Making real estate purchase and rent agreements in Georgia
Georgian real estate is in high demand among foreigners. Many business people find that buying real property in this country brings good profit especially if this property is located in resort areas or in the capital city of Tbilisi. Because Georgia attracts an ever-growing number of tourists, investors are eager to purchase apartments in hotels and in newly built apartment blocks, as well as mini-hotels and hostels that can be rented out around the year. Buying real estate in Georgia is especially popular among business people from the UIS countries and those bordering Georgia. The reasons for that are as follows: a comparatively short distance, Russian-speaking personnel (many Georgians are fluent in Russian), a stable economy, and a simple purchase and rent procedure.
Over 8.7 million tourists visited Georgia in 2018, which is 9.8% more than in 2017. According to the Nubeo Internet portal, Georgia is ranked fifth for tourism development among 125 countries of the world. It is also the fourth fastest growing tourist destination in the world and the second in Europe, according to the UN tourist agency. Analysts claim that the Georgian tourism industry will keep on growing. Active promotion of Georgia in international media will certainly contribute to the growth of tourism in this country. In addition to that, the Georgian government is implementing a series of investment programs that are aimed at improving tourist infrastructure, which will make it possible to make holiday trips to Georgia all the year round, in all four seasons. The increasing number of tourists naturally brings about an increase in real estate prices. Experts forecast that the price of the square meter in Georgia will continue to grow in years ahead. Statistics show that property prices in Tbilisi grew by 24.3% in 2018 compared to the previous year.
Our company has vast experience in drafting purchase and rent agreements for different types of real estate in Georgia. We will help you choose the kind of property to buy (or rent) that will reach the breakeven point very soon and start bringing profit. We will also assist you in selecting an accommodation for residence in Georgia – permanent or temporary. Our lawyers will negotiate the best contract terms for you, and arrange for a discount or an installment payment plan with the seller.
The price for a real estate contract drafting starts at US$ 100. The ultimate price will depend upon the type of property, its location, size and number, as well as the degree of the contract complexity.
Tbilisi real estate market: a review
The Georgian legislation allows foreigners to buy property in the country, both residential and commercial. The only exception is the land: its sale to foreigners was suspended in 2017.
Tbilisi is the leading location in Georgia for real estate sales. 44% of all purchase agreements are signed for the property in this city. Over the first three quarters of 2018 a total of 38 552 residential real estate items were sold in Tbilisi.
The most popular Tbilisi district is Saburtalo (27% of sales) and the least popular is Chugureti (3.5% of sales). The percentage of sales by the city district looks as follows:
|Tbilisi district||Number of sales (%)|
As far as the price is concerned, the most expensive district of Tbilisi is Mtatsminda. Here one square meter can cost as much as US$ 1099. By the way, the price has grown by 7.3% in comparison to the previous year. The second most reputable district is Vakhe (US$ 972 per square meter, 5.3% price growth), the third is Saburtalo (US$ 893 per square meter, 2% price growth). Overall, the price has grown in every Tbilisi district apart from Samgori (US$ 546 per square meter, 2.5% price reduction).
Those who want to buy a house or an apartment with a view to leasing it out would benefit from analyzing the market too. Statistics show that the highest rent is in Mtatsminda district (on average US$ 7.772 per square meter per month), then goes Vakhe (US$ 7.36 per square meter per month). The cheapest rent is in Samgori – only US$ 5.69 per square meter per month. If compared to the year 2017, the situation with the rent prices looks a bit confusing: the rent has grown in Samgori (+19%), Chugureti (US$ 6.78 per square meter per month, +4.4%), Isani (US$ 6.69 per square meter per month, +2.5%), and Nadzaladevi (US$ 5.32 per square meter per month, +0.6%) districts. At the same time, it has gone down noticeably in Mtatsminda (US$ 7.772 per square meter per month, -13.9%) and Krtsanisi (US$ 7.05 per square meter per month. -9.8%).
Real estate market in other Georgian regions: a review
The resort city of Batumi is the second most popular place for real estate sales. It is located on the Black Sea shore, which attracts tourists who like to spend their vacations at the seaside. The main reason for the high demand for property in this city is the fact that it comes at the lowest price among all cities located on the Black Sea shores. Experts forecast a 101% increase in construction in Batumi in 2019. Overall, 22 752 real estate items will be built in this city in 2018-2019. Currently the price of one square meter in Batumi is between US$ 500 and US$ 3000.
The demand for real property is also growing in such ski resort areas as Bakuriani, Goderdzi, and Gudauri. According to experts, return on real estate investment is the fastest in Bakuriani – 25% a year. Such a high level of economic efficiency is attributed to the longest in Georgia tourist season: here it lasts for full eight months. By the way, Bakuriani is the place that will compete for 2030 Winter Olympics. Besides, a freestyle World Championship is already scheduled for 2023 here.
The procedure of acquiring property in Georgia
The following types of real estate items in Georgia are in the highest demand among foreigners: apartments in newly built apartment blocks, apartments in hotels, mini-hotels, townhouses (semi-detached houses), and cottages located in resort areas and in the capital city. Foreigners buy property in Georgia for the following main purposes:
- To obtain a permanent residence permit that is issued with the investment of 300 000 lari (around US$ 120 000) into a real estate item;
- To receive a stable passive income from property rent;
- To receive profit from reselling the property at a higher price;
- To acquire a residence accommodation in Georgia.
