REALIZATION OF REGISTRATION SYSTEM: HOW THE REAL ESTATE MARKET WILL CHANGE

The main factor in the projected revival of the real estate market in Tashkent is the Presidential Decree. “On measures to reform the procedure for permanent residence registration and registration at the place of stay” (N UP-5984 of 04/22/2020). The document provides for a phased transition from a permanent registration system, which is permissive, to a notification registration system. The concepts of “permanent residence registration” and “registration at the place of stay” will be gradually replaced by the concepts of “registration at the place of permanent residence” and “registration at the place of temporary residence”.

The reform of the registration system removes a number of barriers to freedom of movement, choice of residence, and work of citizens. This will contribute to the significant economic growth of the country, including the growth of the real estate market, the possibility of citizens free access to its facilities.

The prerequisites of the Presidential Decree were a number of legislative acts, including the Presidential Message to the Oliy Majlis of January 24, 2020, the State Program for the Implementation of the Action Strategy for the five priority areas of the development of the Republic of Uzbekistan in 2017–2021 (appendix N 1 to UP-4947 of 7.02 .2017) in the Year of the development of science, education and the digital economy.

The key innovation of the document for the housing sector is that from April 1, citizens of Uzbekistan are allowed to freely buy residential and non-residential real estate in Tashkent and the Tashkent region, regardless of the time of its construction. Now this does not require registration at the place of permanent residence in these regions.

This step was taken to develop the real estate market, create an active competitive environment, equal conditions and opportunities for market entities - both sellers and buyers. The document equalized the rights of nonresident citizens with residents of the capital when buying residential and non-residential real estate both in new buildings and in the secondary market.

 

Previously, nonresident citizens were allowed to purchase housing in the capital without registration only in new buildings. They could not buy an apartment in the secondary housing market, which put them, as well as real estate sellers in an unequal position. Such a skew narrowed the property rights of citizens, limited the development of the market.

At the beginning of the rapid development of the construction industry, intensive housing construction, the state supported entrepreneurs implementing priority projects in the housing sector. During this period, instruments of state regulation of the housing market were identified as a temporary measure. This is normal practice when the state participates in civil law relations in the real estate market, determining its order and functioning.

Creating equal conditions for all subjects of the residential real estate market is a very serious and expected step to liberalize the conditions of its activity. The opportunity for any citizen of the country to freely buy residential and non-residential premises in the capital without reference to a residence permit is a drive belt that drives mechanisms to grow the market, increase its size, number of participants, and create an active competitive environment. This will remove the barriers to the free sale of real estate.

We can give several examples of how the imperfection of the registration system restrained market opportunities and limited the rights of citizens. For example, before, the right to register in the capital was granted to nonresident specialists who were elected, appointed, approved for relevant posts, or were invited to work in state organizations of republican significance. Moreover, they received the right to register only for the period of tenure in this position.

A constraining point was also the requirement that the couple should live together in Tashkent for at least a year, after which the possibility of their registration was considered. Or, citizens registered earlier in Tashkent and the Tashkent region and having left the country could have problems with registration when returning for permanent residence. Now they can re-register without hindrance.

 

Now all the actors in the real estate market are in an equal position. But the consequences of equality can be different. The secondary may be in a better position. For developers, the new reality may turn into risks associated with both the consequences of the pandemic and the loss of a number of advantages. After quarantine cancellation, the solvency of the population may decrease. Accordingly, we can expect a decrease in demand for new buildings. Based on the price range, the buyer may prefer a secondary housing fund.

Previously, in new buildings, the practice of joint purchase of housing by nonresident citizens was practiced, when several people or families invested their funds in a real estate object mainly in order to obtain a residence permit in the capital. This trend with

reforming the registration system will decline. For the developer, this is a loss. But, I think, in the future it will be present as a joint long-term investment in real estate.

Another point. Before, having bought an apartment in a new building, a nonresident owner for 3 years could not sell it because of the high separate state duty rate of 400 BRV. Now this duty has been canceled, and owners can resell the apartments, paying the state duty at the rate approved for certification of sales contracts in Tashkent. If they will sell the apartment at a price lower than in a new building, then for the builder this is the loss of buyers.

In order to stimulate demand, the Presidential Decree abolishes the state duty rate in the amount of 5% of the sale amount when buying non-resident housing in new buildings.

It is very important that legal innovations should give impetus to the development of the market for non-residential premises for commercial activities. The market is waiting for entrepreneurs. Before, nonresident citizens in Tashkent could not buy non-residential property at all. Even by the rules of buying apartments in new buildings. Meanwhile, this segment has very great prospects. In the near future, potential buyers from the regions will come to the market. This is a good incentive for the development of business in Tashkent, respectively, and the demand for non-residential real estate.

 

Of course, one way or another, the crisis associated with the pandemic will affect the real estate market and hit apartment prices. But there should not be sharp changes here. Firstly, the demand for housing in the capital at all times is consistently high. Secondly, the instruments of lending to the population for the acquisition of housing are expanding and improving. Well, the reform of the propiska system will to some extent mitigate the consequences of the crisis.

According to forecasts, residential property prices may fall slightly. As for the new building, here a drop in prices can lead to a decrease in the quality of newly constructed facilities. Indeed, the vast majority of developers use modern imported materials and technologies, which affects the cost of apartments.

Members of the upper house of parliament approved the Law "On Amendments and Additions to the Law of the Republic of Uzbekistan" On the List of Categories of Persons - Citizens of the Republic of Uzbekistan, Permanent Registration in Tashkent and Tashkent Region. The Regulation on the registration procedure at the place of permanent residence and the place of temporary stay of citizens of the Republic of Uzbekistan in the city of Tashkent and Tashkent region will be developed.

Registration of citizens begins on September 1, 2020. By this time, the negative economic consequences of the epidemic should smooth out. The housing market may come to a serious recovery. In the competition between new buildings and secondary housing, developers must rely on quality and comfort at affordable prices.

In the legislation that defines the rules of the game on the real estate market, there are a number of unresolved issues. This is the participation of citizens in shared construction, including foreign ones. Attracting new actors - foreign equity holders to the market will provide the country with an influx of foreign direct investment.