Two years have passed since Bucharest has been blocked at the urban planning level, as a result of the suspension or annulment in court of the Urban Area Plans (PUZs) for Bucharest’s districts, while the clarification of the urban aspects remains a long-term wish as the collecting and updating of relevant data for the new General Urban Plan (PUG) was only launched in January 2023.
Developers and active investors on the real estate market in Bucharest met in an event recently organized by the law firm Schoenherr and SCA Associates, with the aim of identifying possible ways to overcome the current deadlock.
The even application of legislation in the field, the revision of the legislative framework so as to allow the reduction of bureaucracy through digitization, the correlation of the measures taken by the authorities with a serious analysis of the social impact of these measures and, above all, stability and predictability – these are some of the necessary general directions identified by the participants in the debate.
“Real estate developers have, at this moment, three possible positioning scenarios in the context of the urban blockage in Bucharest: to wait, to give up on the development of certain projects or to react. The decision to opt for one of another depends on the particularities of each project, and our practice shows that there are effective legal solutions to implement in any of these scenarios. But it is important to draw attention to the fact that these solutions address the effects and not the cause of the blockage”, said during this debate lawyer Sebastian Guțiu, managing partner of Schoenherr and SCA Associates, who coordinates Schoenherr’s real estate practice in Central Europe and Eastern/South-Eastern Europe.
The consequences of urban blockage, just getting started? Possible solutions
“The effect of the urban blockage in Bucharest will be seen especially in the coming years. Unfortunately, the problem extends to the entire country, where large delays have occurred in projects. We therefore observe a domino effect. The causes are excessive legislation and bureaucracy. I think that, for unblocking, we need to go back to the legislation and reduce the bureaucracy through digitalization, to find simpler solutions”, said Tinu Sebeșanu, CEO of Impact Developer & Contractor.
“The legislative framework is very important, but perhaps equally important is the way in which the legislation is applied. I think that a unified approach at the level of the authorities (and their representatives) is essential in applying the legal provisions and safeguarding the legislative stability, which would increase the level of predictability for real estate developers and investors”, said Robert Ioniță, director of the legal department of the NEPI group Rockcastle at the regional level. He added: “The current blockage in Bucharest is, to the best of my knowledge, unique in the Central and Eastern European region, where the NEPI Rockcastle group is active in nine markets.”
Currently, as districts 1, 3, 5 and 6 do not have a PUZ (either they never had one or it was annulled in court), urban planning projects in these districts is done accordinglyto a PUG issued in 2000, the only exception being district 6. For the other two districts – 2 and 4 – the PUZs are subject to annulment actions.
The PUG from the year 2000 will remain in force until a new one is adopted, but the optimistic deadline for this to happen is 2025. Moreover, experts warn that “depending on the outcome of the court actions regarding a possible annulment of the PUG (now in the appeal phase), in the event of the cancellation of the PUG, we could find ourselves in a situation where we go back in time 27 years, returning to the Urban Planning Regulation from 1996”, said Mădălina Mitan, a lawyer specialized in real estate, managing attorney at law within Schoenherr and SCA Associations.
Recently, the unblocking of the PUZs for districts 2 and 4 was achieved at the first ruling in court, this decision representing a first step towards unblocking an artificially created situation and it sends a signal that things can evolve in a good direction for Bucharest.
“We have reached a situation where the urban development of Bucharest is decided in court and this happens because there is no dialogue between authorities, investors and the beneficiaries of urban development, mainly the citizens. The figures are clear, the GDP is decreasing because the contribution of the real estate sector has decreased. It is difficult to attract new investors to Bucharest in the absence of a predictable and coherent legal framework”, said Despina Ponomarenco, president of the Bucharest Real Estate Club (BREC), the main organization of the real estate industry.
Among the possible solutions with the potential to simplify and clarify legislative aspects in the field of urban planning and construction, the Urban Planning Code should have been adopted by the end of March this year. At its current stage in the legislative process, however, it is unlikely for it to be adopted before 2024.
The social impact must be considered. 70% of buildings in Romania, unsafe
Real estate developers and investors underline that the social impact of certain measures is not taken into account by authorities. At the same time, the urban blockage is all the more difficult to understand when Bucharest has a housing fund that is largely weakened and would be unable to cope in the event of a major earthquake.
“I recently attended a seminar at the Bucharest Technical University of Construction on the subject of earthquake resistance of buildings and learned that 70% of buildings in Romania do not meet earthquake safety standards, according to university statistics. Therefore, the natural question is how is it possible to block the renewal of the housing fund when 70% of the current one is expired”, said Andrei Diaconescu, co-founder of ONE United Properties.
18 approvals for erecting a fence
Laurentiu Afrăsine, CEO Akcent Development, draws attention to the way in which the legislation is applied. At the same time, he rings the alarm about the possibility that the urban blockage may also have an impact on investors’ interest in Bucharest as a destination for their businesses: “The effects of the urban blockage will be seen in the next two years, and I don’t think I’m exaggerating when I’m saying that they will be devastating because foreign investors are no longer looking at Bucharest, even though the price per square meter is lower than in Budapest and Warsaw. I’ll give you a telling example for the current situation: we recently needed 18 approvals to obtain an authorization to build a fence and in the future we will need dozens of approvals for utilities,” said Laurentiu Afrăsine. He emphasized that, in addition to the PUZs and building permits, there are also problems with the issuance of building certificates, which has serious consequences for the final buyer.
The current situation does not solve Bucharest’s problems, but deepens them. Traffic and pollution are increasing due to the many developments around the Capital. The latest official data shows that the population of Bucharest decreased by 166,400 in 2021 compared to 2011, while the population of Ilfov increased by 153,000 in the same timeframe. Investors expect an increase in the discrepancy, considering the numerous construction sites in Ilfov and the considerable decrease in those in Bucharest. The migration of people outside the city limits puts more pressure on traffic, as most of them still carry out the vast majority of their activities in the Capital.