belgrade-Zvezdara Belgrade-Zemun Table 3.6-1: Number of residential real properties in the real estate market for a part of the Belgrade Region from 2010 to 2013, per individual quarters Table 3.6-2: Number of residential real properties in the real estate market per individual regions from 2009 to 2013, per individual quarters Annual Quarter Serbia 1,271 1,521 1,495 2,262 2,272 2,357 2,422 2,508 1,782 2,078 2,347 1,877 1,218 1,592 1,875 1,752 1,403 1,813 Belgrade , Region Vojvodina Region Southern and Eastern Serbia Region Sumadija and West Serbia Region , , P a g e

58 3.7. Real Estate Agencies There is a significant number of agencies and individuals performing the real property appraisal in Serbia. According to data of the Serbian Business Registers Agency, there are 1,040 registered real estate agencies in Serbia at the moment pursuing the real estaterelated business activities. Appraisals are made to determine the asking prices of the real estate assets, and agencies usually carry out appraisal of all the property assets types. Other than the sales transactions, appraisals are also carried out for the needs of reports on assets and rights that are registered as investments in companies, valuation of investments (in cases of privatization), appraisal of balance statement items, mortgages, changes in company status or on the occasion of company s or corporate capital appraisal. The following immovable property assets are most commonly appraised: - Buildings, - Construction land, - Agricultural land, - Orchards and perennial plantations, - Forests and forest land, - Production equipment and plants, - Vehicles and machinery, - Business complexes of petrol or gas stations, - CDS or cable distribution systems, - Mines and quarries (as the natural resources), - Stock and shares of the company share/nominal capital,... On the occasion of appraisal of buildings, a number of methods are used depending on the type of the real estate asset and purpose of the appraisal. In valuation of buildings, their market value is most commonly determined by using the cost approach and sales comparison approach. In the cost approach, price is determined based on the construction value of the same facilities on the same location, reduced by the actual depreciation of such facilities. The price includes the price of construction of the facility (material and work) and complete infrastructure and utilities on the location and in the facility. In sales comparison approach, real estate market value is determined based on the sales transactions with real estate assets in the same or in some similar locations. In determining the price of a real estate asset, assessors usually take into account some additional factors, such as: the location value, proprietary rights, quality of investment-related and technical documentation, potential for reconstruction and adaptation, available options for alternative use, distance from the housing development centre and transport network, micro and macro location, and so on. On the occasion of appraisal of forests, the forest or wood volume as well as the forest land are included in the appraisal. Wood volume value is calculated according to the types of trees and surface units (in sustainably managed forests). Total wood volume is presented in volumetric units and reduced by the wood chips mass or manufacturing residues. Net wood volume is multiplied by the current price for the specific type of wood to obtain the selling price of timber. Production costs are deducted from the calculated price (actual costs of cutting, manufacturing and transportation of wood assortments to the transport routes). The 58 P a g e

59 value of forest land is then added to the wood value that was calculated in the above manner. Appraisal or determining the market value of agricultural land in the Republic of Serbia is most commonly performed by using the following parameters: - Location (cadastral municipality, tract); - Creditworthiness (land type, class); - Intended use (land available for agricultural production of certain types of products); - Distance from the populated areas; - Distance from the hard surface road; - Distance from the source of electrical energy; - Distance from the source of water, and - Potential for irrigation. The above listed elements are provided by means of: - Providing access to title deeds; - Providing access to copies of the plan kept by the service in charge of the Real Estate Cadastre; - Providing access to the drawings of the land parcels (in the case of agricultural companies); - Providing access to pedology maps, and - On-site inspections of the land. In addition to the above, information on market prices for agricultural land in the given territory and information on tax base amount for agricultural land as determined by the relevant Tax Administration unit with territorial jurisdiction are used in determining the market value of agricultural land. The value of real estate assets that are built on the agricultural land, such as the irrigation system (the immovable part of such systems), buildings, fence, wells, roads and plantations, etc., is added to the value of the land itself; the real estate assets on the agricultural land are, however, appraised by using another appraisal method. Some real estate agencies have created their own databases for property search for sale or lease (Figure 3.7-1). 59 P a g e

60 Figure 3.7-1: Property search facility ( Based on information on realized sales, the real estate agencies offer the real estate appraisal services. For example, on the website of srbije-nekretnine (Figure 3.7-1), apartment appraisal service is available based on the information on location, surface area and year of construction, along with a short explanation of the appraisal methodology used (Figure 3.7-2). 60 P a g e Figure 3.7-2: Real Estate Appraisal Results (

61 Information on real estate value is provided for real estate intervals, and in addition to appraisal, the site provides the scope of the real estate sample, average price and highest and lowest residual values. Direct contact with Agency staff is recommended to potential clients for a more detailed appraisal of their real estate property. The real estate website (imovina.net) contains a database of 61,508 real estate assets offered for sale/lease in the entire Serbian territory and it provides photographs as the starting point for the real estate search (Figure 3.7-3). There are several dozens of similar examples of real estate agencies that more or less operate in a similar manner and fulfil their roles on the local level by providing significant benefits for citizens and for the real estate agencies that increasingly make investments in the real estate market and act as investors or joint investors. Small and medium-sized real estate agencies have proven to be very resilient to the problems faced in the process of collecting information and resolving problems that the citizens face in their attempts to acquire various construction permits, to meet the prescribed requirements for utility connections and preparation and drafting of documentation and stamping/authentication of various Agreements. Owing to the nature of Serbian administration, real estate agents are nowadays an unavoidable element in selection and acquisition and title registration; without the assistance that they provide, buyers that in most of the cases lack the necessary knowledge or skills, would have great difficulties in realizing their wishes. 61 P a g e

62 Figure 3.7-3: Available search option for purchase of a desired apartment ( 62 P a g e

63 4. EXAMPLES OF GOOD PRACTICE IN REAL ESTATE APPRAISAL SYSTEMS 4.1. Introduction Real estate appraisal systems are organized in a number of different ways in the European countries. Differences among these individual systems pertain to the following: - Legal framework that regulates the real estate appraisal; - Profiles of experts and professionals working on the real estate appraisal; - Eligibility criteria for valuation profession; - Real estate appraisal methods used; - Standards that the valuers abide by in their work, etc. In addition to the above, each country has its own specific features that originate from their accumulated national legal heritage or bodies of statutory rights and obligations within their respective legal systems, title and other modalities of proprietary rights attached to real property that is difficult to convey, and such modality of proprietary rights attached to the real estate property is difficult to appraise. The real estate appraisal systems in following countries are analysed in this Paper as the best practice examples: Austria, Germany, Greece, Russian Federation, Ireland, Norway, Italy, Sweden and Slovenia. Available information on real estate appraisal system in these countries differ in character, and due to this, the level of details in the descriptions of respective real estate appraisal systems parameters will inevitably vary for individual countries Legal Framework The necessary precondition for real estate appraisal consists of the legal regulations that regulate this field. Legal regulations should regulate the criteria for candidates for valuation profession, certification and recertification criteria; it should regulate supervision of implementation of different real estate appraisal approaches, disciplinary measures for inadequate performance of valuers tasks. In addition to the above, legal regulations should regulate the technical details pertaining to the real estate appraisal and provide recommendations on most suitable real estate appraisal methods, etc. Table 4.2-1: Legal regulation for real estate appraisal implementation Country Legal Regulations Austria Austria s Federal Property Valuation Act (LBG) (1992.) Provincial Construction Codes Other legal fields: Administrative Procedure, Criminal Procedure, etc. Germany German federal building code (BauGB) German federal valuation decree (Immobilienwertermittlungsverordnung 63 P a g e

64 Greece - ImmoWertV) German administrative regulation for valuation ( Wertermittlungsrichtline WertR) Laws No.: 820/1978, 979/1979 et al. Decrees passed by the President: 279/1979, 488/1979 et al. Code of Ethics for SOE Members Russia Federal Valuation Law (#135) (1998); Ireland Norway Italy Slovenia Sweden The Amendments to the Federal Valuation Law (#1578); The valuers profession has so far managed to avoid to get legally regulated, despite the efforts made in that direction; Laws regulating the lease of land; General legal regulations that provides for various aspects of conveyance of rights; The Law regulating the selection of publicly designated court experts; Standards and Rules regulating real estate appraisal; Law on Mass Appraisal of Immovable Property; Law on Real Estate Registration; The Property Assessment Act The Property Assessment Ordinance As presented in Table 4.2-1, legal framework for implementation of real estate appraisal consists of various legal norms prescribed in various laws. Austria, Germany, Slovenia, Russia and Sweden have laws that regulate real estate appraisal and by-laws that provide details on certain areas of real estate appraisal. In Greece, Norway and Italy, legal regulations are complied with in the real estate appraisal, which in individual segments include real estate valuation (laws regulating all forms of title or rights to real property, lease of land and so on); in Ireland, the valuers profession is not legally regulated, despite a number of attempts to legalize this profession. In countries in which the valuers profession is in its early development stages and which lack legal regulations to regulate this field of activities, real estate appraisal has been regulated by standards that are observed by the valuers. Austria. Principles of real estate market value appraisal are set out in Austria s Federal Property Valuation Act (LBG) that was passed in In addition to the real estate market value, there is also the non-market value of the real estate, which may be calculated in compliance with the Austrian Banking Act (BWG) (the credit value of the real property), the Mortgage Banking Act (HypBG) (mortgage value of the real property) or the Residential Apartment Ownership Act (WEG) (practical value of an apartment). The legal basis for real estate appraisal additionally includes the principles that regulate other legal fields, such as the criminal proceedings, administrative proceedings, and others. 64 P a g e

65 Germany. Germany is characteristic for its federal state system that is characterized by duality of the legislative process and enactment of laws: there are legal regulations passed to regulate the central government level, and legal regulation that pertain to the constitutive federal units. Real estate appraisal in Germany is regulated by the German Federal Building Code (BauGB) that was passed in 1960, pursuant to which the real estate market value was defined as the property value on a specified date, which is achieved in an ordinary transaction on the fair market and under the actual, prevailing market conditions, where there are no family relations between the parties in the transaction. Another document of importance that regulates the real estate appraisal in Germany is the appraisal regulation (Decree) passed on the local government level of the constitutive federal states - the German Federal Valuation Decree (Immobilienwertermittlungsverordnung - ImmoWertV) that serves as the basis for the real estate appraisal procedure and that provides guidelines for valuation the German Administrative Regulation for Valuation ( Wertermittlungsrichtline WertR). The law regulates organization of this system and its functions. On the provincial level, the Supreme Valuers Council is established and it comprises of a certain number of Valuers Councils that operate on the level of local self-governments and towns with population exceeding 60,000 (there is a total of 1,367 Valuers Councils in Germany). Each Valuers Council has its President, Deputy President and a number of experts (that are specifically selected for this duty of honour) of different professional profiles (construction engineer, economist, expert for real estate, and so on). Valuers Councils produce Reports on Real Estate Market Values; it maintains the database on selling prices and determines indicative values of real estate assets (Figures and 4.2-2). Figure 4.2-1: Map of tentative land values ( (970 = value presented in EUR / m² of surface area, 1.5 = coefficient of gross developed surface, W-IV- 40 = residential surface area with 4 floors and 40 m of depth) 65 P a g e

66 Figure 4.2-2: Map of tentative value of other real properties ( (Undeveloped (W-1,5/780) W = residential 1,5= gross developed surface area 780 = value presented in EUR/m² (residential/useful surface area); Developed (W-1930/1150) W = residential 1930 = year of construction 1150 = value presented in EUR/m² (residential/useful surface area); Communal space (1970/1900) 1970 = year of construction 1900 = value presented in EUR/m² (residential) Valuers Council is assisted in their work by the Valuers Council branch office that is a stationary office or an office within the Geodetic Unit or within a local self-government unit that on average has the staff of 15. The Valuers Council members are appointed for the period of 4 to 5 years, if elected by the regional self-governments. Information on tentative value of individual real estate assets are graphically presented in the BorisPlus application (Figure 4.2-3) that is managed by the Supreme Valuers Council. Figure 4.2-3: Display of urban zones and tentative real estate prices in the BorisPlus application ( BorisPlus, in addition to the graphical data, contains a multitude of numerical data of other types that are representative of individual real estate asset and majority of data, other than 66 P a g e

67 the information on property owners, are publicly accessible for the interested users. By providing this, Valuers Councils act in compliance with their legally prescribed obligation pertaining to the establishing of a transparent real estate market. Appraisal of the credit value of real property is regulated by the German Pfandbrief Act (Pfandbriefgesetz) and by the Regulation on the Determination of the Mortgage Lending Value (Beleihungswertermittlungsverordnung). Greece. Real estate appraisal in Greece is carried out the valuers, who are members of the Body of Sworn-in Valuers (SOE) in Greece, and these valuers hold exclusive right to the title of sworn-in valuers in Greece. Their work is regulated by a number of Laws (No. 820/1978, 979/1979, 1041/1980, 1346/1983, 2229/1994, 2515/1997, 2753/1999, 2778/1999, 2940/2001) and Presidential Decrees (No. 279/1979, 488/1979, 140/1990, 105/1999, 340/2000). Greece undertook to develop the real estate valuation system by relying on CAMA (Computer Assisted Mass Appraisal) that is used to simplify the valuation procedures, shortens the time necessary for such tasks and efforts employed in the analysis of a large number of input data that is required in the valuation procedure. In Greece, OLMVS (Objective Land Mass Valuation System) embarked on the task of developing the system in 1985, in compliance with the Law on Taxes (from 1982). It encompasses the entire territory of this country and it is based on the objective criteria that are acceptable both for the requirements of the mortgage market, and for expropriation or assessment of the total state capital. Within the OLMVS, each local self-government territory is divided into as many value zones as necessary to simulate the variation of real property values in the area. The initial, basic value per m 2 is then assigned first floor residential apartment for distinct suburban zone that is farthest off from the central part of local self-government district. Relative Tables and charts are publicly available through the Ministry of Finance and Economy. The objective, taxable value V obj of an individual real property is calculated by multiplying the initial value V zone by the factor x ij that is presented in the Tables, as the following equation:, Where i represents the property value factor (land parcel size, age of constructions, exploitation coefficient and other attributes of the land), and j indicates the specific type of the real property in question (residential, land parcel, garage, etc.). The frequency of real property appraisals in OLMVS was legally regulated to be carried out biannually, when the initial values are to be updated in this system, independently for each individual region. Table 4.2-2: Updating of objectively appraised real estate assets values in Greece Greek experiences in real estate appraisal have confirmed the necessary requirement of thorough professional understanding of the real estate market, taxation policy and investment climate. The real estate appraisal system fails to adequately reflect the economic 67 P a g e