To make a purchase or rent agreement a foreigner has to submit only her foreign passport. The text of the agreement will contain the buyer’s name, passport number, citizenship, and address.
If a foreigner wants to use a loan or an installment payment plan when buying property in Georgia, her passport has to be valid for the period of the loan or the installment payment plan.
Depending on the type of the real estate item that one wants to buy, two legal procedures are employed. If the house is still under construction, two agreements have to be signed: a preliminary one and a principle one. The first agreement contains the following information: construction completion deadline, apartment details, type of interior works (base building condition or fine finish), and an obligation to sign the principle agreement.
After signing the preliminary agreement, the buyer has to file an application to the real estate registrar for registering the future ownership.
Then, in accordance with the agreement, the constructor shall complete the building by the specified date, and the buyer shall pay the whole sum. After that, the principle agreement is signed. To finish the purchase procedure the buyer has to have her property reregistered in her name as the full owner.
Property rights are registered at the Chamber of Justice upon submission of the following documents:
- Application form (filled out electronically by the Chamber of Justice officer at the moment of application);
- Buyer’s foreign passport;
- Purchase agreement;
- A copy of the construction permit;
- Building blueprint;
- Documents proving payment.
Buying an apartment in the building that has already been completed is even less complicated. The buyer and the seller sign only one principle agreement. In this case, the property right is registered in the State Public Registry upon submission of the following documents:
- Application form;
- Buyer’s foreign passport;
- Operational acceptance certificate;
- Building blueprint;
- Money order or a pay slip proving payment.
Before signing the purchase agreement, the buyer has to make sure that the property is free from any charge or encumbrance. In order to do that the buyer has to obtain an extract form the property rights registry. This extract can be obtained at the Camber of Justice upon payment of a 50 lari toll (the extract is issued on the same day) or a 15 lari toll (the extract is issued on the next day).
Georgian laws allow signing the purchase agreement by a trusted agent who holds a notarized power of attorney. In this case, three copies of the agreement have to be signed. The text of the agreement must be in the languages understandable to all parties. Therefore, translations from Georgian into Russian or English are often used.
The final registration of the property rights is performed at the Chamber of Justice or the Public Registry upon payment of a toll. The amount of the toll depends on how fast the new owner wants to receive the documents. 50 lari will make them ready in four days, for 150 lari one can get them tomorrow, and for 200 lari on the day of submission.
Payments under real estate purchase agreements in Georgia
One does not always have to pay the whole sum at once or use one’s own money to buy property in Georgia. Sometimes it may be a good idea to negotiate an installment payment plan with the seller, or take out a mortgage. If the payments are made in installments, the last one usually has to be made at the moment the construction of the house is completed (this is in case the house was under construction when the agreement was signed). The last payment against the mortgage has to be made before the buyer’s permit for legal stay in Georgia expires.
Payments under the purchase agreement are made by a transfer to the seller’s bank account in Georgian lari. Payment deadlines, schedules, and account details have to be specified in the agreement. Most often, the seller will want a full payment within three days after signing the contract, or three days after the operational acceptance certificate for the building has been issued.
To provide for the safety of all payments under a real estate purchase agreement we recommend using such bank instruments as a safety deposit box or a Letter of credit. The payment terms and methods also have to be specified in the text of the agreement.
Advantages of buying property in Georgia and possible risks
The following factors make investing into Georgian real estate attractive for many business people:
- A stable growth of property prices;
- An opportunity to gain a steady passive income from rent;
- An opportunity to obtain a residence permit;
- The absence of property tax: foreign citizens do not have to pay it.
It should be added that apartment blocks that have a management company at their disposal are more popular among investors who want to rent out the apartments that they purchase. The company takes charge of the repairs, utility maintenance and payments, overseeing the apartments while the owners are away, and finding tenants. It will also help save time on preparing the apartment for rent. With a management company, the owner does not get involved with different issues related to the maintenance of her apartment, but simply enjoys the profit that is brings.
However, before venturing to purchase property in Georgia, the foreigner has to take into consideration some possible risks. Those who know neither the local market nor the local legislation may end up with a poor buy because:
- The price of the property may turn out unfair;
- Some negative characteristics of the property may fall outside the scope of the buyer’s attention (such as the absence or poor quality of the utility systems, location drawbacks, interior defects, etc.).
Besides, it may be difficult for a foreign buyer to negotiate for the best price, or a discount, or an installment payment plan that extends over the maximum possible period of time.
By contacting an experienced lawyer who knows the local market and legislation, a foreign buyer stands a better chance to purchase or rent a real estate item on the conditions superior to the standard ones. This way she can enhance the effectiveness of her investments.
For many years our company has been providing purchase and rent agreement drafting services in Georgia. We also provide legal support of the deals at all stages. If you are interested in buying or renting a piece of property in Georgia, we will gladly help you make the best choice and strike the best deal. The price for our services starts at US$ 100. The ultimate price depends on the individual characteristics of every deal, so all the details will have to be discussed with our lawyer at the very beginning.
After the price is determined, you can transfer the money to our account in a foreign bank by any method you like. Please feel free to contact us at any time via e-mail: email@example.com and we will get back to you in an instant to discuss all the details of the future deal.
Tags: #Real estate in Georgia #Resident permit in Georgia