The Reduction of Corruption in Bulgarian Real Estate

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2010 will begin an interesting phase for Bulgarian real estate, with property prices at the lowest they have been for some years, mortgage loans becoming increasingly accessible at lower rates and the possibility of the new Notary Act coming into effect. The Bulgarian real estate market is expected to begin its revival with the new Notary Act, enabling transparency of all real estate transactions to be processed through the State Depository Bank.

With the passing of an amendment to the Notary Act, all new transactions such as real estate and vehicle purchases will be required to pass through the State Depository Bank. Designed to end the common existence of excessive cash purchases, the declaration of all acquisitions will be a major change to the current purchasing methods from many investors.

The new Notary Act is expected to come into force from the 1st January 2010 in an effort to reduce real estate fraud, corruption and money laundering. The changes will also ensure that all necessary fees and taxes relating to the sale and purchase are paid.

The introduction of a State Depository Bank will be set up to process all real estate payments, yet with restrictions as it will not be designed to function as a regular commercial bank. The bank will not be permitted to charge interest on payments; however a fee is expected to be charged on all transactions.

Although the procedure is set to come into effect as of January 2010, many of the details are still to be confirmed. It has not yet been decided how the bank expects to charge necessary fees on transactions, yet it is suggested that a sliding scale based on the property purchase price will be adopted.

The banning of cash transactions for purchasing real estate in Bulgaria will represent a new era in the market. In an effort to reduce taxes, the actual purchase price of properties has rarely been declared at the correct amount. These efforts to reduce tax fraud still omit the possibility of buyers and sellers agreeing to lower prices for the official transactions and exchanging cash privately, yet the majority of cash transactions will be greatly reduced.

The recent increase in demands for Bulgarian properties particularly from Russian clientele is potentially relating to the cash purchasing opportunities of the current market position. While the Bulgarian real estate market is predicted to be facing the lowest point of its downturn over the past 12 months, future sustainable growth will only be possible with major changes in the operational processes.

As the market is making efforts to move away from the extensive corruption methods that previously existed. The renewed growth into a stable economic sector is still predicted to take several years, despite the low property prices and the reduction in the supply against demand ratios. Amendments in the mortgage sector have produced some optimum opportunities not seen in the Bulgarian real estate market for some years, providing additional assistance with the recuperation of the market.

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