68 situation in Greece. The real estate market in Greece has dramatically changed over the past years, following the Greek accession to the European monetary union, capital projects implementation, low interest rates and introduction of the new financial instruments such as leasing or real estate funds. Towards the middle of the past decade (in 2005), OLMVS value was, generally speaking, below the market value (MV), which came as a consequence of the character of the political system. OLMVS is among the simpler, manually operated systems, without a developed component for monitoring of the real estate market values in the neighbouring region. The values of V obj /MV vary in individual zones and within individual real property types. Periodic renewal of appraisals often resulted in considerable modifications of the initial values, and it is in such periods that the Ministry resorts to modifications in rates of influences from different real estate factors, which leads to system distortion and can be influential on the real estate market, changes in the policy of state influence, and even on the political upheavals. CAMA system was initially used in Greece towards the beginning of 2000, which turned out to be a very effective improvement in the transition from the old OLMVS to an updated, GIStechnology based system. Integration of GIS and CAMA solutions has resulted in connecting the real estate characteristics with their spatial positions. The most important advantages of such integration have resulted in: 1) improved organization and aggregation of Cadastre data; 2) homogenous neighbourhoods analysis; 3) improved cartographic presentation of CAMA data queries; 4) efficacious indication of valuation anomalies, as well as in 5) improved interactive data modification. Unfortunately, real estate appraisal in Greece is carried out unregulated by any standard and with no coordination from any part whatsoever, and under such conditions various organizations cope by resorting to various means. Thus, the banking sector relies on services by externally hired licensed freelance assessors, Courts hire sworn-in court experts, real estate agents rely on their own experience, and property consulting companies develop their own appraisal models and market simulation methodology. Priority among the developmental tendencies for the Hellenic Cadastre is however the development of the Land Information System, which is a solid foundation for integration with the Greek CAMA model. In Greece, this service is within the remit of the Hellenic Ministry of Finance and Economy, and is, to a significant degree, interconnected with the tax system. The central system server is located in the Ministry. Access to it is free, but the modification options are available to the authorized personnel only. As of lately, the importance of CAMA is growing, and it is expected that the value of real estate will not be subject to different appraisals any more, providing that the market value, selling price and tax base remain identical. In addition to this, CAMA is expected to contribute to improvements in uniformity and objectivity, and also to improvements in social justice. Russia. The first international seminar on real estate valuation was organized in Saint Petersburg in 1993, and on the following year, in 1994, Russia became a member of the international valuers organizations (TEGoVA, IVSC and FIABCI). The Federal Valuation Law (No. 135) was passed in 1998 and in addition to the methodology and real estate valuation procedures, it set out provisions on regular educational training program for valuers within the high education system. Amendments and addenda have been passed to modify this Law The Amendments to the Federal Valuation Law (No. 1579). 68 P a g e

69 Ireland. Despite efforts aimed at legal recognition of the valuers profession and real estate appraisal, this field has not yet been legally regulated in Ireland. Real estate appraisal is performed in compliance with the EVS and IVS Standards. Norway. Norway doesn t have a specific law to regulate real estate valuation either, and valuation is thus legally regulated by the laws regulating lease of land and all forms of conveyance of rights attached to land. Italy. Italy doesn t have a specific law to regulate the real estate valuation either. There is a Law regulating designation of publicly appointed court experts, and real estate valuation is carried out in compliance with the national and international standards. Slovenia. In Slovenia, the Law on Mass Real Estate Appraisal has been passed, and thus the problem of mass appraisal has been raised to the highest level. The Law specifies the elements of the valuation system, responsibilities, standards, real estate assets that are to be appraised, Register of selling prices, Valuation Models Register, general valuation process, appraisal and indexing processes. Parallel with this, to keep complete record on modifications in the existing and on the newly built facilities, they passed the Real Property Registration Act. This Law specifies data on facilities and parts of facilities that is to be collected and verified directly and by means of the tailor-made questionnaires, directly in the field. The on-site part of this job took one year, and the same amount of time was spend in collected data processing and establishing of the Real Estate Register (it was completed in 2008, with approximately 6.5 million of registered real estate facilities). Implementation of the valuation system on the operational level began in In compliance with the Law, a special Valuation Office was established with the Slovenian Surveying and Mapping Authority towards the end of 2006, consisting of 24 full-time experts (as of 2012), 12 of which are working on the central and another 12 working on the regional level. The Law on Mass Real Estate Appraisal was amended in 2011 to include statutory obligation of systematic and all-inclusive collection of data on sales and lease of residential real estate and business facilities, and consequently the Register of Selling Prices was gradually promoted to become the Real Estate Market Register. The complete system was established and as of January 1, 2012, it is operational and in use in the entire territory of Slovenia (Figure 4.2-4, Table 4.2-2). In compliance with the Law, valuation model is permanently assessed and tested for adequacy once every four year. Acceptable difference between the valuation and achieved prices should not exceed 10%. 69 P a g e

70 Figure 4.2-4: Information on value zones in the residential property system Table 4.2-2: Valuation Table Sweden. In Sweden, the Real Property Assessment Law was passed to regulate organizational structure and valuation of real property. Each property has its official appraisal that includes the value of land and all the existing buildings on it. Provisions of the Law specify that appraised value must be 75% of its market value at the minimum, and that the valuation of real property is to be carried out once in three years. The valuation standard is the fair market value, in the highest and best use of the real property, and valuation time period is the second year preceding the year of taxation (for example, for 2013, it is the year of 2011). The National Land Survey (NLS), as a public institution, is responsible for maintenance of the real estate valuation model and for the use of IT. The NLS maintains the Selling Prices Database that is integrated in the Property Information System. Property taxes, valuation methods and standards were all set on the national level and are within the remit of the Ministry of Finance (and its Tax Board). The activities of private valuers are 70 P a g e

71 carried out on the regional level and are included in the zoning renewal procedure, determining of value zones and valuation rules. The Selling Prices Database contains information on all transactions in Sweden and is the basis for the market analysis. In the valuation model, information on the last three years is used and it is analysed in detail to be prepared for the general assessment. The missing information is supplemented by using a special procedure that is carried out through the direct contact with the property owners or tenants, through the local Tax Administration offices. This process begins with the analysis of the value zones according to data from the previous round of general assessment, during which amendments are made to take account of any on-site changes; after that, the value level for the norm property is specified in individual value zones. By using tables and formulae, other real property assets are appraised based on their characteristics that are compared against the norm property. Valuation models and zones are tested to establish their congruence levels, where the ratio study is used (the relation between the assessment obtained by using the valuation model and the actual price; average ratio should be 0.75 and higher, in compliance with the Law, the provisions of which prescribe the minimum threshold of 75% of the market value). The last stage of preparation includes the selection of valuation rules and valuation maps with value zones and selected value levels for individual zones. The work on zoning is before all based on valuers experience, and to a lesser degree on statistical analysis. The process begins with an analysis of zone from the previous valuation cycle (that was carried out three years ago). Increase in the number of zones of approximately 10% is common in between two valuation periods (information from 2007). The second part of this process pertains to the assessment of values of all real property assets and it is carried out by the Tax Administration, predominantly on the local level. The procedure is initiated in mid-october, one year prior to the general assessment when relevant questionnaires are delivered to property owners for inspection and approval. Tax Administration prepares and delivers the questionnaire based on the information from the Register, attached to the draft appraisal, which is based on the Registry data and valuation rules for the relevant zone in which the real property is located. Property owners are entitled to objections that need to be delivered to the Tax Administration by the beginning of November (within 15 days from receipt of questionnaire). After having analysed the owners objections and after having eliminated the perceived errors, the Tax Administration delivers their Decisions to the tax payers by the end of June of the same year (the year in which the assessment is carried out). In case that the tax payer has any objections to the valuation, he/she is entitled to request a new assessment, for which a statutory five years deadline is established, from the end of the year in which the assessment was carried out. Tax payer is entitled to object to the new assessment before an Administrative Court. Appeal does not have suspensive effect on tax payment, and if the tax payer is in the right, any such difference, with interest, is to be returned to the tax payer. An example of commercial property valuation (multiple floors family houses, offices, hotels, shops, etc.) will be used here to briefly describe the valuation methodology and appraisal model used. Properties categorized as commercial are assessed by combining the comparative sales method and income method. Owing to the fact that the number of transaction is relatively small in comparison with the single family properties, information on lease is valuable here. The most important factor of the value of commercial property is their location. According to data from 2006, approximately 2,000 value zones were established in Sweden in the commercial property category. The zones are relatively small, and the prices are higher in the central parts of towns; in the suburban parts and in central parts of the 71 P a g e

72 country the situation is just the opposite. Property values are appraised separately for the land and for the facilities built on it. Land is valuated first, according to the construction rules (which are most respected with in Sweden), and only then the facilities are valuated as well. In case of the land, the valuation model include: the location, purpose and construction rights (gross residential surface area in m 2 ) and for each value zone the value of land is determined per m 2 of permitted gross residential surface area. In case of facilities, the following elements are used as factors of importance for this model: location, intended purpose (residential facility or other rooms), gross lease and age. By comparing the selling prices and rents, average gross capitalization factors are determined for individual zones, which are also in a part determined by the facility s age of the facility (apartment). Age as a factor of influence has a very important role and it is indicative of the life expectancy of the facility. Age is determined for individual facilities based on the year (the value-year), so that the information on the year of construction of a facility is among the mandatory information to be collected. The mathematical valuation model for facilities is as follows: Where: stands for assessment (unadjusted), is the capitalization factor (which depends on the zone), stands for rent, and - for the facility s age. Sweden has the established Real Property Register that contains information on real property, titles and values. Several separate parts or registers are integrated in the Real Property Register, and specifically: the Land Register, Extract from the Property Tax Assessment Register that is maintained by the Tax Agency, Address Register and Register of Objects. Information in the Real Property Register is public and available to government bodies, banks and valuers. There is a separate Sales Price Database that is used for various real property valuation purposes. This database is created as an extract from the Real Property Register and it contains the information on sale transactions (price, purchaser, seller, transaction data, real property type, real property characteristics, etc.). Property Assessment Register is a separate Register kept by the Tax Agency, which has been integrated in the Real Property Register. Updating of the Property Assessment Register is among the tasks and remit of the local government authorities that deliver information on construction permits to the local tax units, while at the same time the local cadastres deliver information on modifications. Once a year, and based on information on effectuated modifications, the Tax Agency mails a special form to the tax payers (the property declaration form) to obtain their opinion on details (during a three years period, approximately 15,000 transactions with commercial real property are registered, and the number of replies to the delivered Tax Agency questionnaire can reach up to 90%, which is a good basis for value zones creation and identification of capitalization factors). It is important to additionally note here that the collected market information is verified, and that any so-called non-representational sales are discarded (non-compliance with the market openness principle, transactions between family members/relatives, etc.). Valuers role is important in this procedure, both on the central and on the regional level. According to 2006 data, of the total number of 15,000 sales transactions with real property, approximately 60% is discarded as useless. 72 P a g e

73 Finally, in presentation of collected information and numerous analyses, an important place belongs to the GIS technology. GIS is integrated with the CAMA system, and with each modification in capitalization factors, new values of real property are automatically updated along with the new ratios of achieved prices and appraisals. Similarly to that, modifications of property values are automatically obtained in the case of the modifications in value zones boundaries. Upon completion of a mass appraisal cycle, results obtained are published on the Tax Agency webpage (value zones, valuation rules and application method of valuation model used) Valuers Profile In the European countries, real estate valuation is predominantly carried out by the experts of two different profiles: accredited court experts and certified valuers in compliance with the international standards (Table 4.3-1). In countries in which valuers profession has not yet been legally regulated, and in those in which this profession is in its early, developing phases, there are currently certain interim solutions that will be used until legal regulations are passed to regulate this field. Table 4.3-1: Experts profiles in real property valuation field Country Austria Germany Greece Russia Ireland Norway Italy Slovenia Sweden Experts Profile Accredited court experts Certified Valuers in compliance with the ISO/IEC Standard Publicly nominated and sworn valuers Certified Valuers in compliance with the ISO/IEC Standard Sworn-in Valuers in compliance with the ISO/IEC Standard Appraiser (profession officially recognized by the Russian Labour Ministry in 1996) Recognized European Valuers REV Publicly nominated valuers, Certified valuers in compliance with the ISO/IEC Standard In Norway, valuers are predominantly surveyors Publicly appointed court experts Valuers holding the CRIF Certificate, in compliance with the ISO/IEC Standard Recognized European Valuers REV Sworn-in valuers and experts in civil engineering Valuers with certificate of the Agency of the Republic of Slovenia for Promotion of Economic and Company Reconstruction Valuers holding the Licence of the Agency of the Republic of Slovenia for Promotion of Economic and Company Reconstruction Certificate of a designated real Estate Valuer of the Institute of Auditors Certificated real estate valuers Austria and Germany have their respective real estate valuation systems organized in almost identical manner, both in respect of the profile of experts valuating the real estate, and in respect of eligibility criteria for these experts. Accredited court experts in Austria must pass special accreditation procedure and register in the Provincial Courts special lists of court experts. The Federal Law on Accreditation of Court Interpreters and Experts 73 P a g e

