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Serbia, Is it worth it for the state to waive the fee to encourage investment and construction

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The conversion with compensation of the right of use to the right of ownership over construction land will be abolished by amendments to the Law on Planning and Construction, probably by April or May, announced the Minister of Construction, Transport and Infrastructure Goran Vesić. Experts point out that by canceling the fee, the state would give up significant income and point out that in that case investors who had allocated money and paid for the conversion in previous years would be harmed and placed in an unequal position. The investors, however, believe that by purchasing the company in bankruptcy, they have already paid the fair value of the land, and that is why they are asking for the compensation to be canceled.

When the Law on converting the right of use into the right of ownership on construction land for a fee was adopted, it was announced as a driver of the construction industry, and today it is cited as the main culprit for the stagnation of certain investments. According to experts, the standstill occurred because the owners who bought the factories through privatization and bankruptcy had to pay compensation to the state, if they wanted to build new facilities on the site of the former state-owned enterprises. Since they did not want to pay, they abandoned the construction.

By purchasing those companies, they acquired the right to use the land that is under the buildings, but if they decided to demolish the factory to build apartments or business premises, that is, if they wanted to change the rights on the land, they had to pay for it, since it did not enter at the factory price. The authorities have now calculated that it is more profitable for the state to give up charging the fee, because they believe that it is the reason why investors do not want to build and claim that the state lost much more money as a result than it gained through the conversion.

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Vesić: We lost more than we gained

The Minister of Construction, Transport and Infrastructure, Goran Vesić, said earlier that by canceling the conversion, 5,000 construction sites would be freed up. Vesić said that this slowed down investments and the creation of new jobs.

“I don’t understand the example that, that’s what I heard, that by repealing the law on conversion, the state will be left without billions of euros in compensation, because that’s what those who passed the law 13 years ago are saying. They provided 36 million euros in the budget for these 13 years, and lost we lost thousands of jobs. Local governments lost hundreds of millions of euros through contributions for construction land that were not collected and through property tax that was not collected. We lost much more than we gained,” said Minister Vesić.

Restitution Network: It’s citizens’ money

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Mile Antic, from the Restitution Network, told Euronews Serbia that the cancellation of the conversion payment is not possible. He pointed out that the Constitutional Court in its decision from 2013 was very clear and stated that the right of use can be converted into the right of ownership, that is, given to those who are currently found users, only with a market fee.

NALED: By purchasing the company, the businessmen have already paid for the land

Jasmina Radovanović, Head of the Unit for Property and Investments of the National Alliance for Local Economic Development (NALED) and member of the working group for amendments to the Law on Converting the Right of Use into a Property Right, said that NALED did an analysis of the effects of the conversion and that it showed modest results, such as and that a small number of conversions were made for a fee.

“Since 2015, the state has charged 7.7 million euros, and the value of the planned projects, which are pending due to the pending conversion, is between 40 and 50 million euros. It is not true that only commercial facilities will be built on the sites of privatized factories, there are many factories that they want to expand and have to rent another space, because due to the pending conversion, they cannot build on their land,” Radovanović told Politika.

She pointed out that the businessmen came to that land through privatization and bankruptcy and that they believe that by purchasing the company they acquired and paid for that land as well. Radovanović also cited the example that the company submitted a request for payment for the conversion of about three hectares, waited four years and finally gave up, because it is required to pay about half a million euros for the conversion, and the market value of the land is about 300,000 euros.

RERI: Those who paid the fee will be harmed

The lawyer of the Regulatory Institute for Renewable Energy and the Environment (RERI) Jovan Rajić told Euronews Serbia that, although a lot of information appeared, the public was not told why the law was not applied in the previous period. He assessed that the Law on Land Conversion in 2015 was announced as a driver of the construction industry, and that today it is cited as the main reason why investments are stagnating. According to his assessment, the Constitutional Court will inevitably be forced to participate in the resolution of this case.

“Both from Minister Vesić and NALED, which is very active when it comes to these changes to the law, we hear that it is not applicable, that the state lost millions of potential investments in the previous period, but how did this administrative congestion occur and why We have missed so many development opportunities and why the construction industry has lost so much, we have not heard that anywhere,” Rajić told Euronews Serbia.

He recalled that, when the Law on Land Conversion was adopted, the then mayor of Belgrade, Siniša Mali, announced it in 2015 as something that would start the construction industry and bring new investments. Rajić believes that the question of how now is precisely the main reason why investments are stagnant. He points out that, according to the existing regulations, this is an expense that investors had to count on, and that some investors will now have “this obligation removed from the agenda, while those who did it will be put in an unrepeatable position”.

“If the changes are adopted, investors who fulfilled their obligation and paid the fee for the conversion according to the existing law will be placed in a less favorable position than those who did not fulfill this obligation. because they consider that they paid the fair value of the land when they bought the company in the process of privatization or bankruptcy,” says Rajić.

He notes that half of the money from land conversion should have gone to the budget, and the other to the Restitution Fund.

“According to the law, 50 percent of the total fees charged for land conversion go to the budget of Serbia, the Autonomous Province or local governments, depending on who is the current owner of the land, and 50 percent goes to the Restitution Fund, to the citizens who submitted their requests for restitution property that was confiscated from them earlier. These are millions that the state is now giving up,” Rajić pointed out.

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