When a Spanish investor decides to start a business or expand their existing one in Eastern Europe, they face several questions: Where should I locate my company? What procedures are required? What is the current state of the real estate market in these countries? What tax advantages and subsidies are available to me?
Due to the upcoming opening of the European Union towards Eastern European countries, entrepreneurs are realizing that there is a large field to explore for companies that want to enter the real estate market in these countries.
Firstly, because many of the existing legal barriers will be eliminated. Secondly, because of the future improvements to road and rail infrastructure that will be implemented in these countries. And most importantly, because of the arrival of EU funding for foreign investment.
Perhaps for these reasons, real estate investment in Central and Eastern European countries is increasing rapidly. According to a study by the real estate consultancy Jones Lang LaSalle, during the first half of 2003 the office market saw demand 4% higher than in the same period of 2002. This, in turn, translated into an increase in the occupancy rate, reaching 18% in the first half of the year.
But conditions vary considerably from country to country. While weak economic conditions in Poland limited rental activity in 2003, demand remains strong in Romania and the Czech Republic. Specifically, investor sentiment has been particularly buoyant in the Czech capital in recent months, attracting almost half of all activity in these countries. Meanwhile, occupancy demand continues to be very strong in Moscow, where offices rank fifth in the price ranking compiled by the real estate consultancy Cushman & Wakefield.
Where to start
Today, many obstacles still exist for entrepreneurs wishing to acquire property in Eastern Europe. In these countries, specific laws prohibit the acquisition of offices and premises through foreign capital.
These legal issues are expected to disappear with integration into the European Union, but a transition period is possible. Therefore, the first step is to seek legal advice to determine the best way to enter the market. In some cases, the acquisition is typically made through a local investment partner.
To advise business owners on these types of transactions, there are several specialized companies: real estate consultancies. In Spain, there are many, although some have not yet carried out real estate operations in Eastern Europe.
Among the international real estate consultancies based in Spain are Cushman & Wakefield, Jones Lang Lasalle, Irea, King Sturge, Auguste-Touard and Aguirre Newman.
Next step: funding
Once the entrepreneur is aware of the legal problems he may face if he wants to buy or rent a property in Eastern Europe, it is time to analyze the possible financing options.
In this respect, we once again encounter another barrier: the absence of Spanish banks in Eastern Europe. According to statements by the Commercial Counselor of the Czech Republic, Ales Macik, "If you want large projects, it's almost essential to have a local foreign bank present, just as the French, Italians, Germans, and even Taiwanese have already done. Spanish banks are absent from the CEC countries (Central and Eastern European Countries), and they haven't made the decision to enter the region. We know that Spanish banks have some alliances with German banks, but that's not the ideal way to enter the Czech Republic," Macik explained.
Among the German banks with the largest presence in Eastern European countries, Eurohypo stands out. This entity, aimed at international real estate investors, is currently a leader in our continent and is very well established in countries such as the Czech Republic, Slovakia, Poland, and Hungary.
Among the services they offer their clients are property acquisition, property refinancing, financing through real estate assets, and financial project development. In this way, Eurohypo finances and advises its clients on the purchase of office buildings, shopping centers, and business hotels.
The economic boost
Furthermore, it is important for entrepreneurs to be aware of the various sources of financial support available to them when investing. In this regard, it is crucial to distinguish between funding from Spanish institutions and funding from the countries where the investment is planned.
Among the first options are the repayable loans and advances granted by the Official Credit Institute (ICO). This agency provides up to three million euros or financing for 70% of the project to Spanish companies with fewer than 500 employees that wish to establish themselves abroad. The aid system is a loan with a repayment period that can range from 5 to 10 years. The problem with this aid is that the loans are managed through banks, which often reduce the benefit for the investor.
Other financial aid is offered by the various governments of Eastern Europe to foreign companies that decide to invest in their territories. At this point, Spanish investors can contact the investment agencies of the different countries, which will inform them about the subsidies that fit their business project.
In each country, these agencies or offices have different names. In the Czech Republic, the entity is called Czech Invest; in Poland, it is the Polish Agency for Foreign Investment (PAIZ); in the Russian Federation, the entity to contact is the Trade and Investment Promotion Agency (TIPA); and in Hungary, the Hungarian Investment and Trade Development Agency (ITDH). The latter has a branch in Barcelona, which initially overcomes the problems arising from language and distance between countries.
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