74 (Sachverständigen - und Dolmetschergesetz SDG) provides for accreditation by means of authorization and it additionally includes an exam aimed at professional quality assurance. Accredited court experts must be registered in the electronic statistical database of accredited court experts and interpreters (Statistical Database of Sworn Court Experts and Sworn Court Interpreters). Accreditation criteria for publicly nominated and sworn valuers in Germany are very strict and similar to the requirements in force in Austria. The ISO/IEC Standard is aimed at creating customers trust in certification provided by certification bodies for professionals in European Union member states. Harmonization of exams and certificates in the European Union member states should serve as a basis for mutual recognition of national certificates in the Member States. Ministry of Labour and Economy is the authorized accreditation body in Austria. At the moment, there is one accredited certification body in Austria for persons working as property valuers in compliance with the above mentioned Standard. This body is called ImmoZert Gmbh and its official seat is in Vienna; it obtained its accreditation in Valuers certified in compliance with the ISO/IEC Standard in Germany are nominated by the state certification body (Chamber of Commerce, Chamber of Trades and other certification bodies). Certification is focused on verification of technical knowledge, expert knowledge and capacities to fulfil professional responsibilities. In Germany, valuers profession is supported by expert bodies Supreme Experts Council, Experts Councils in local self-governments and larger towns, and by the Working Group of Expert Councils Chairpersons, which is regulated by the law regulating construction, or the German Federal Building Code (BauGB) and legislation on the level of German federal states. In addition to real estate valuation for the needs of the local self-government units, their task is to draft Reports, create databases of sales transactions and perform appraisal of real property to provide indication of price in individual property markets, in order to provide and ensure transparency of the real estate market. Valuers in Greece are self-employed persons, members of association of sworn valuers, Body of Sworn-In Valuers (SOE). All the SOE members hold the certificate in compliance with the ISO 17024, ISO and ISO 9001 Standards. General educational profile of valuers in Greece is diversified construction engineers, architects, surveyors, mechanical engineers and professionals of the related professions. National organization of person pursuing the business of real property valuation in Russia was established in 1993, when the Russian Association of Appraisers was founded; over time, this organization earned its reputation both in the field of professional education and in accreditation of professional institutions. Appraisers profession was officially recognized in 1996, and it is pursued by persons performing the immovable property valuation tasks, who hold relevant professional qualifications and who are members of one of professional organizations. Compliance with the EVS standards in real property valuation in Russia and translation of these Standards in Russian resulted in high level of cooperation between the Russian Association of Appraisers and the European Group of Valuers Associations. Designation of a group of Russian appraisers as the Recognized European Valuers (REV) can be considered to be the result of cooperation between these two associations. In Ireland, the publicly nominated experts are mainly employed by the Government to perform valuation of tax payers property; other tasks related to real estate appraisal are entrusted to the certified valuers. 74 P a g e

75 In Norway, real estate appraisal is predominantly carried out by geodesy experts, while the Norwegian Association of Valuers and Surveyors, the NTF, has undertaken to develop professional standards and ethical rules pertaining to work on real estate appraisal and geodetic jobs. There are three different categories of appraisers in Italy. One of these categories is made up of the publicly nominated valuers (they are selected in compliance with the Law on selection of court experts). The second category is made up of appraisals holding the CRIF certificate, in compliance with the ISO/IEC Standard, and the third category is made up of the Recognized European Valuers (REV) Eligibility Criteria for Professional Valuers There is a number of distinguishable categories of eligibility criteria for professional valuers: education, practical working experience, professional experience in performing jobs related to the real property appraisal, relevant exams passed, membership in professional organizations, monitoring and control and education. Professional eligibility criteria are the strictest in Austria and in Germany, and we shall thus dedicate the largest portion of this Chapter to this issue. Among the eligibility criteria for accredited court expert in Austria is the requirement that the candidate can fluently speak and write in German, and also that the candidate has submitted the Accreditation Application to the Provincial Court of relevant jurisdiction. Such Application must be attached to the references provided, to support the candidate s continuous professional development and training, as well as the number of real estate appraisal cases (registered in the Court) that the candidate has completed. In Germany, in addition to the above mentioned eligibility criteria, the candidate must provide copies of certificates for all the relevant academic and professional qualifications (issued by the recognized state University or High School in architecture, construction management/engineering, geodesy, economics and the related fields), proof of professional experience and experience gained in property valuation (of prescribed duration). In Austria, on the occasion of submitting the Accreditation Application for Court Experts, candidates must provide Professional Liability Insurance policy amounting to the minimum of EUR 400,000. In addition to the mandatory requirements pertaining to fluency in spoken and written German language and relevant qualifications (educational degree in architecture, construction management/engineering, geodesy, etc.), a candidate must submit an application to the relevant certification body and provide the required supporting documents to become a certified valuer in compliance with the ISO/IEC Standard in Austria or in Germany. In addition to the Application, proof of acquired qualifications, proof of practical work related to real property of prescribed duration and three expert reports on real estate appraisal must be submitted. Once that the documentation submitted by the candidate is verified, the Commission passes their Decision on candidate s eligibility and exam taking. The exam consists of a written and oral part. During the written part of the exam, the candidate s skills in resolving a number of appraisal tasks for different types of property and/or facilities and in verification of authenticity of a complex exerts Real Estate Appraisal Report are tested, and he/she is asked to provide answers to a number of questions. The oral part of the exam is carried out before a Commission consisting of three members and it is not open for the general public. 75 P a g e

76 A candidate that fails at the written part of the exam may take the exam again within the following six months period; in case of a failure at the oral part of the exam, a candidate may take the exam again over a period of 3 months. In case that a candidate should fail to pass the oral part of the exam within a period of 18 months from passing of the written part of the exam, the exam is annulled. The third time restriction pertains to the fact that the entire exam may be taken by the eligible candidates for a maximum of two times, within a period of 5 years. The Certificate is issued for a period of 5 years. Upon certification, valuers work under constant supervision of certification bodies. Person holding a certificate is obliged to attend specialized professional training courses for a minimum of 3 days each year. Upon request from the Certification Commission, candidates are obliged to deliver their Reports on completed real estate appraisals for inspection. All the appraisals must be assigned positive grades, or the valuer may be required to take some corrective measures. In the case of the members of the Court Experts Council in Germany, the valuers licence is not of key importance; attention is primarily focused on the professional experience and results of work of the Council members. Recertification (3 months prior to expiry of the certificate at the latest) is performed to extend the validity period of the certificate for 5 years. The main prerequisites for recertification are the positive grade for the person holding the Certificate during the monitoring process, complete body of proof for professional training attendance and positive assessment issued from the audit inspection. Recertification includes inspection of delivered materials and oral conversation between the candidate and Certification Committee. In case of any damage incurred by professional misconduct, valuers in Russia are personally liable with all their personal property. On the occasion of submission of Application for professional valuer s qualification, the relevant state body requires proof of mandatory professional insurance coverage amounting to a minimum of RUB 300,000. Valuers in Sweden are members of the Association of Valuers that is closely connected to the Swedish Society of Real Estate Economics (SFF), which is an IVSC member organization. Members of the Association of Valuers are officially authorized professionals certified by the SFF, providing that they should meet the following criteria: a minimum of three and a half years of university education in the field of economics, law and construction management, three years of professional practice and adequate knowledge of the real estate market. To keep their certificate, valuers must pursue permanent lifelong education Real Property Valuation Standards With the aim to ensure that uniform reports on real property valuation are used, the national and international Associations adopted relevant Standards. All the Standards prescribe the minimum mandatory contents for Valuation Reports (the professional standards), as well as the ethical standards, the aim of which is to ensure that the valuers behave in a professional, responsible and adequate manner; there are some general requirements as well. Table presents the Standards used by the valuers in some European countries. In all the countries, the international IVS Standards and the European EVS Standards are complied with in real property valuation. Table 4.5-1: Real Property Valuation Standards 76 P a g e

77 Country Austria Germany Greece Russia Ireland Norway Italy Slovenia Sweden Standards European Valuation Standards (EVS) European Valuation Standards (EVS) German Federal Valuation Decree (Immobilienwertermittlungsverordnung - ImmoWertV) German Administrative Regulation for Valuation ( Wertermittlungsrichtline WertR) European Valuation Standards (EVS) International Valuation Standards (IVS) European Valuation Standards (EVS) Federal Valuation Standards - FSOs European Valuation Standards (EVS) International Valuation Standards (IVS) European Valuation Standards (EVS) National Standards and Manuals NTF's Manual for Real Property Valuation NS Norwegian Standards (NS 3940 for measuring of construction areas, NS 3451 for construction elements, NS 3424 for Valuation Reports drafting) European Valuation Standards (EVS) International Valuation Standards (IVS) Italian Property Valuation Standards - Tecnoborsa Guidelines for the valuation of property guaranteeing exposures Directive about mortgage lending Real Property Mass Appraisal Act Valuation Guidelines for SFI/IPD Swedish Property Index European Valuation Standards (EVS) International Valuation Standards (IVS) International Financial Reporting Standards (IFRS) In addition to the international and European real estate valuation standards, some countries have adopted their own national real property valuation standards and their national guidelines for real estate valuation that are used for different valuation purposes. Germany has its federal regulation, or decree regulating valuation the German Federal Valuation Decree (Immobilienwertermittlungsverordnung - ImmoWertV) that serves as the basis for real estate valuation procedure. In addition to that, there are also the valuation 77 P a g e

78 guidelines - the German Administrative Regulation for Valuation ( Wertermittlungsrichtline WertR), which is used by the public authorities. Since 2007, Russia has the national Standards for real property valuation, the Federal Valuation Standards (FSOs), which were adopted by the Ministry for Economic Development. These Standards consist of a number of different segments and they regulate the following: general concepts and principles for real estate valuation FSO1; individual types of values FSO2, and requirements pertaining to the content of real estate valuation reports FSO3. The mandatory content of a Real Estate Valuation Report according to FSOs is much more strictly defined than the Report content prescribed by the IVS Standards. Norway also has its national Standards that their valuers abide by in real estate appraisal and in drafting their Reports on real estate valuation. These Standards pertain to measuring of the construction area (surface areas of land parcels and facilities), construction materials and drafting of Real Estate Appraisal Reports. In addition to these, Norway has its Manual for Real Estate Valuation. When valuating real property, valuers in Italy abide by the international and by the European standards, but they also follow the Italian national real estate valuation Standards. The National Standards the Italian Property Valuation Standards, were published in 2005, by Tecnobors a Company consisting of the members of Chambers of Commerce, trade, agriculture and industry representatives. This Standard contains some provisions of the IVS and EVS Standards, which are adjusted to take into account the specific features of the Italian real estate market Applied Valuation Methods In all the countries presented in this Paper as examples of best practices in property valuation, the real property valuation method includes three regularly used valuation approaches (which are in some of the countries also called the regulatory methods ): - Sales Comparison Approach, - Income Approach, and - Cost Approach. The Sales Comparison Approach is used to appraise land and facilities that are directly or indirectly comparable, such as apartments, family homes and the similar. The use of this method depends on availability of adequate data sets for comparison. In Sales Comparison Approach, the value of a property asset is calculated by comparing the asset in question with assets of characteristics from the realized sales transactions. Similar assets are the assets similar to the asset in question if compared by the features of relevance for their value. The values obtained from the completed transactions are adjusted to take into account any conditions of relevance at the time when the transaction was realized and to take into account any conditions resulting from any unusual circumstances of the sale. Whenever the Sales Comparison Approach is used, it is necessary to specify the assets that are being compared and to describe all their individual value elements and selling prices. In the Income Approach, the value of a facility is measured through capitalization of achieved or expected net proceeds over the expected useful life span of the property in question. Net proceeds are generated from the net operating income from which depreciation and management and maintenance costs are deducted. In calculation of net 78 P a g e

79 proceeds, the risk, potential liquidation costs and income are taken into account. Interest rate for assessment of income capitalization is based on the income on capital that is usually accrued for the facilities of the given type. The Cost Approach in real estate appraisal (the depreciated replacement costs method) is based on calculation of value of a facility based on the value of land and facility replacement costs from which all the costs of technical and economic age of the facility are deducted. This method is most commonly used in appraisal of family homes that are difficult to compare with other real property. The value of land is usually calculated by comparing it with the sales prices of undeveloped construction land. The replacement costs equal total value of all the facilities constructed on such land. This approach is based on calculation of construction costs of a new facility that are then reduced by the technical and economic value of the existing facility. Within the German real estate appraisal system, the initial result, that is, the sum of land price and the price of facilities, is not the final result of appraisal. Calculated amount is then adjusted to reflect the actual trends in the real estate market, by applying a factor that was generated by the Municipal Valuers Councils. In addition to the customary, standard or regulatory real estate appraisal methods, the socalled customized or tailored methods are also used in real estate valuation. Such methods are basically similar to the customary ones, or are derived from the customary methods by means of modification. A specific customized valuation method used in Greece is the antiparochi method, which is based on the presumption that the person who owns the land, may have a property constructed on his/her land by a construction company, for which he/she is entitled to receive a part of the constructed facility in return. By using this method, the value of land is calculated based on the value of a future share in the constructed facility. The non-regulatory methods of property valuation include, among others, the following methods: the Discounted Cash Flow real estate appraisal method (this method is used in cases where the real estate produce variable income over time), developer method (this method is used to determine the highest actual selling price from the purchaser s point of view, based on the market value of such property, construction costs, developer s revenues, financing costs and time) and investment method, which is used by a number of international companies Beneficiaries of Real Property Appraisals Beneficiaries of the real estate valuation are as follows: - Banks, - Real property funds, - Investors, - Accountants/auditors, Courts, public bodies, - Persons using the real property and others. Property is appraised for various purposes and also for the purposes of individual interest groups: state, legal and physical persons. Real estate appraisal performed for official state purposes includes valuation of real property for taxation purposes, publicly owned real estate valuation for pursuit of different interests, assessment of property assets in companies in liquidation or bankruptcy procedure for property sales purposes, and for other purposes. Real estate appraisal for legal and physical persons includes property valuation for the 79 P a g e

80 purpose of realization of various rights attached to the property of legal and physical persons. In Greece, under certain conditions, property valuation is legally prescribed and Property Appraisal Reports (the so-called mandatory appraisals ) are statutory requirements for such appraisals. In addition to the statutory or mandatory appraisals, non-mandatory appraisals are frequently carried out for a large variety of different purposes (for private use). Statutory property valuation is performed in the following cases: - Real property intended for sale or purchase, compensation from the part of the state and/or state administration bodies, - Valuation of construction machines and equipment of construction firms for categorization purposes and for improvements in the usage levels of such machinery and/or equipment, - Valuation of capital assets of certain corporations that have not yet issued their securities, - Assessment of damage on buildings and/or automobiles caused by terrorists acts, - Appraisal of property that belongs to Churches, foundations, institutes, Municipalities, pension funds, etc. Property value is assessed for private purposes in the following cases: - Ordinary transactions, - Inheritance, - Disputes between individual citizens and between the citizens and the public authorities, - Financial reporting (in accounting), - Citizens or companies wishing to separate their property or to convey their property, - Companies in bankruptcy or merger procedures, and - Overview of banking valuations for lending purposes. Table 4.7-1: Members of the European Group of Valuers' Associations TEGoVA Country No. of membe rs Members Austria 1 Austrian Association of Real Estate Expert Germany 5 Bund der Öffentlich bestellten Vermessungsingenieure e.v. (BDVI) German Association of Publicly Appointed Surveyors Bundesverband öffentlich bestellter und vereidigter sowie qualifizierter Sachverständiger e.v. (BVS) Association of Publicly Certified and Qualified Experts Immobilienverband Deutschland IVD Bundesverband der Immobilienberater, Makler, Verwalter und Sachverständigen e.v. (IVD) German Real Estate Professional Association Verband deutscher Pfandbriefbanken e.v. (vdp) Association of German Pfandbrief Banks Bundesverband Öffentlicher Banken Deutschlands e.v. (VÖB) Association of German Public Sector Banks Greece 1 Body of Sworn-in Valuers of Greece (SOE) Russia 2 Russian Society of Appraisers (RSA) Partnership of the Russian Society of Appraisers (PRSA) Ireland 1 INSTITUTE OF PROFESSIONAL AUCTIONEERS AND VALUERS (IPAV) 80 P a g e

