The Romanian Real Estate sector fared very well in the recent years: At the moment, according to the Global Property Guide, Romania is ranked on the 3rd position in the European ranking of Gross Rental Yields (after Moldova and Ukraine).
The gross annual rental income (what a landlord can expect as return on his investment before taxes, maintenance fees and other costs) is situated at 7.76% at the moment, outreaching countries like Italy, Denmark, Germany or France.
Romanian Legislation has no interdictions with reference to the ownership right over Romanian real estate such as apartments, commercial or industrial buildings for foreign citizens, stateless persons or for legal entities, regardless of their country of origin.
So they can acquire ownership right over the above mentioned real estate properties under the same conditions with those applicable to Romanian citizens.
However, the land the above–mentioned categories of buildings are standing on cannot be acquired and therefore, a right of “superficies” must be established in favor of these properties. So, in brief, a foreign citizen interested to make a Romanian Real Estate investment can simply acquire the right to use the land, but not the land itself.
At his moment, there are 2 different circumstances under which foreign individuals are able to acquire real estate (only land), in Romania:
individuals not domiciled in Romania, but being EU citizens or citizens of a member state in the Economic European Area, stateless persons not domiciled in Romania, but domiciled in an EU member state and as well legal entities not domiciled in Romania (established in accordance with the legal provisions of an E.U. member state) – they all can acquire ownership right over lands, only if these lands are used to build secondary residences or secondary headquarters. So legal information to buy property Romania should point out the fact that this particular category of entities is permitted to buy land only under these conditions;
farmers who are either citizens of an E.U. member state or stateless persons domiciled in an E.U. member state, who establish their residence in Romania, can acquire ownership right over agricultural land, forests and forestry land under the same conditions as those applicable to Romanian citizens and to Romanian legal persons, only if they can officially prove that they work as farmers and they will not change the nature of their activity during their transit period.
There is a law for ownership right over Real Estate for Romanian Legal Persons. As opposed to all previous restrictions, a business organization (which is a Romanian legal entity) may acquire the ownership right over Romanian real estate (lands and buildings). This regulation entitles companies which are also legal entities to the ownership right over any type of land, including agricultural land, forests and forestry land. Consequently, the shareholders or the partners of a company, no matter what their nationality, indirectly have the right to acquire lands and buildings
Each property has a cadastral registration and a land book where it is noted all events affecting the property title (change of owner, litigations, mortgage, long term renting contracts, etc). The system is computerized and it is under the ward of the Ministry of Administration and Internal Affairs through its branches in each region of the country.
The obligations between the buyer and the seller are usually (but not mandatory) defined by an Agency (registered commercial society) or legally authorized individual practitioner. Contracts are signed with both the buyer and the seller and are only written. Commission contracts are mandatory.
Although not practiced by the entire market, a Romanian real estate agent`s fees come from two sources: the landlord and the client; this is the reason why, as a client, you might be charged a commission: usually 50% of a month of rent (for rent properties) / 2-3% of the transaction value (for a property you buy). It depends on the agency contract, but payment generally occurs after the transaction is signed.
There are no statutory restrictions on remuneration. If the broker is not involved in the actual transaction, but only in counseling or advisement services, payment is made by commission or fee. There are not specific requirements.
Negotiation margins: Prices may be decreased through negotiation (rent/buy), depending on factors such as: total value of transaction, contract period, value of the advance payment, value of the guarantee (properties for rent).
Various property marketing systems apply, including web-based listing portals. All types of properties (residential, commercial, office, logistic assets) are included in these systems, that are operated by specialized entities. No multiple listing systems are currently available.
A notary is mandatory for sales contracts and occasionally lawyers are also involved. Lawyers may sell properties, but only notaries are required to be involved to complete real estate transactions. Notaries charge % of the transaction, on a standard taxation scheme that will apply to the buyer. No charges apply to rental transactions.
Contract registration: The contract stipulating your transaction should be registered by the owner of the asset, in no more than 15 days, at the local fiscal administration. If 60 days pass from the transaction and the property owner doesn`t register the contract at the local fiscal administration, he is risking a 50-500 lei (10 – 110 EUR) fine.
Tax on transfer of ownership, excluding inheritance, is calculated in the following manner:
for constructions of any kind and land gained in a term of up to 3 years: – 3% for amounts up to 200,000 Lei (49,000 USD) – 6,000 Lei (1,500 USD) + 2% of the amount exceeding 200,000 Lei (49,000 USD), for amounts over 200,000 Lei (49,000 USD)
for constructions of any kind and land gained in a term of over 3 years: – 2% for amounts up to 200,000 Lei (49,000 USD); – 4,000 Lei (900 USD) + 1% of the amount exceeding 200,000 Lei (49,000 USD), for amounts over 200,000 Lei (49,000 USD)
Annual Taxation on Buildings: Any person owning a building located in Romania owes an annual levy to the State. This tax is to be paid to the local budget of the respective county, town or municipality where the building is located. For physical persons the levy is calculated by applying a quota of 0.1% to the taxed value of the building. As an example, the taxed value for a building constructed of reinforced concrete, brick or stone is in amount of 397 Lei/square meter (97 USD/ sqm). The taxed value is reduced depending on the year of the building’s construction. If a physical person owns 2 or more residence buildings – not rented to another party – the levy shall raise accordingly. In the case of companies, the levy on buildings is calculated by a applying a quota of 0,25% to 1,50% to the established value of the building. Each exact levy is established by the Local Council in these limits.
Annual Taxation on Land: Any person owning Romanian land owes an annual levy to the State, with certain exceptions. This levy is owed to the local budget of the county, town or municipality. When the land is situated in Bucharest, the taxes are to be paid to the local budget of the city’s sector. The levies on land are not owed for the land beneath a building. The land tax is established taking into consideration the number of square meters, the rating of the respective location of the land and its category per the decision of the Local Council. In the case of non-agricultural land, registered as “land with construction”, the tax is established per hectare. As an example, the most expensive rate is 7,404 Lei (1,800 USD)/hectare.
Levies are to be paid annually in 2 equal rates, until the 31st of March and 30th of September. If the amount does not exceed 50 Lei (12 USD), then the levy is to be paid fully until March 31st.
The Romanian Association of Real Estate Agencies (ARAI) has a Code of Ethics and also an internal dispute process – ARAI board being responsible for its enforcement.
Licensing in Romania is not compulsory at the moment, but individuals who wish to obtain a license may do so by attending specialized courses. Reports on the number of practicing estate agents vary, ranging from 3,00 – 4,000 agents working with from between 100 (large) to 1,000 (all totaled) companies. 60% of these companies are actively involved in real estate practice according to Romanian Association of Real Estate Agencies. Approximately half the of the estate agents work in Bucharest.
Various funding solutions and real estate lending products are available, through investment banking structures or other types of financing entities for foreign investors in Romania, for various needs such as: Investment/Refinancing Transactions, Development Projects, Acquisition Transactions, Cross-National Portfolio Transactions. Fore more details regarding financing options please contact: codrin.matei@crosspoint.com.ro.
