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Albania: Legal Framework and Recent Developments on Using State-Owned Real Estate for Promoting Investments

Albania: Legal Framework and Recent Developments on Using State-Owned Real Estate for Promoting Investments

Issue 10.3
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The trend is clear: real estate is noticeably becoming the most dominant sector of foreign investments in Albania. Records from national and international entities and organizations provide data confirming the accelerating increase in the past few years.

According to the data provided by the Bank of Albania, by the end of September 2022, the total value of foreign investments in real estate has exceeded USD 1 billion, representing a 43% increase compared to the same period of the previous year, and constitutes 9.5% of the total foreign investments in Albania.

The reasons behind the soaring of real estate transactions in Albania can be attributed to the geopolitical background related to the clear perspective of Albania’s EU accession, and competitive prices compared to the region, as well as, to some extent, to recent changes in the legal framework facilitating the use of state-owned land for purposes of investment in real estate. 

With the fall of the communist regime, the Albanian Government has carried out a series of legal reforms aimed at the privatization of state-owned land to boost its crippled economy. The main pillar of that strategy was the attraction of foreign investments through the grant in use of state-owned land with the option to acquire ownership once the proposed investment was completed. 

The first piece of legislation was enacted back in 1995, allowing foreign individuals or legal entities that had plans to invest in Albania to purchase state-owned land or other state-owned immovable properties, at the sole condition that the value of the investment made or planned to be made was not less than three times the value of the land, as established by a Council of Ministers Decision. In practice, that condition is easily met as the value established by the Council of Ministers Decision for state-owned land is well below the market value, which is a clear indicator of the encouraging nature of that legal provision towards foreign investments.

The possibility of foreign investors acquiring state-owned land was further enhanced in 2008 by expanding the options available to them. Based on that legislation, it is nowadays possible to conclude a lease agreement or an emphyteusis agreement with state organs, allowing the use and successive acquisition of state-owned land for carrying out the planned investments. In order to privatize such state-owned land, the lease or the emphyteusis agreement should be at least for five years and the investment should be not less than 150% of the land’s value; if the investment is higher than 750% of the land’s value, no minimum term is applicable.

In addition to the above, a recent normative development related to the introduction of strategic investments legislation is currently being heavily used in practice for boosting foreign investments in real estate transactions as well. Based on the legislation on strategic investments, a proposed investment in certain economic sectors – such as energy and mining, transport and communications, tourism, agriculture and fishing, technological and economic development areas, etc. – meeting certain thresholds (from USD 1 million to USD 100 million), and aimed at job creation, is eligible for obtaining a series of support measures from the Albanian Government, including the use or ownership of state-owned land. 

In terms of supporting measures, with reference solely to real estate, the investor can benefit from land consolidation services, as well as the right to use state-owned immovable properties to the benefit of the investment, or to acquire the ownership of state-owned land, including the possibility to benefit from the expropriation of private owners.

The use or ownership of state-owned land for the benefit of strategic investments can be directly linked to the trend evidenced above, considering that a substantial part of the projects having obtained strategic investment status is related to the construction of touristic accommodation structures, and residential and commercial ones, along the Albanian riviera, mainly constructed over state-owned land.

The current practice and investment curve further confirm that state bodies have shown consistency in being open to offering state assets to foreign investors, and this trend does not seem to be slowing down. 

By Aigest Milo, Co-Managing Partner, and Armando Toslluku, Senior Associate, Kalo & Associates 

This article was originally published in Issue 10.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here

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