81 Norway 1 Norges Takseringsforbund (NTF) Norwegian Valuers and Surveyors Association Italy 4 Consiglio Nazionale Geometri E Geometri Laureati (CNGGL) National Council of Italian Surveyors Instituto Italiano Di Valutazione Immobiliare (IsIVI) Italian Institute for Real Estate Valuation Associazione Geometri Valutatori Esperti (GEOVAL) Association of Expert Valuers CRIF Certification Services (CCD) ISO Sweden The Association of Swedish Valuers branch of The Swedish Society of Real Estate Economics SFF 5. IAAO STANDARD OF MASS REAL ESTATE APPRAISAL International Association of Appraisal Officers (IAAO) is a valuable source of information necessary for the development of the real estate appraisal system, in administration of the valuation process and in taxation policy. One of the basic IAAO principles pertains to networking of valuers by means of exchange of information and other contents of significance for quality appraisal. The first part of this Chapter contains a brief presentation of the contents of the Standards on Mass Appraisal of Real Property (hereinafter: the Standard) that was issued in 2013 and that was recommended by the International Association of Appraisal Officers; this Standard contains a systematic and inclusive presentation of the long years of professional experience in this field and offer useful advice for the main actors working on development of the mass appraisal system. In addition to this Standard, IAAO prepared a number of other Standards and Recommendation papers, which will be discussed in greater detail later on in this Paper. The main purpose of the brief presentation of the Standard is to point out to the processes and contents of individual mass appraisal system elements, in order to gradually achieve a sustainable real property valuation model that would strive to meet all the requirements contained in the Standards, from the data collection phase, through database maintenance that is a common feature both in the individual and in mass real property appraisal approaches, and to the final real property appraisal An Overview of the IAAO Standards for Mass Real Property Appraisal Standard on Mass Appraisal of Real Property (IAAO, 2013) is a sequence in a series of Standards for mass property appraisal. The first document from the above mentioned series of Standards was published in 1983 (Standard on the application of the three approaches to value in mass appraisal). After that, in 1984, the Standard on mass appraisal was published, followed by the Standard on urban land valuation in 1988, and Standard on mass appraisal of real property in 2002, which was published again with the same title in 2012 and in The IAAO Standards are of advisory nature and are not mandatory, but despite this, these Standards are definitely worthy of attention, due to the fact that they are the result of the rich experience and best practice examples; in this Paper, these Standards are included for purely educational purposes. The Standard on Mass Appraisal of Real Property (IAAO, 2013) specifies the necessary preconditions for establishing of a mass real property 81 P a g e

82 appraisal system, based primarily on the needs and requirements of the tax administration system. This Standard lays special emphasis on the role of valuers, supervision (control) and tax payers. All the solutions contained in it were adjusted to suit the functionalities of the CAMA (Computer Added Mass Appraisal) solution, and proposed procedures were aimed at determining the market value of the real property based on three most commonly used methods the cost methods, comparison method and income method. The Mass Real Property Appraisal Standard lays emphasis on the importance of complete and accurate data, effective valuation models and adequate resource management. In addition to the specification of the mass appraisal issues, the Standard contains detailed description of real property data collection and real property database maintenance, real property valuation method, appraisal model testing and quality assurance, as well as of certain requirements pertaining to the educational profile of staff, data processing, organization of the re-appraisal process and of the cost-benefit analysis Market Value Market value is a generally accepted category and in the context of mass assessment it is the measure of the real estate value and it has been generally defined as the value established during the procedure of mass assessment (most often it is also used as the starting point in the individual assessment as well). To assess the value of a real estate, a valuer is relying on certain valuation equations, tables and other indicators based on mathematical analyses of market data. On the occasion of valuation of individual real property, it is not sufficient to rely on the selling price of the real property, but it is good to consult certain analyses and market data as well, which must be accurate, complete and updated Collection and Maintenance of Characteristic Data on Real Estate Accurate appraisal of real property depends on availability of complete and accurate data on real property characteristics and also on the quality of real property market data. In order to obtain quality data, a valuer must establish relevant procedures and for data collection and database maintenance (data on title, location, size, use/purpose, physical characteristics, price, rent, value, etc.). Updated cadastral plans are among the valuable sources of information. These plans have to be accurate, complete and updated, to provide for unique identification and locating of all the land parcels, both on-site and in the office. Digital cadastral plans that are linked with GIS tools and databases of spatial data are of critical importance for development of a CAMA system, which can be used to significantly speed up the development of the mass appraisal system Characteristic Information on Real Property Assets The selection of characteristic information on real property is the primary valuers task and primary factor in quality and objective real property appraisal. Collection and maintenance of characteristic information on real property is based on the following presumptions: - Identification of important factors for the local real estate market; - Specific requirements of the selected valuation methods; - Requirements of the classification of real estate assets and requirements of the tax policy; - Requirements of other public and private users; and 82 P a g e

83 - Costs and benefits of the collection and maintenance of certain types of characteristic data on real property. If the use of the CAMA model is planned in the early, initial stage, it is then very important to identify the characteristic information on real property, since such choice may produce longterm consequences on the development of the entire system. Customary practice includes implementation of a relevant pilot project to test the data model and to analyse the positive and the negative aspects of the chosen solution. Collection and maintenance of database of characteristic real property data is among the most demanding and costliest phases of the CAMA process and it is precisely due to this fact that data of no relevance for real property appraisal should be avoided. Special attention should be paid to the existing data. If found to be unreliable, data needs to be checked. When carrying out the real property assessment, the Standard underlines the basic characteristics of the real property, and specifically to: - Data on quality and level of service useful surface area, quality of construction (foundations, outer walls, etc.), date of construction or condition of the real property in question, construction style (solution applied), secondary surface areas (cellars, garages, porches and balconies), number of bathrooms, heating solution applied, separate facilities (guest house, storage rooms, barns, etc.); - Data on land land parcel surface area and service/utility level (sewerage, water supply, electricity supply); - Data on location distance from the shopping malls, suburban housing projects and neighbouring communities, special amenities of the given location such as the view and proximity of a recreational facility or natural waters, noise and pollution sources (traffic/transportation hubs, airports, etc.) Collection of Data on Real Property Data collection is a critical and among the most demanding stages in the valuation model development. In this state, clear and standardized procedures for data coding and careful control and monitoring of the entire process of data collection are required, which needs to be realized by means of a separate quality control program. A reliable data collection system must be based on consolidated criteria and it is thus necessary to produce and adopt a special Data Collection Manual to provide for collection of accurate and complete data on real property. In the initial phases of data collection, certain analyses have to be carried out by experienced assessors or by specially trained persons, to ensure that the collected characteristic data on real property corresponds to the needs and requirements of appraisal. In addition to this, it is necessary to provide for internal control that would include the work of on-site teams on data collection, and also for the external control that would be tasked with harmonization of criteria on the levels of individual markets or classes (groups, types) of real property. 83 P a g e

84 Phase Collection of data and maintenance of database on real property Subphase Database maintenance Data entry Data collection Selection of key data on real property Documents Quality control program (internal, external and supervision) Data Collection Manual Figure : Mass appraisal of real property Data format is an especially important issue. Adequate data format should speed up the onsite data collection procedure and data entry into the database. Data formatting is closely linked with data coding that is aimed at providing data consistency per individual data types and its further use and control during the data processing process. Data Collection Manual should include instructions on data collection method and on registration of data on real property with complete accompanying information for exhaustive insight into individual real property, such as photos, drawings, etc. Such Manual has to be simple and thorough, and persons working on data collection must be property trained to use it. In addition to the data collection methods, certain procedures for the field work must also be regulated, both for data collection and for any exceptionable situations, such as the ban on trespassing, etc. Other than according to the type and volume, the Standard contains mandatory requirement to meet the accuracy criteria. There are three criteria pertaining specifically to quality levels, which are of special importance, and specifically these criteria are: - Data used in surface area calculation, including the height of the outer wall, must be collected with accuracy of approximately 30 cm (1 foot) or in such a manner that the calculated surface area corresponds to the accurate value with a maximum margin of 5%; - A minimum of 95% of the total objectively collected data in individual categories (for example, the attributes such as the outer wall material, number of bathrooms, etc.) must be accurate; and - A minimum of 90% of the total collected data of subjective character (quality level, physical conditions, construction style, etc.) must be accurately coded. Data Collection Control Program is used to ensure that collected information is accurate in compliance with the data accuracy standards. Independent data control is implemented immediately upon data collection and it is carried out by valuation experts or by experienced specialized agencies. For control purposes, random data sample is taken to be analysed and to produce the Report on Data Control. Any perceived faults must be removed prior to any further data processing. 84 P a g e

85 After having performed data control, data is entered in a computer to prepare it for further processing. There is zero tolerance for any computerized data inaccuracy. Real property data updates are scheduled depending on frequency of data modifications. Standard has defined a number of ways to perform data updating procedure, and specifically: by using the records on construction permits issuing, by making aerial photographs, or by means of relying on direct information from the property owners. Periodic on-site inspections are performed with the aim to ensure completeness and accuracy of characteristic real property indicators. If we presume that the new facilities are regularly identified as early as in the construction permits issuing phase, the period of physical on-site inspections or on-site verification visits should take between 4 and 6 years at the maximum. Subject to some special reasons, inspection period can be even shorter Data on Sales, Lease Income, Prices and Depreciation Data Handling of information contained in the Sales Agreements is legally regulated by special central government level laws in certain countries, or by the local level regulations. However, all the systems share one general and common characteristic, and that is that they all need permanent maintenance of databases on Sales Agreements. Information contained in the Sales Agreements are used in Sales Comparison Approach, on the occasion of real property valuation or for depreciation (the Cost Approach), or alternatively for determining the capitalization rate, which is necessary whenever the Income Approach is used for property valuation. Information on lease revenues and costs must be registered and verified by qualified valuers. Whenever real property is valuated by using the Cost Approach, it has to be based on current prices and depreciation of costs from the local market. It is necessary to produce a number of Manuals and Rulebooks with information on prices and other factors used in calculation of property depreciation Real Property Valuation Analysis in the mass real property valuation procedure begins with the presumptions on the highest and best use of land that practically pertains to the current use of the real property in question (due to the purely practical reasons). Despite the fact that the current and best use are not identical or congruous, in cases where the tax base is determined, the current or actual use of the real property is most commonly taken as the starting point. Zoning and land purpose are by all means and to a certain degree based on the principles of the best and highest use, but the actual use of the real property still has to be taken into account as well. In principle, the best and the highest use of land must be analysed in the legally admissible, physically possible, adequately supported and financially viable manner Real Property Appraisal Models In all appraisal types (individual or mass) a model based on the same principle is used: it is necessary to find the mathematical expression to relate the value of real property with the variable factors of offer and demand. Models used in the mass real estate appraisal, undertake to present the market for a specific, representative type of real property in the relevant territorial zone. In the mass appraisal, the first step is to specify the model used to identify the offer and demand factors and to determine or specify the characteristics of the 85 P a g e

86 real property that affect its value, such as, for example, its surface area, location and so on. Once the specific parameters are selected, the appraisal model is calibrated, which includes identification or assessment of parameters that represent and contribute to the real property value in the best possible manner. Both in parameters specification and in model calibration, it is necessary to analyse the real estate market. The mass appraisal models are applied in all the three classical approaches to property valuation the Cost Approach, the Sales Comparison Approach and in the Income Approach. The specific feature of the mass property valuation is that the mass appraisal models are developed for a specifically defined group or batch of real property. It should be pointed out here that different models can be developed for the same territory, depending on the specific type of real property in question, that is, there are no universally applicable models, since the models always reflect the offer and demand and other market conditions. In the following part of this Paper, all of the three afore mentioned approaches to property valuation will be briefly presented and the specific characteristic of the respective use of these approaches will be described Cost Approach in Real Estate Appraisals This valuation approach is most commonly used in developed land parcels. It is reliable in cases of new facilities that were built from standard materials and in standard styles. Current prices of facilities should be based on the price that is similar of equal to the price of construction of a similar facility from the same construction materials and with the same level of utilities installed/provided in it. It is generally recommended to provide a special Manual for prices or to include the prices in a relevant software application that would speed up the valuation procedure. Availability of construction and materials prices are the necessary prerequisite for the use of this appraisal approach, and these prices must be determined and verified by the qualified experts of construction management profile Comparative Sales Approach in Real Estate Appraisals This approach in property appraisal pertains to valuation of real property based on statistical analysis of selling prices of real estate assets featuring similar characteristics. This approach is most commonly used for residential real property and other property that is regularly and actively purchased and sold in the property market Income Approach in Real Estate Appraisals Income approach in property appraisal is most commonly applied on real property that produces income from lease or yield. In case of the income appraisal approach, it is necessary to provide information on yield rate or on capitalization rate. It is necessary to collect, maintain and carefully analyse income and cost data to ensure successful application of the income approach in property appraisal. 86 P a g e

