The legislation of the Republic of Armenia regulates relations related to development through both civil and administrative legal instruments.
Significant changes were made in the field of construction activities in 2015, when the Civil Code of the Republic of Armenia defined the specifics of the contract for the right to purchase real estate or a residential house from a multi-apartment or subdivision building under construction.
In particular, the statistics of design permits, construction permits and completion acts for the period from 2014 to 2022, published on the official website of Yerevan Municipality, show that the number of construction permits issued in 2014 is significantly different from the number issued in 2022. of building permits, and the number of applications for both building permits and design permits has steadily increased over the period under review.
Moreover, to date, the number of graduation acts has not changed significantly, in contrast to the permits issued for construction and design.
In the Republic of Armenia, the following reforms have been made in the field of urban planning and development.
- The introduction of the mechanism for compensation of interest paid on mortgage loans through the return of income tax has given a great impetus to the residential real estate in the primary market, which will continue to operate until January 1, 2025, and after that it will stop in Yerevan, but will operate in marzes outside of Yerevan.
- Changes have been made regarding VAT, according to which the developer can pay VAT after the construction is completed.
In order to build an apartment building in the Republic of Armenia, it is necessary to perform the following actions in the specified order, as follows:
The first step is to establish a legal entity to carry out the relevant activity or the relevant person obtains the status of an individual entrepreneur.
The most appropriate way to build an apartment building in the Republic of Armenia is the establishment of a legal entity, because it is more advantageous and attractive for legal entities from the point of view of tax regulations, as well as certain privileges have been granted by the state to all tax-paying legal entities that build an apartment building. Buildings.
There are various legal forms of legal entities, the choice of which should be determined not by the fact that the tax environment is more favorable, but by taking into account the composition of the entities involved in the activity, the possibility of signing agreements between the founders in the future, the need to raise funds, the desired methods of raising funds and other similar circumstances, after the scope of which is completely simplified, it will be possible to choose the organizational legal form of the relevant legal entity.
After the establishment of a legal entity, it is necessary to open a bank account, which will later be a special account of the developer and to which some restrictions will be applied in the future, about which we have also presented information in this article.
After opening the bank account, it is necessary to start the process of purchasing the corresponding plot of land, on which the multi-apartment building is planned to be built. When buying land, it is necessary to take into account many circumstances, in particular: zoning, permissible taxation, environment, communications, possible problems with neighboring and/or living entities and other similar circumstances. One of the most important circumstances is zoning and allowable taxation, because these circumstances determine a number of important realities for the developer in the future, for example, it is important to take zoning into account so that it is clear for the developer whether the buyers will be able to take advantage of the possibility of income tax refund in the given when buying an apartment in the building, because, as mentioned above, from January 1, 2025, this opportunity will no longer work in Yerevan, and before that, not all zones in Yerevan will be able to use this opportunity. The need to find out the permissible amount of tax before buying a plot of land is necessary so that the developer can roughly calculate his expenses and the degree of profitability, as a result of which the expediency of building an apartment building on a prime plot of land will be clear.
After choosing the land, it is necessary to start the purchase process, the purchase process can be either simple, for example, there is one owner of the land and requires a certain amount, or not so simple, for example, the land belongs to different people who have different expectations from the sale of the corresponding land. In the Republic of Armenia, there are many cases when the developer, instead of paying the full amount for the land, partially pays the price of the land, and instead of the other part of the price, provides apartment(s) and/or commercial space(s).
After the land purchase process is properly completed, the necessary activities to obtain planning permission should be initiated.
Thus, the design permit or the architect-planning task defines the mandatory conditions and restrictions for the development of the architectural design documents of the urban development object, based on the requirements of the spatial planning documents of the community.
The developer submits an application to the competent authority to receive a task in order to carry out urban development activities, in accordance with the prescribed form, which indicates the planned new object or the object subject to change (reconstruction, restoration, strengthening or change of operational purpose, as well as moving and changing immovable monuments of history and culture). (or a part of it) location, significance, planned surface area, height of the structure, in case of a change in the operational purpose of the structure, the purpose of the change and other information presented in the form specified in this point.
Previously, the design permit was drawn up and amended by the state body free of charge, but on June 28, 2023, according to the decision of the Council of Elders of the City of Yerevan, fees were set, the amount of which is directly related to the surface area of the object under construction, in particular
- Design permit preparation fee for buildings and structures with a total area of 3,001 square meters or more: four million AMD and the product of the sum of AMD 4,000,000 for every 3,000 square meters exceeding 3,001 square meters and the zoning coefficient corresponding to the zoning of the place of construction of the building.
- Fee for making a change to the design permit: for buildings and structures with a total area of 3001 square meters or more, one million AMD and the product of the sum of AMD 1 000 000 for every 3000 square meters exceeding 3001 square meters and the zoning factor corresponding to the zoning of the place of construction of the building.
- Design permit is issued free of charge for a building with a built-up area of up to 3000 square meters.
In order to make the calculation process clear, we will give an example, in particular, if the land is located in the small center of Yerevan, then its coefficient is 4. The conventional construction area is 15,000 square meters, then it is necessary to divide 15,000 by 3,000, multiply it by 4,000,000 AMD, and multiply the received amount by 3 ((15,000/3,000)x4,000,000 x 4 = 80 000 000 AMD (approximately $200 000)).
After obtaining planning permission, there are certain procedures that must also be followed before obtaining building permission, namely:
- examination of project documents,
- project approval
The above-mentioned activities include many processes in terms of content, but in order not to overload this article unnecessarily, we do not address them.
After performing all the actions in due order and in accordance with the legal regulations and passing the necessary examinations and paying the fee for the construction permit, the head of the community issues a permit, from which moment the developer can carry out the construction.
The developer has the right to use the funds available in the developer's special account, but there are restrictions in some cases, for example, the freezing of a certain part of the available money, which must remain in the special account before the developer receives the completion deed, and the money available in the special account deposit interest is accrued on the funds, which amount can be used by the developer during construction.
After completing the construction in accordance with the requirements set by the construction permit, the developer applies to the state body for the formulation of the completion act and obtaining the operation permit. After receiving the permission for the operation of the multi-apartment building, the funds available in the special account of the developer can be used freely.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