87 Table : Typical choice of different valuation approaches depending on the real estate type Cost Approach Comparative Sales Approach Income Approach Single family residential building Multiple apartment residential building Commercial facility Industrial facility Non-arable land Arable, agricultural * land Special purpose facility ** * Farm, ranch and forest land ** Institutions, state-owned and recreation facilities Periodicity of Real Estate Appraisals Real estate appraisals updating is directly related to the changes in ratio studies indicators or in market analyses indicators, and updating is performed based on the criteria established for individual real estate assets types, location, size or construction date. Reappraisal is usually carried out periodically, once in 4 to 6 years, in either one of the following manners: - By carrying out periodical checks of all real estate assets within set intervals of time (for example, once in 4 to 6 years), or - By carrying out cyclical checks of real estate assets (for example, by carrying out annual checks of a quarter, or of one sixth of the total number of real estate assets), or - By carrying out priority real estate checks, based on ratio studies indicators or in some other manner, so that all real estate assets are checked once every sixth year Appraisal Model Testing, Quality Assurance and Appraisal Justification Appraisal model testing and assessment of model quality parameters are very important for obtaining a reliable real estate appraisal. Fortunately, owing to the current information technologies levels, there are numerous available options for automated data processing and facilitated quality assessment. Regardless of the method used in defining the real estate value, sales ratio studies are most commonly used as quality indicators. IAAO has passed a Standard that describes in detail and defines quality assessment, (Standard on Ratio Studies, IAAO 2013a). Two primary aspects of appraisal quality analysis are presented in the above mentioned Standard, and specifically: the assessment level and assessment uniformity. Assessment level pertains to the total or general level of an assessment as a whole, to different real estate classes, samples and individual real estate groups. Market value is used in assessment. The usual measures of the central tendency are most commonly used as the measure of assessment level, and specifically: median, simple average and weighted mean. According to the Standard on Ratio Studies (IAAO, 2013a), relative median of a group of real estate assets should remain within 0.90 and Current, updated valuation models and tables are helpful resources in achieving the Standard, and values are amended once that the statistical tests are completed, during the recalibration or reappraisal procedure. 87 P a g e

88 In case of uniformity or homogeneity of appraisal, there are a number of different aspects, among which the consistency of appraisal levels among different groups (classes) of real estate assets is especially discerning. It is important to confirm that the residential and commercial real estate assets for example are appraised with a similar percentage of error in determining the market value or with the same level of reliability or that the value zones between neighbouring markets, construction classes or age groups are consistent, which can be proven by comparing the measures of the central tendency calculated for different real estate classes and illustrated with relevant graphic presentations. Standard on Ratio Studies (IAAO, 2013a) is a criterion, according to which the appraisal level per individual groups (classes) of real estate assets must remain within the limit of 5% from the total appraisal level. The following aspect of uniformity (homogeneity) of appraisal pertains to consistency of value levels within individual property groups. A number of measures is used for this analysis, among which the most commonly used one is the coefficient of dispersion (COD) that is the average deviation from the relative median, as presented in percentage. The lower the COD, the higher the uniformity or consistency of appraisals within a property group is. Standard on Ratio Studies (IAAO, 2013a) contains the following definition of standard COD values: - In cases of single family residential facilities and shared spaces - COD should range from 5% to 10% in the new ones, or from 5% to 15% in the older or more heterogeneous communities; - In cases of real property appraised based on the revenues - COD should range from 5% to 15% in larger urban communities, or from 5% to 20% in other cases; - In cases of undeveloped construction land COD ranges from 5% to 20% in urban communities and from 5% to 25% in rural or seasonal recreation centres; and - In the rural residential, vacation/seasonal and brickwork houses COD ranges from 5% to 20%. It is necessary that all the participants in the appraisal procedure comply with the above listed criteria and make adjustments where necessary. Inadequate uniformity levels within property classes are indicative of problems or failure to comply with valuation procedures and they cannot be corrected by applying the market adjustment factors. Ultimate appraisal uniformity aspect lays in the level of equality between the appraisals of property assets of low and high values. Standard on Ratio Studies (IAAO, 2013a) additionally points out to the relevant measures based on which the appraisal uniformity level is determined, and specifically: PRD Price-Related Differential and PRB Price-Related Bias. PRD should range between 0.98 and PRD below the 0.98 threshold is indicative of the progressive character of appraisal in which the relative appraisal increases with the increase in price, while the PRD values above 1.03 are indicative of regressiveness. On the other hand, PRB is indicative of the percentage by which the relative appraisal changes when the price is doubled or reduced by a half. For example, if PRB = , that means that the appraisal level drops by 3% when the property price doubles. Standard on Ratio Studies (IAAO, 2013a) contains recommendation that PRB value should range from and +0.05, while the PRB values exceeding the to interval are treated as unacceptable since the price is relevant only in the cases of real property assets on the market, PRB is difficult to correct since it is clearly indicative of a problem that arose as a consequence of real estate appraisal. 88 P a g e

89 In an appraisal model quality assessment procedure, a set of data that was not used in appraisal is selected. The holdout sample should be selected randomly, and as for its size, it should be a sample of 10% to 20% of elements comprising the total number of real estate assets that was used in the mass appraisal model. If the sample is smaller, then the following transactions should be used for control. Valuation and assessment modelling procedure must be adequately supported by relevant documentation, which is a mandatory requirement for all the persons working within the valuation system. Valuation has to be properly documented by providing relevant Price Lists and Manuals that have to be based on statistical conclusions and best practices. Selected valuation models and mathematical expressions used when applying the multiple regression, must be adequately documented and based on the significance of applied model parameters. It is especially important, not only in cases where the comparative sales method is used, that the rent levels, capitalization rates, depreciation rates, etc., are carefully prepared in advance and published to facilitate its use whenever the income and cost appraisal approaches are used in valuation. Persons pursuing the valuation business must be confident about adequacy and accuracy of assessments, so that they can provide explanations and defend calculated values at any time. This entails adequate selection of valuation techniques, adequate Valuation Reports and summary overviews of preliminary assessments. Each Report should contain information on land parcels, land parcels characteristics and calculated values (appraisals). Land parcels with some unexpectedly high or low (extreme) values or those showing some extreme variations in value should be identified and thoroughly checked for any errors. An equally adequate, summary presentation should contain average values, variations in values and ratio studies for different sets of data Management of Valuation System Mass real estate appraisal requires careful management of the system resources, both the human ones and the IT and other indispensable system elements. For successful human resource management, the mass appraisal system requires significant human resources, which are sufficiently trained to pursue the administrative and professional tasks of control, collection and assessment of valuation data, as well as to adequately respond to their obligations related to some purely administrative tasks. The number of staff will depend on objectives and number of real properties that need to be appraised. Workflow can be organized in a number of manners. Staff dedicated to valuation does not necessarily have to work on data collection as well. The task of data collection can be realized in a number of different ways, from establishing of a specialized agency and individuals from the private or public sector, independently from the assessment unit or a service that would work on graphic representations of value zones or administration that would calculate taxes, in cases where the valuation is performed for such purposes. If a significant level of CAMA solutions is planned to be used, which is recommended in cases of developing valuation systems, then a number of characteristic segments must be carefully studied. Selection of equipment is based on recommendations on allocation of ample funding to obtain the required system performances, to provide for successful application of all the three approaches in real estate appraisal in addition to countless other important calculation options. To ensure adequate data entry, valuation by using the mass 89 P a g e

90 appraisal approach and GIS application functionalities, as well as the online support for system operations, it is necessary to acquire reliable computer hardware Other International Valuers Associations and Standards Standards Promoted by the International Association of Assessing Officers International Association of Assessing Officers (IAAO) was founded in 1934, as a non-forprofit, educational and research association. Today, IAAO has more than 7,300 members internationally and it promotes innovation and excellence in property appraisal and assessment administration, and deals with the tax policy issues through professional development, education, research and technical assistance in development and assessment system operations. Other than the Standard on Mass Appraisal of Real Property, IAOO monitors and periodically publishes a number of other Standards, and specifically: the Standard on Assessment Appeal, Standard on Automated Valuation Models, Standard on Contracting for Assessment Services, Standard on Digital Cadastral Maps and Parcel Identifiers, Standards on Facilities, Computers, Equipment, and Supplies, Standard an Manual Cadastral Maps and Parcel Identifiers, Standard on Oversight Agency Responsibilities, Standard on Professional Development, Standard on Property Tax Policy, Standard on Public Relations, Standard on Ratio Studies, Standard on Valuation of Personal Property, Standard on Valuation of Properties Affected by Environmental Contamination, Standard on Verification and Adjustment of Sales. All the IAAO Standards are available for download from Standards of the International Valuation Standards Council The International Valuation Standards Council (IVSC) is an independent, non-for-profit private sector organization incorporated in the USA, with its operational headquarters in London, which works on development of international technical standards and Code of Ethical Principles in asset valuation. IVSC cooperates with the national professional valuation organizations, users and participants in the valuation system, government organizations and academia. Main objectives of the IVSC include development of international standards, facilitating collaboration and cooperation among its member organizations and collaboration and cooperation with international professional associations and serving as the international voice for the valuation profession. IVSC was founded in 1981, as the International Assets Valuation Standards Committee; the Committee changed its name in 1994 to the International Valuation Standards Committee, which, since 1990, in addition to the real estate, pursues activities related to the valuation of capital. In 2008, the organization s name was changed to its present name, the International Valuation Standards Council. IVSC has a membership of approximately 70 organizations in 54 countries internationally. The International Valuation Standards (IVS) are by their nature of the international character, and the IVSC Standards Board is responsible for the IVS development and maintenance. In addition to the General Standards, Asset Standards and IVS Framework, the Valuation Applications are of special importance, as the documents drafted for the usual purposes that require valuation. Each application contains both the Standard and the Guidelines TEGoVA Standards TEGoVA or The European Group of Valuers Associations is the leading European professional organization in the field of real estate valuation. In its present form, TEGoVA exists since 1997; until then, its name was EUROVAL. TEGoVA is the umbrella organization 90 P a g e

91 for national associations of valuers. Its primary task is to create and spread harmonized standards for valuation practice, for education and qualification as well as for the development of the ethics of valuers. TEGoVA brings together 53 associations from 30 countries with a total of over 70,000 members. TEGoVA is responsible for drafting and promotion of the European Valuation Standards (EVS) in the European countries, thus promoting the approach oriented towards their drafting and valuation methodology. In addition to this, TEGoVA points to the minimum criteria for education that each member must possess. TEGoVA has established the so-called TEGoVA Recognised European Valuer Scheme that provides for spreading and harmonization of standards of valuation and valuers profession in Europe. The EVS standards are also known as the Blue Books; EVS 2012 version is currently being used RICS Standards The Royal Institution of Chartered Surveyors (RICS) is an independent professional body that regulate profession dealing with immovable property and survey in the Great Britain and its sovereign partners. RICS members are chartered surveyors that are recognized by the MRICS designation after their name. RICS is committed to education and drafting of education standards and it protects the interests of its members in compliance with the rules and assists the public services in realization of their obligations. RICS was established in London in 1868, where its seat is situated now, and it has 14 regional offices throughout the United Kingdom. It cooperates with more than 146 countries in which it brings together more than 159,000 members. RICS Valuation professional standards, which are called the Red Book, contain mandatory rules, best practice guidance and related commentary for all members undertaking asset valuation. The latest version of the Red Book standards was published in P a g e

92 6. PROPOSAL FOR FURTHER DEVELOPMENT OF THE REAL ESTATE MASS APPRAISAL SYSTEM IN THE REPUBLIC OF SERBIA 6.1. Basic Principles of the Proposal for Further Development of the Real Estate Appraisal System Clear, necessary, uniform and all-inclusive real estate appraisal system in the Republic of Serbia should be based on the following initial presumptions: - Uniform and fair appraisal of the real property in the entire Serbian territory, for all purposes, achieved through active participation, efforts and inputs by the relevant institutions and qualified valuers; - Introduction of the market price as the measure of the property value; - Compliance with the international standards and experiences; - Acceptance of the mass real estate appraisal concept in determining the indicative values of the real property; - Proper regard for the existing conditions, organizational structure, needs and potentials of the State; - Real Estate Cadastre Data and market information; - Transparency, cost-efficiency and sustainability of the system as a service for as broad a spectrum of purposes as possible; - Legal, information and organizational consistency of the system, and - System interoperability. In order to realize the above listed initial presumptions, it is necessary to achieve the following of the central government level: - Show clear political will; - Define key needs for appraisal; - Adopt detailed strategic decisions and concept; - Pass relevant laws and by-laws; - Define organizational structure of the system; - Provide for the necessary technical options; - Define mutual obligations between the elements of the system and clear procedures and processes; - Agree the dynamics/schedule of mass appraisal system development; and - Provide for sources of funding for this system. Uniform and fair valuation of the real estate assets in the entire territory of the country is necessary for creation of a consolidated and stable real estate market, as a precondition for sustainable and uniformly distributed development of the State. Uniformity and fairness must be provided for by ensuring active participation of the broadest circle of interested parties and qualified valuers. Introduction of the market value of real estate assets as tax base has already been provided for in a large number of existing regulations. In addition to this, the majority of countries 92 P a g e

93 internationally relies on the market value of the real estate assets as the basis for taxation and based on such preferences that the international standards were adopted and tax systems were organized. It been declared officially declared that the international standards and experiences, and especially the EU ones, will be recognized in Serbia; this decision was supported by the objective of Serbian EU accession and by the introduction of standards related to the geospatial data management, decentralization of the state and strengthening of the local self-governments. Acceptance of the real estate mass appraisal concept for all real estate assets is a concept that, accompanied with the use of the automated appraisal models, is a very efficacious tool in the real estate appraisal procedure. Recognition of the existing conditions, situation, needs and potentials in Serbia is necessary and rational, and the same approach was adopted by all the other countries internationally. The significance of consistent compliance with rules and principles of spatial and urban planning, along with the land management systems and land administration system should be specifically noted here, and the renewed insistence on land (agricultural, forest and construction land) as the most important resource among the immovable property should be especially highlighted here. Data of the state survey and cadastre as the basis for establishing of this system stem from the fact that the Real Estate Cadastre and Utility Lines Cadastre are the basic sustainable and established registers. If observed from the aspect of its concept, legal regulations, human resources, organizational structure and technical resources, these Cadastres were envisaged to provide services and legal security with regard to the real estate assets and utility lines for all official needs and for the needs of the legal and physical persons. Just like in other countries, state survey and cadastre data is the only official data in Serbia that may and must be used for the broadest array of different purposes. With that objective in mind, organizational structure in data collection, consolidation and maintenance of the national information system and local self-government units systems were initially set up. It is only rational and logical to further upgrade such infrastructure, to use it and connect it with all the other purposes such as the creation of an updated cadastre, resolving the ownership and legal issues, urban planning, legalization of illegally built facilities, tax requirements, etc. the new real estate appraisal system must take into account the specific features of the already established Spatial Units Register, Address Register, Real Estate Cadastre and Utility Lines Cadastre Database, information infrastructure and services of the Republic Geodetic Authority and specify criteria for the use thereof and adjust them to the actual appraisal needs. Updatedness is among the elementary features of data, and it is thus necessary to specify minimum set of data that must additionally collected at some later point for valuation purposes. Other than the cadastre data, another, but equally important source of information is the market data that require organized and systematic monitoring and market trends analyses, lease prices analyses and collecting and control of market data, for the purpose of its adequate preparation and further processing within the selected valuation model and in production of relevant quality reports. Transparency, cost-effectiveness and sustainability of this system as a service for all purposes are the principles that provide conditions to meet the broadest array of needs, 93 P a g e

94 market stabilization and development and decision making on management of real estate and economic activities on the national level. In addition to this, these principles contribute to improved information levels in each legal and physical person for adequate decision making in public interest. A system can be transparent only if it consists of multidisciplinary expert services and if it allows for participation of key social actors, from the very beginning to the end of the valuation process. It is extremely important to note here the empirical principle it would be expensive and irrational to take the things that can be resolved and/or decided on the local self-government level to a higher level of administration. Legal, informational and organizational consistency of the system is necessary for the system to be sustainable and cost-effective and its data reliable. By achieving this, collecting of double data entries from different institutions in different manners is avoided, the number of staff is increased and resources are wasted, adequacy of data and public registers is compromised and confusion is created, which leads to disrespect and non-compliance with the legal obligations. Interoperability of the system is a feature of use in all the institutions that manage information. Interoperability is capacity to operate different systems so that information can be exchanged, where no additional operations are needed to connect them. In the present-day information age, there is a growing need for a consolidated database on real estate that should permanently be updated. Such a database would be invaluable for tax administration units, local self-government units, banks, investors and valuers. There is the question that has not yet been resolved pertaining to the identity of entity that would create, update and maintain such a database and in addition to that distribute data to the interested clients. It would only be logical to leave that task in our case to the relevant cadastre body. In Serbia, it is the Republic Geodetic Authority, which possesses the largest body of information of importance for such a database. Among all the potential clients, this analysis has shown that the Tax Administration units, local self-governments, banking sector and citizens themselves have the keenest interest in data on market value of the real estate assets. Decentralization of responsibilities from the central Government level to the local selfgovernment level is among the more important parameters of the future developmental strategy internationally and in Serbia. The Council of Europe Charter on Local Self- Government (Serbia is a member since 2003) reads as follows: Public responsibilities shall generally be exercised, in preference, by those authorities which are closest to the citizens" and local authorities shall be entitled,, to adequate financial resources of their own, of which they may dispose freely within the framework of their powers." Pursuant to the Constitution from 2006, Municipalities in Serbia were entitled to independently manage their assets. The set of laws on local self-government from 2007, experiences with functioning of the local self-government bodies in practice and the Law on Local Self-Government Financing from 2006, were passed with the intention to facilitate successful work of the local self-government. Pursuant to the solution contained in the Law on Local Self-Government Financing from 2007, responsibilities of the Ministry of Finance and those of the Tax Administration as a body within the organizational structure of this Ministry, were transferred to the Departments for Local Tax Administration (in Belgrade, it was the Tax Administration Directorate), the remit of which included the tasks of determining, control and collection of local public revenues, which was among the key system modifications that led 94 P a g e

95 towards the transfer of all the functions of significance for the functioning of the local selfgovernments and that could be realized on the local level. Educational institutions provide significant contribution to the development of the real estate appraisal system as well, which provide the educational background, knowledge and skills that are necessary for development of the valuers profile. Civil Engineering Faculty in Belgrade has a special Master Studies educational program in its Department for Geodesy and Geoinformatics; thus, within this biannual study program in the Geodesy Department, courses in economic sciences (Real Estate Market, Analysis of Investments in Real Property and Real Estate Appraisal) were introduced for the first time Organizational Concept of the Real Estate Appraisal System in Serbia It is necessary to make plans for the adequate technical, human resources, organizational and financial resources for the realization and implementation of real estate valuation; these resources have to be linked with the plans and expected results. Budget has to cover the actual costs of implementation of all the real estate valuation procedures and it has to be correlated with the realization of desired objective, which is the transparency of the real estate market in the Republic of Serbia. The necessary time period for achievement of the above objective will depend on the total number of real properties that need to be appraised. Administration will mostly rely on the predefined conditions, and thus the costs of data collection and database maintenance (which, generally speaking, constitute the highest cost category of all), valuation and appraisal costs (including the costs of professional training) will all depend on the total volume of real property that need to be appraised. If the empirical norms of the Tax Administration costs are taken as the starting point for calculation in this area, which range between 5% and 10 % of the total budget revenues earned from the property taxes (taken in general, in the developing countries), then it can be assumed by relying on the free assessment, that the costs of establishing of a real estate appraisal system, as the most complex and most demanding one, could amount to somewhat less than that (3 % - 4%). Significance and value of the entire real estate appraisal system depends to a large degree on the quality of data, and thus adequate attention needs to be paid to this segment. Data collection and database maintenance for real estate appraisal, on the physical, geometrical and legal features of the real estate assets, but also of the market data, is performed by the Republic Geodetic Authority in compliance with its legally prescribed authorizations; the Republic Geodetic Authority has embarked on establishing of the Transactions Register. The Transactions Register came as the result of quality cooperation of the Ministry of Finance, Ministry of Justice and Tax Administration with the Republic Geodetic Authority and it is operational since It is only natural and appropriate to keep and maintain the central database Register of Real Estate Transactions (cadastre data and market data) in the Republic Geodetic Authority, and to legally oblige the parties authorized to collect the necessary information (real estate appraisal branch units, on the local self-government level) to enter the relevant data in the Transactions Register by using the web application. The Transactions Register has to be updated, complete, accurate and available in its entirety and without any limitations to all the authorized users that professionally pursue the real estate appraisal activities. To enable collection, control and entry of data of significance for the content of this Register, relevant Manual on Establishing and Maintenance of a 95 P a g e

96 Consolidated Transactions Register and Professional Training Plan and Program for staff tasked with collection, control and entry of data must be prepared and passed. SYSTEM MANAGEMENT - Planning and Budget - Standards - Human Resources - Quality Assurance - Security of Data Management level Operational level DATA COLLECTION - Document on transaction/information on sales - Construction permit/permit for use - Data collected during on-site inspection visit - Owner's Statement - Lease Revenues and Expenses - Other DATABASE MAINTENANCE - Cadastre Plans - Land Use Plans - Data on Sales Transactions - Immovable Property Certificates - Other REAL ESTATE APPRAISAL - Previous analysis - Appraisal Model - Adopted Model is used and permanent analysis of individual model parameters is carried out Real Estate data and Market data Appraisal Title/Tax Payer's status and data on real estate features APPRAISAL - Tax Benefits - Final appraisal - Decisions by relevant bodies Tax collection system, oriented towards tax payers, etc. etc.... User level Clients: Real Estate Agencies, Banks, Insurance Companies, court experts, Figure : Real Estate Appraisal System When speaking about the human and technical resources necessary for establishing of the real estate appraisal system, it is necessary to point out to the following: - Importance of proper organization of work process (data collection, data collection control, data registration/entry, appraisal model specification, appraisal model calibration, report drafting, etc.); - Selection of adequate technology and human resources and their further development, and - Communication and supervision. For each position, it is necessary to specify the following: 96 P a g e

97 - Responsibilities and remits, - Required professional skills and qualifications, and - Methods for candidates selection and for assessment of candidates application. Lifelong education is a necessity and obligation of each individual, but it is still necessary to provide for permanent planning and to organize professional training for staff. In the very beginning, the lack of experience should be supplemented by relying on the services provided by external consultants Organization and Management of the Real Estate Appraisal System Organization of the work process in real estate appraisal starts from the very nature and load of work, required skills, as well as from the actual needs for a specific amount of decisions and solutions that need to be made and/or passed. Such approach in mapping of obligations requires efficacious and clear organizational structure and submission to one competent management body expert team. Expert team should be established in compliance with the assessment of the key process partners (Ministry of Finance Tax Administration, Ministry of Construction and Urban Planning, Republic Geodetic Authority, Ministry of Justice, Statistical Office of the Republic of Serbia, Standing Conference of Towns and Municipalities, National Bank of Serbia, National Association of Valuers and educational institutions). Expert team should predominantly work on the following: - Analysis of the significance and developmental needs of the valuation system and of the necessary resources for its implementation (including the use of CAMA - Computer Added Mass Appraisal), - Drafting of necessary legal regulations, by-laws and standards, - Communication with the general public and raising public awareness of the need to create a consolidated and transparent real estate market, - Organization of educational system and permanent (lifelong) learning for property valuers, - Planning and organization of internal and external control of individual processes on the central and on the local level (quality assurance), - Rules for access to and use of the consolidated Register of Transactions, and - Data protection policy. Operational component of the real estate appraisal system should be organized as a two-tier structure: - Local, and - Central. On the local level, this system should employ qualified professionals (that completed additional training courses) of various professional profiles to perform the following tasks, in compliance with consolidated instructions, manuals and operational procedures: 97 P a g e

98 - Directly collect new data and verify the existing Cadastre and market data and information on the real estate (current market condition, applications, turnover, lease, etc.), and - By using a specially designed web application, enter data on real estate and real estate transactions in the relevant database (Register of Real Estate Transactions), - Analyse collected data, determine relevant value zones for all real estate types, value levels and norm property with its specific characteristics on each value level, - Prepare relevant tables for valuation of real assets with characteristics that are different from those of the normative real estate asset, - Specify and calibrate the parameters of the valuation models and test the quality of appraisal, - Produce maps with tentative real estate values, - Appraise new real estate assets in compliance with the specific requirements and needs, - Produce relevant reports and overviews of market prices on the territory of their jurisdiction, and - Deliver the appraisal data to the central level and authorized users in the territory of their jurisdiction. The local level of the real estate appraisal system would comprise of the selected representatives of one or more local self-governments (Regional Appraisal Unit), which would include the following entities: - Existing Real Estate Cadastre unit, - Tax Administration body in the local self-government, - Local self-government unit tasked with determining, collection and control of the local self-government unit, - Municipal body dealing with the urban planning tasks, - Court/Notary Public of the Court with territorial jurisdiction, - Local valuers (real estate agencies), and - Other services, as necessary. Local self-government units would be responsible for control and management of the local level of this system. The number of branch units should be determined depending on the territorial organizational structure and level of development of the real estate market. The number of staff in a branch unit shall depend on the workload, territory covered as well as on the level of activity on the real estate market. Staffing of a real estate appraisal branch unit should include experts with professional profiles of the following branches: construction management/engineering, economics, legal profession, agriculture, forestry, IT sector, spatial planning, architecture and urban planning and geodesy. In addition to the mandatory requirement regarding their relevant university degrees, valuers working with the real estate appraisal branch unit need to have a minimum of five years of practical professional experience in real estate appraisal and successfully completed relevant training aimed at meeting some specific requirements of the operations of the real estate appraisal branch unit. The training objectives should include development technical, professional, interpersonal, business, IT and managerial skills. In development of training model for real estate valuers, three levels of competencies should be born in mind: the first one that includes acquisition of knowledge and understanding of the real estate appraisal issues; the 98 P a g e

99 second one that includes abilities to apply the acquired knowledge and understanding of the above issues; and the third one that includes capability to provide consultancy services and to solve complex professional problems. In order to provide for the acquisition of the above listed competencies, it is necessary to pass and to implement a special Training Plan. Generally speaking, such a Training Plan should include the following broader topics: 1) economic principles; 2) main appraisal theories; 3) basic legal principles; 4) statistics; 5) construction technology; 6) basic knowledge of accounting principles; 7) land economics; 8) real estate appraisal approaches; 9) ownership rights; 10) urban and rural planning; 11) real estate management; 12) basic principles of survey and cadastre; 13) practical work on real estate appraisal; 14) facilities maintenance; 15) marketing; 16) land administration; 17) tax policy, and 18) practical professional experience. After successful realization of the training program, an exam should be taken before a relevant certification body to obtain the licence and title of the Real Estate Valuer. Valuer s licence would be valid for five years and which it would be renewed, providing that the following eligibility requirements are met: 1) a minimum of three successful real estate appraisals carried out on the annual level; 2) attendance at a relevant professional training course of a minimum of three days each year, and 3) participation in relevant professional meetings, seminars and conferences. A certified real estate valuer should: - Possess thorough knowledge of the organizational structure and operations of the real estate market (prices, values, lease, leasing, etc.); - Follow and assess the development of the real estate, rents, prevailing conditions in construction management, special conditions of offer and demand in the real estate market and development trends in the real estate market; - Possess knowledge of the economic effects of rights attached to immovable property and encumbrances on such property, and be able to adequately assess and take into account such rights and/or encumbrances when carrying out property valuation; - Possess relevant theoretical knowledge of the financial, statistical and economic aspects of investment-making and property renting; - Be thoroughly acquainted with the market operations, location factors and analysis of investment effects (benefits); - Be thoroughly acquainted with the basic principles of real estate appraisal administration (budgeting, investment and other principles); - Be capable to successfully apply different real estate appraisal approaches; - Be thoroughly acquainted with the building requirements, regulation rules, building procedures and methods, construction materials and their specific characteristics, relevant Standards and technical regulations, procedures and criteria for damage and defects identification in construction; - Be thoroughly acquainted with the relevant legal regulations in planning and construction and real estate appraisal; - Be thoroughly acquainted with other legal regulations of relevance for finding solutions to the title deeds and related legal issues (neighbours rights, Real Estate Cadastre, law regulating housing, etc.); - Valuate facilities with some specific features; - Be thoroughly acquainted with and capable of carrying out valuation procedures; 99 P a g e

100 - Be capable of selecting adequate real estate appraisal approached and methods, depending of specific features and aspects of individual cases; - Be able to successfully produce the complete appraisal report; and - Be thoroughly acquainted with the fiscal legislation, requirements and deadlines prescribed by the fiscal legislation. Central level of the appraisal system should be situated in a single location (the Republic Geodetic Authority has been proposed as this single location) and it should deal with the following tasks: - Supervision of realization of individual tasks in collection and entering of data in the Real Estate Cadastre and from the real estate market, - Maintenance of the central real estate database to meet the needs of the individual and mass real estate appraisal, - Development of web applications that will be used to enter data, for e-government and e-public relations, - Drafting of relevant reports and real estate indices on the national level, - Registration of appraisal information in the database of the Real Estate Cadastre, and - Data protection and security. Central level (Mass appraisal,...) Expert supervision U s e r s Mass appraisal data Appraisals Information on real estate and transactions Real Estate Appraisal Branch Unit Appraisals U s e r s Real Estate Cadastre Unit Information on transactions Courts/Notaries Public, Tax Administration bodies, units in charge of revenues specification, collection and control, urban planning bodies urbanizma,... Figure 6.3-1: Real estate data flows within the real estate appraisal system 6.4. Real Estate Appraisal System Quality Assurance Practical procedures and standards are necessary to ensure quality assurance in the real estate appraisal system. Appraisal Quality Assurance Program should be developed and adopted, to include the following elements: - Selection and professional training of staff, - Code of ethics, 100 P a g e

101 - Adequate organization of the work and management process, - IT equipment configuration and software, - Standards of work, - Documented procedures, - Data management programs, - Verification of collected information, - Occupational safety and security of data, - Revaluation period, - Analysis of the appraisal quality assurance measures, - Communication between individual participants in the appraisal process, - Corrective measures, - Right to appeal for the parties concerned, and - Independent external control Database on Real Estate Characteristic information on real estate were specified in the Draft Rules on real estate appraisal (Republic Geodetic Authority, 2012) and in the forms of the Tax Administration (the PPI forms), and they make up an aggregate of characteristic data of importance for real estate appraisal. For the collection of data on real estate, it is necessary to adopt the Manual for collection, control and entry of real estate data for the real estate mass appraisal procedure Database on Real Estate Market Data on market must be continuously collected. For adequate functioning of the system for collection and processing of information on sales, it is necessary to provide for the following: - Access to information on sales transactions; - Control over the realization of transactions; - Control of objectivity of criteria for thorough information for the parties in transactions; - Control of the entered data on real estate asset that is sold/bought in the transaction; - Corrections in the transaction value on the agreed date, and - Control of adequacy of establishing the Sales Agreement content, with characteristic elements (information on the sales transaction: price and date of sales, opinion on objectivity in relations between the parties in the transaction, identification of the real estate asset, characteristics of the real estate, overall appraisal as of the transaction date as a piece of data of importance for calculation of the appraisal ratio study, as well as the distinction between the value of the land and the value of the facility). Generally speaking, records or registers of income and expenditure should contain the following information: - Record or transaction reference number; - Record date; - Reporting period or valuation date and year of reference; - Real estate asset identification reference; - Characteristic parameters of the real estate asset (use, location, size, current condition, age, etc.); - Sales information (if relevant; price, date, use, etc.); 101 P a g e

102 - Information on lease (for each individual Lease Agreement; real estate asset leased, renewal, responsibility, rent amount, etc.); - Business costs, and - Indirect data (data that is, if possible, derived from the primary data, such as the profit, expenses, etc.) CAMA and GIS Integration in Real Estate Mass Appraisal Model Due to the fact that the mass appraisal procedures and use of spatial and information technologies, which are better known as GIS and CAMA (Computer Assisted Mass Appraisal) systems, may be applied to significantly speed up the development of the real estate appraisal system, CAMA system is the recommended application, when integrated with the GIS technology. It is a proven fact that parallel valuation of a number of real estate assets contributes to operational efficiency, and thus, from the methodological aspect, mass appraisal of the real estate must be adequately considered for application. Despite the fact that the mass and individual appraisal approaches are, as approaches in appraisal of an individual and specific facility, sometimes viewed as apparently incompatible approaches, both the appraisal types require economic analysis. There are some specific reasons due to which the individual real estate appraisal approach is required in cases of some specific facilities such as the infrastructural or some other capital facilities and resources; practical experiences have, however, undoubtedly shown that the developmental needs of the tax system are naturally linked to mass appraisal (more than 70% countries in Europe has declared the requirements of their tax systems as the primary reason for introduction of the mass real estate appraisal). A modern mass appraisal program includes the following: - Collection and maintenance of data and attributes of all the taxable real estate assets; - Collection and registration of market values, such as the selling prices, construction prices, lease prices, etc.; - Market analysis; - Development and application of appraisal model, and - Assessment of accuracy of individual valuations. Appraisal begins with preparatory activities that are aimed at detection and description of the existing real estate market and building of trust in appraisal methods and of appraisal methods prioritization. Since this entire task is complex and extensive, it is usually divided into a number of smaller tasks, by setting the basis for appraisal modelling. A number of activities are of special importance here, which need to be specifically developed in a special Real Estate Appraisal Manual, and specifically: - Stratification or classification of real estate assets based on their classes (land, apartments,...) and market areas to facilitate describing and statistical analysis of real estate assets and implementation of certain differences in the process of tax collection. By grouping them, the real estate assets are getting homogenized according to their basic characteristics, which simplifies the appraisal procedure, especially so if the relevant market data is collected, adequate to the specific real estate class. Thus a respectable number of elements or real estate assets in each class is the necessary precondition for better reliability of statistical reasoning and for the efficiency of the appraisal model; 102 P a g e

103 - Providing definitions for the real estate within individual classes includes providing descriptions of value ranges or range of properties in each class as well as of the characteristics of typical properties, that include the number or volume of property with different attributes; - Providing definitions for ranges of properties and trends requires permanent analysis of the selling prices and specifying certain statistical indicators of market characteristics, such as the market trends or characteristic samples. All the properties should be presented by using a certain unit (m 2, ar, ha, etc.) and their graphic representation in a relevant map or within a GIS application. Based on data prepared in the above described form, valuer analyses properties per unit measure within individual classes and ranges of properties as compared against the neighbouring areas and per their age, by setting apart the typical ranges and characteristic causes. Graphic tools and GIS technology provide for significant advantage in the realization of the tasks of this kind and no modern appraisal service can be imagined without the use of the GIS technologies; - Ratio study analysis is a standard and without it no successful or efficacious appraisal model can be considered to be reliable or meaningful; - Specifying the level of depreciation is a necessary prerequisite for application of the cost appraisal approach and it needs to be included as an integral part of the future Real Estate Appraisal Manual; and - Selection of real property in the real estate market used for comparison purposes is among the characteristics of an efficient CAMA system that will automatically identify sales that are comparable with the real estate class in question that are to be appraised by using the mass appraisal procedures. After having selected, classified and specified property ranges and levels and characteristic real estate assets, modelling, as the mathematically defined ratio of effects of offer and demand on the market price of the real estate asset, is the next step. Appraisal models depend on registered market information and market models based on the selling prices are most commonly selected approach, regardless of the sufficiency of sales (transactions) on a certain market. The IAAO Standard that was described in the previous Chapter points to the experiences gained in application of individual methods. Modelling within the mass appraisal approach includes specification and calibration, two processes that both have their respective meanings and are naturally following each other. Whereas specification includes theoretic analysis of the appraisal method, selection of key characteristics of the real estate assets of significance for their price and analysis of their influence, calibration is an assessment process of coefficients in the mass appraisal model and it requires empirical, analytical approach that should lead to acceptance of the adequate appraisal model. This process is iterative and it has to be performed by an experienced analyst who should test the assessed parameters of the model to determine their significance and pass the decision on model that will finally be used. It has been demonstrated in practice that the mass appraisal models are not unique for all the classes of real estate, but that each class may have certain specific characteristics that will influence the choice in implementation of specific model, and there are numerous papers written on this subject in expert literature in this field. 103 P a g e

104 The appraisal results of the selected model should be subjected to tests prior to their use, to verify their consistency and congruence with expectations. As it was already described in the Chapter on IAAO standard of mass appraisal, the ratio study analysis provides the most reliable measures and indicators of quality. Analysis of the quality of obtained assessments must be adequately documented and explained in an efficient and transparent manner, since it can only be generally accepted and objective if it is adequately documented and explained. Additional details on radio study analysis and standards were provided in Chapter In addition to the quality assessment, another important policy segment in the development of the appraisal system consists of indexing and re-appraisal. The importance of indexing is reflected in the requirement to reduce appraisals to a given date. Reduction to a given date or period can be realized in three different ways: 1) by indexing or identifying trends in current appraisals; 2) by recalibrating or supplementing the existing model, and 3) by calibrating a new model. The selection of strategy is within the remit of the persons in charge of the taxation policy. Each approach has its advantages and disadvantages attached to it, and these are often even combined in practice. 104 P a g e

105 - 7. CONCLUSIONS Modern society requires quality spatial information for optimum resource management, efficacious decision making and continuous development this is a sentence taken from the Strategy for Establishing the infrastructure for spatial data in the Republic of Serbia in (hereinafter: the Strategy, 2010) that was adopted by the Republic of Serbia Government in This statement is quite indicative of the importance of the real estate appraisal system and its concept is still in developmental stages. The real estate appraisal system is struggling to take its place in the Society that, in a number of ways, either through calculated effort or unintentionally, impedes the development of the real estate appraisal system and slows down the entire process. Public administration undoubtedly has an important role to play in the future development of this system; public administration has to provide for broader access to geographic information, (Strategy, 2010), so that the technology can reach its full potential and provide countless options for improvements in public services. Creating a national infrastructure for spatial data and spatial database, which are necessary and integral parts of the real estate appraisal process, are the obligation of the entire society, all the public and state bodies, and certainly of all the other organizations and individuals that work on collecting, analysis and processing of spatial information of public importance for modern and efficacious society. It is impossible to establish a regulated system without cooperation and standards for cooperation, because they provide the common framework that can only rationalize efforts and reduce administration costs. This is why the availability of official data must by all means be among the priorities in realization of developmental policy of certain public services, in order to make the results of their work more transparent and readily integrated in a consolidated system. The real estate market insists on availability and relatively simple approach to spatial information that are among the key postulates of their successful development. Accessibility and simplicity of procedures are important requirements, necessary, but not sufficient. Spatial data, and especially spatial data on real estate of significance for construction and maintenance of the real estate appraisal system must be complete, accurate and updated. This includes very high level of social organization, better expert knowledge, technologically supported, faster and more efficient operations of all the services dealing with collection and maintenance of geospatial information and information of other forms of public importance. In the process of creation of such a society, the valuation system and all the actors in this system must be aware of its public importance and their roles in that process. Analysis of the prevailing conditions in this field that was derived from the existing legal solutions and by-laws, of which only the most important ones were presented in this Paper, clearly points to the shortcomings in practical work on real estate valuation, lack of strategic approach and cooperation in development of real estate valuation from the part of officials in the public administration system. Approach to the development of the appraisal system must be by far more constructive, user-friendlier and aiming to achieve high user satisfaction levels, while at the same time mandatorily respecting the real estate market, tendencies for faster development of the local self-government and citizens interests in these local communities that are directed towards independence and efficiency in management of their own resources and potentials. In that sense, education sector is also expected to provide its full contribution, primarily through active monitoring of the 105 P a g e

106 development of the real estate management and also by means of providing the required level of education and expertise of the participants in this process. 106 P a g e

107 LITERATURE 1. Almy, R.: Real Property Assessment Systems, Lincoln Institute of Land Policy, Introducing a Market Value-Based Mass Appraisal System for Taxation of Real Property in the Czech Republic, Cambridge, Massachusetts, 6-11 October Arsić, M., Ranđelović, S., Bućić A., Vasiljević, D.: Reforma poreza na imovinu u Srbiji: Rezultati i perspektive, Fondacija za razvoj ekonomske nauke 2012 (Property Tax Reform in Serbia: Results and Perspectives, Foundation for Economic Sciences Development, 2012) 3. Danos International property consultants & valuers, Serbian real estate market overview H Seidel, C.: Transparency in the German real estate market results and problems, chances and new development, FIG Commission 9, CIREA and HKIS Symposium, Xian, China P.R October Seidel, C.: Valuation of real estates in Germany, methods, transparency, market development and current aspects of research, 6. European Group of Valuers Association (TEGoVA), 2010: Country-Specific Legislation and Practice Country Chapter, Germany 7. European Group of Valuers Association (TEGoVA), 2011: Country-Specific chapter on property valuation in Austria 8. Enemark, S., Supporting Capacity Development for Sustainable Land Administration Infrastructures, The Eighth United Nations Regional Cartographic Conference for the Americas, New York, International Association of Assessing Officers: Standard on Mass Appraisal of Real Property, Kansas City, Missouri , Nacrt Pravilnika o proceni vrednosti nepokretnosti, Republički geodetski zavod, Beograd, 2012 (Draft Rules on Real Estate Appraisal, Republic Geodetic Authority, Belgrade, 2012) 11. Republička agencija za prostorno planiranje, Ministarstvo za infrastrukturu, Izveštaj o realizaciji Prostornog plana Republike Srbije, Beograd, 2008 (Spatial Planning Agency of the Republic of Serbia, Ministry of Infrastructure, Republic of Serbia Spatial Plan Implementation Reports, Belgrade, 2008) 12. Samuelsson, P.: Official and Unofficial Valuation Standards in Sweden, FIG Working Week, Stockholm, Sweden, June, Strategija uspostavljanja infrastrukture prostornih podataka u Republici Srbiji za period do godine, Vlada Republike Srbije, 2010 (Strategy for Introduction of Spatial Data Infrastructure in the Republic of Serbia in , Government of the Republic of Serbia, 2010) 14. Zeković, S., Evaluation of the current urban land system in Serbia, Spatium, 2008, No , pages Property Tax Law, (RS Official Gazette, No. 26/01, 42/02, 80/02, 80/02 - other laws, 135/04, 61/07, 5/09 and 101/10) 16. Law on State Survey and Cadastre, (RS Official Gazette, No. 72/2009) 17. Law on Expropriation, (RS Official Gazette, No. 53/95, FRY Official Gazette, No. 16/2001 Federal Constitutional Court Decision, and RS Official Gazette, No. 20/2009) 18. Law on Planning and Construction, (RS Official Gazette, No. 72/2009) 19. Law on Real Property Transactions (RS Official Gazette, No. 42/1998) 107 P a g e

108 20. Farnkvist, O., Market Data Collection for Mass Valuation of Commercial Real Estate, XXII FIG Congress, Munich, Germany, October 2006, 21. Labropoulos, A., Dimopoulou, E., Zentelis, P.: The necessity of developing a CAMA system for the Real Estate Market in Greece, Faculty of Surveying, Engineering NTU o Athens. 108 P a g e

109 APPENDICES 109 P a g e

110 APPENDIX 1: Real Estate Market Classification and Real Estate Grouping in Individual Markets (in compliance with the Draft Rules of the Republic Geodetic Authority, 2012) Market Market Real Estate 1 Apartments market Apartment 2 Houses market House Seasonal house Construction land Construction land 3 Construction land market Construction land 4 Agricultural land market Agricultural land 5 Garages market Garage Garage facility/parking spot 6 Business facilities market Business facility Construction land 7 Business and industrial facilities market 8 Industrial facilities and warehouses market 9 Agricultural facilities market Industrial facility/warehouse Agricultural facility Business facility Industrial facility Construction land Construction land / Agricultural land 10 Other land market Other land 11 Forest land market Forest land 12 Special purpose facilities market Special purpose facility Construction land 110 P a g e

111 APPENDIX 2: Type, subtype and codes of real properties (in compliance with the Draft Rules of the Republic Geodetic Authority, 2012) REAL ESTATE MASS APPRAISAL CADASTRE НЕПОКРЕТНОСТИ ON THE MARKET BUILDINGS TYPE RESIDENTIAL FACILITIES GARAGES COMMERCIAL BUILDINGS SUBTYPE House Seasonal House Residential Apartment Building CODE CODE DESCRIPTION Garage Commercial Building/Facility used to provide services Family residential building Family residential building a part Auxiliary structure Part of an auxiliary building Seasonal House Part of a Seasonal House Residential Apartment building Part of a Residential Apartment building Residential and Commercial Building Part of a Residential and Commercial Building Garage Part of a Garage Public Garage Building Part of a Public Garage Building Public Garage Facility Building used for crafts and personal services Part of a building used for crafts and personal services Facility used for crafts and personal services Building used to provide technical services Part of a building used to provide technical services Facility used to provide technical services Building used to provide commercial 111 P a g e

112 Tourism Industry Building/Facility services Part of a building used to provide commercial services Facility used to provide commercial services Building used to provide financial services Part of a building used to provide financial services Facility used to provide financial services Building used to provide construction services Part of a building used to provide construction services Facility used to provide construction services Building used to pursue tourism activities Part of a building used to pursue tourism activities Facility used to pursue tourism activities BUILDINGS COMMERCIAL BUILDINGS Hospitality Industry Building/Facility Commerce and Trade Building Buildings used for sports and recreation Building used to provide hospitality services Part of a building used to provide hospitality services Facility used to provide hospitality services Building used for commerce and trade Part of a building used for commerce and trade Facility used for commerce and trade Buildings used for sports and recreation Part of a building used for sports and 112 P a g e

113 INDUSTRIAL BUILDINGS AND WAREHOUSES Other commercial buildings and facilities Light Industry Building/Facility Tank, silo and warehouse Other industrial buildings/facilities recreation Facility used for sports and recreation Stadium Swimming pool Commercial building with no specific commercial purpose Other buildings Parts of other buildings Building with no specified purpose Part of a building with no specified purpose Facility for pursuit of other commercial activities Textile industry building Part of a textile industry building Textile industry facility Leather and fur industry building Part of a leather and fur industry building Leather and fur facility Food and beverage industry building Part of a food and beverage industry building Food and beverage industry facility Building for tobacco production and processing Part of a building for tobacco production and processing Facility for tobacco production and processing Building for other industries Part of a building for other industries Facility for other 113 P a g e

114 industries AGRICULTURAL BUILDINGS Agricultural products storage facility Agricultural production buildings/facilities Other agricultural buildings/facilities (storage for mechanization, materials, etc.) Silo Cooling facility Cattle food production building Part of a building for cattle food production Cattle food production facility Agricultural building Part of an agricultural building Agricultural facility BUILDINGS SPECIAL PURPOSE BUILDINGS Petrol station Electricity generation facility Buildings/facilities used for exploitation of mineral resources Petrol station building Part of a petrol station Hydro power plant Thermal power plant Nuclear power plant Building used for coal production and processing Part of a building used for coal production and processing Facility for coal production and processing Building used for production, processing and transportation of oil, oil derivatives and gas Facility used for production, processing and transportation of oil, oil derivatives and gas Building used for production of iron ore and ferrous metals Part of a building used for production of iron ore and ferrous metals Facility used for production of iron ore and ferrous metals Building used for non- 114 P a g e

115 ferrous metal production and processing Part of a building used for non-ferrous metal production and processing Facility used for nonferrous metal production and processing Building used for nonmetal production and processing Part of a building used for non-metal production and processing BUILDINGS SPECIAL PURPOSE BUILDINGS Buildings/facilities used for exploitation of mineral resources Special purpose agricultural buildings and facilities Heavy industry building Facility used for nonmetal production and processing Building used for production of stone, gravel, sand and construction materials Part of a building used for production of stone, gravel, sand and construction materials Facility used for production of stone, gravel, sand and construction materials Fishery building Part of a fishery building Fishery facility Fish pond Forestry building Part of a forestry building Forestry facility Building used for hunting purposes Part of a building used for hunting purposes Hunting facility Graphic industry building Part of a graphic industry building 115 P a g e

116 BUILDINGS SPECIAL PURPOSE BUILDINGS Heavy industry building/facility Graphic industry facility Industrial transportation building Part of an industrial transportation building Facility for industrial transportation Chemical industry building Part of a chemical industry building Chemical industry facility Electricity generation building Part of an electricity generation building Electricity generation facility Metal processing and metal working industry building Part of a metal processing and metal working industry building Metal processing and metal working industry facility Machine building industry building Part of a machine building industry building Machine building industry facility Shipbuilding industry building Part of a shipbuilding industry building Shipbuilding industry facility Building used for production of traffic means Part of a building used for production of traffic means Facility used for production of traffic means Building used for production of 116 P a g e

117 Other buildings/facilities electrical machines and appliances Part of a building used for production of electrical machines and appliances Facility used for production of electrical machines and appliances Timber, furniture and paper production building Part of a timber, furniture and paper production building Timber, furniture and paper production facility Transformer station NON-APPRAISABLE BUILDINGS COMMERCIAL BUILDINGS Residential building for communal purposes Building/facility for pursuit of cultural and artistic activities Museum and library School building and building for scientific and research activities Hotel for long-term accommodation services Part of a hotel for long-term accommodation services Dormitory Part of a dormitory Boarding school Part of a boarding school Building for pursuit of cultural activities Part of a building for pursuit of cultural activities Facility for pursuit of cultural activities Prep school building Primary school building Part of a primary school building Primary school facility Secondary school building Part of a secondary 117 P a g e

118 NON-APPRAISABLE BUILDINGS COMMERCIAL BUILDINGS School building and building for pursuit of scientific and research activities Hospital and other buildings for medical care school building Secondary school facility Higher education building Part of a higher education building Higher education facility High education building Part of a high education building High education facility Building used for other educational purposes Part of a building used for other educational purposes Other educational facilities Science building Part of a science building Science facility Medical care building Part of a medical care building Medical care facility Social welfare building Part of a social welfare building Social welfare facility Building used for social services for children and youth Part of a building used for social services for children and youth Facility used for social services for children and youth Building used for social services for adults and elderly Part of a building used for social services for adults and elderly Facility used for social services for adults and elderly 118 P a g e

119 NON-APPRAISABLE BUILDINGS COMMERCIAL BUILDINGS Building used for traffic and communication activities Building used for traffic and communication activities Other commercial buildings/facilities Railway traffic building Part of a railway traffic building Railway traffic facility River and lake traffic building Part of a river and lake traffic building River and lake traffic facility Air traffic building Part of an air traffic building Air traffic facility Road traffic building Part of a road traffic building Road traffic facility Telecommunications and information building Part of a telecommunications and information building Telecommunications and information facility Postal services building Part of a postal services building Postal services facility Utility services building Part of an utility services building Utility services facility Water supply building Part of a water supply building Water supply facility Government bodies and organizations building Part of a government bodies and organizations building Government bodies and organizations facility 119 P a g e

120 NON-APPRAISABLE BUILDINGS COMMERCIAL BUILDINGS Other commercial buildings/facilities Local government unit building Part of a local government unit building Local government unit facility Local self-government unit building Part of a local selfgovernment unit building Local self-government unit facility Social fund building Part of a social fund building Social fund facility Commercial and other associations building Part of commercial and other associations building Commercial and other associations facility Political organization building Part of a political organization building Political organization facility Building used by social organizations and citizens associations Part of a building used by social organizations and citizens associations Facility used by social organizations and citizens associations Building used by diplomatic and consular missions Part of a building used by diplomatic and consular missions Facility used by diplomatic and consular missions Building used by international 120 P a g e

121 OTHER BUILDINGS Building used for religious and other ceremonies Historical or protected monuments organizations Part of a building used by international organizations Facility used by international organizations Building used by foreign branch offices Part of a building used by foreign branch offices Facility used by foreign branch offices Relay station TV tower Serbian Orthodox Church building Part of a Serbian Orthodox Church building Serbian Orthodox Church facility Roman Catholic Church building Part of a Roman Catholic Church building Roman Catholic Church facility Islamic religious community building Part of an Islamic religious community building Islamic religious community facility Other religious community building Part of a building of other religious community Other religious community facility Public shelter building Part of a public shelter building Public shelter facility Railway track 121 P a g e

122 NON-APPRAISABLE BUILDINGS OTHER BUILDINGS Industrial track Cableway Railway bridge Railway viaduct Railway tunnel Underground railway Railway station Tramway track Urban railroad Seaport Waterway River/canal lock Airport Helicopter landing pad District road Regional road Local road Uncategorized road Bus station Street Path Square Parking lot Road traffic bridge Pedestrian bridge Overpass Underpass Road traffic viaduct Road traffic tunnel Pedestrian tunnel SPECIAL PARTS OF BUILDINGS APARTMENT Apartment GARAGE Garage room SPACE Garage place Garage 3002 Business premises 3992 Business premises for unspecified business Business premises activity Public garage business BUSINESS 3412 premises PREMISES Business premises for 3522 sports and recreation Shop Trade business premises 3352 Hospitality industry business premises 122 P a g e

123 INDUSTRIAL PREMISES Office Warehouse space Industrial production space Tourism industry business premises Business premises for crafts and personal services Business premises for provision of financial services Business premises for provision of technical services Business premises for provision of businessrelated services Business premises for electrical generation businesses Business premises used by the metal processing and metal working industries Business premises used by shipbuilding industries Business premises for shipyard businesses Business premises for production of traffic means Business premises for production of electrical machines and appliances Business premises for chemical industry Business premises for timber, furniture and paper production businesses Business premises for textile industry businesses Business premises for production of leather and furs Business premises for food and beverage production businesses Business premises for cattle food production businesses Business premises for tobacco production 123 P a g e

124 SPECIAL PARTS OF BUILDINGS OTHER Other part of a residential building Other part of a nonresidential building and processing businesses Business premises for graphic industry businesses Business premises for other industrial businesses Business premises for construction industry businesses Business premises for industrial transportation businesses Attic, basement, shared facilities, etc. Business premises for agricultural industry businesses Business premises for fisheries Business premises for forestry industry businesses Business premises for hunting Business premises for coal production and processing businesses Business premises for production, processing and transportation of oil, oil derivatives and gas Business premises for iron ore and ferrous metals production Business premises for ore and non-ferrous metals production Business premises for production and processing of nonmetals Business premises for production of stone, gravel, sand and construction materials OF NON- APPRA ISABL BUSIN ESS PREMI SES Office Business premises for postal services 3382 Business premises for 124 P a g e

125 SPECIAL PARTS OF NON- APPRAISABLE BUILDINGS BUSINESS PREMISES Office utility services Business premises for public shelters Business premises for science Business premises for culture Business premises for telecommunications and information Business premises for primary education Business premises for secondary education Business premises for higher education Business premises for high education Business premises for other educational institutions Business premises for medical care Business premises for social welfare Business premises for social protection of children and youth Business premises for social protection of adults and elderly persons Business premises for government bodies and organizations Business premises of the local government bodies Business premises of the local selfgovernment units Business premises of the social funds Business premise of commercial, business and other associations Business premises for political organizations Business premises for social organizations and citizens associations Business premises for diplomatic and 125 P a g e

126 consular missions Business premises of international organizations Business premises of foreign companies branch offices Business premises of the Serbian Orthodox Church Business premises of the Roman Catholic Church Business premises of the Islamic Religious Community organizations Business premises of other religious communities Business premises of water supply businesses Business premises for railroad traffic Business premises for river and lake traffic Business premises for air traffic Business premises for road traffic TYPES OF LAND CONSTRUCTION LAND Urban construction land Land located in construction area Construction land located out of a construction area Other construction land with title deed AGRICULTURAL LAND Agricultural land FOREST LAND Forest land OTHER LAND Other land NON- APPRAISALB LE LAND CONSTRUCTION LAND NON-ARABLE LAND Public construction land Other state-owned construction land Naturally non-arable land 126 P a g e

127 SPECIAL PURPOSE LAND Man-made non-arable land Public parks, urban green surfaces, botanical gardens, zoological gardens, children s playground, etc. 127 P a g e

128 APPENDIX 3: Elements used to assess the quality of a building (Rulebook on method of property tax base assessment for real property title deeds, RS Official Gazette, No. 38/2001, 45/2004 and 27/2011) Item Description Unit Points Construction of the building 1.1. Buildings made of sun-dried bricks or sheds Prefabricated houses (made of wood, tin, steel) Buildings made of mixed materials Buildings made of solid materials Staircase 2.1. Wooden staircase Metal or concrete staircase Marble staircase Doors 3.1. Wooden - standard 3.2. Solid doors made of hard wood or steel doors Windows Windows made of wood, steel and plastic material, single (with single window pane) Windows made of wood, steel and plastic material, double (double window panes) 5. Shades 5.1. Eslinger blinds (made of wood, plastic) 5.2. Venetian blinds, shutters and venetian blinds rolling shutters Floors predominantly made of: Bricks, concrete, cement mortar and terrazzo tiles, planks and wood strip flooring 6.2. Parquet made of fitted beech, oak, etc., wooden blocks 6.3. Artificial or natural fibres, vinyl PVC flooring, vinas flooring, etc Sanitary equipment Completely built and finished bathroom (bath tub - shower, WC, washbasin) Per apartment Per apartment Per apartment Per apartment Per apartment Per apartment Per apartment Per apartment Per apartment Per apartment P a g e

129 7.2. Partially built or finished bathroom Per apartment Water supply 8.1. Water supply installations connected to the water supply network Per apartment Water supply installations connected to a well hydraulic accumulator Per apartment Sewerage 9.1. Sewerage connected to the sewerage network Per apartment Sewerage connected to the septic pit Per apartment Electrical installations Electrical installations Per apartment Telephone installations Per apartment Heating Central heating Per apartment Other heating systems (solid fuels, liquid fuel, or electricity) Per apartment Elements of practical building value Façade with classic finish Façade finish with façade bricks Façade finished with artificial stones Façade finished with natural stones Roof finished with copper tin Other elements Gas installations Per apartment Elevator in the building Swimming pool P a g e

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