Wednesday, Dec 08, 2021

Real estate and the big challenge of modernization due to COVID-19

post-image
Author : Dr. George Mountis
  • December 01, 2020

It has been more than six months since the COVID-19 pandemic has struck the Greek society, with the effects being intense on the wider economy. As in all European countries, along with the public finances, significant sectors of activity have been affected, and inevitably the real estate sector.

However, so far the data has shown that the degree of influence of the sector, compared to other productive sectors of the economy, is limited. It seems that after the first shock, investors and other stakeholders, recognized the short-term nature of this recession and judged that any impact on real estate will be temporary and will affect specific types of real estate, such as those associated with the regular presence of natural persons.

For example, it is obvious that hotel accommodation as well as office space - due to remote work - have been significantly affected during this period. Of course, there are also cases of investors and owners who decided to sell, either because they want to increase their cash flow or because they believe that their investments are affected by factors of uncertainty.

The reaction of professionals involved in land development and property management was immediate. Using modern technological means, they brought the real estate really in front of the eyes of the interested buyer. Virtual tours even in real time, rich audiovisual material and instant data sharing have become the new reality for both buyers and sellers.

In this way it was possible to hold the decline in the market and to complete sales in a way that until a few months ago was unthinkable. These sales, along with the professionals, brought fresh money to the state funds, in a very difficult period.

This is what one would expect from the government mechanisms to respond with the same efficiency, since the effort to maintain the productivity of the economy is for the benefit of all. Suffice it to say that for 2020 a recession of 9% is expected, an increase in unemployment to 19.9%, a budget deficit of 6.4% as a percentage of GDP and an increase in public debt to 196.4% of GDP. Thus, it is obvious that we need team effort to keep the pandemic impact limited to the least.

Unfortunately, both during the first wave of the pandemic and today, as we are experiencing the second one, the phenomenon of the dysfunction of the competent state services is strongly observed. Once again it seems that the state mechanism suffers from a lack of flexibility and adaptability to new data, even if they create emergency conditions.

This problematic situation has been identified by professionals in the industry in various departments, which affects the smooth operation of the sector as a whole. For example, in the procedures of transfer and disposal of real estate to the issuance of permits (building permits, etc.) by the competent authorities and the settlement of real estate, as well.

It is imperative that the services involved in the sector pick up the pace and assist the efforts of the private sector. Not by doing favors or turning a blind eye, but simply by picking up the pace and facilitating the settlement of agreements and pending issues. It is not helpful for big deals to be stuck in bureaucratic procedures of old times that should have been irrevocable for decades, especially this period, when foreign investment is necessary for every economy.

In the current context and, in fact, under the weight of the effort to reduce NPLs, the government should also consider changing the regulatory framework, so that real estate sales can proceed quickly, without the prior legalization process. This issue is particularly important, as all the effort to drastically reduce NPLs through their sale to investors is based on real estate – collaterals.

At the moment, after the properties are transferred to the servicing companies and to their consultants, hundreds of settlements must be made before they are put on the market. This does not happen in countries such as Cyprus or England, where the property can be sold arbitrarily, after the potential buyer being informed. Especially for banking properties, there must be a new legal framework that allows them to be sold faster, limiting this huge number of settlements which has been created.

In Cyprus, not for extreme cases of encroachment, but for breaches such as a semi-sheltered space, the bank transfers it with the specific breach and there is no obstacle for the semi-outdoor space to be demolished so that the sale could proceed. In certain cases, there is a clause in the deed that these breaches exist and the property is sold at a slightly lower price, which includes the settlement cost or part of the specific cost.

There are cases in Greece where we try to settle simple issues which take 6-12 months. Not only do the banks lose, which spend millions to legalize the real estate they acquire through the "red" loans, but also the State itself loses from this circumstances.

The current Greek government has often said that it aims to attract investment in the country and to facilitate entrepreneurship. This is the defining moment that it must prove it in practice. Envisaging the future of the Greek economy, it is important that part of the European funds, for the recovery of the member countries, be allocated for the modernization of the procedures and systems of all the Authorities involved in procedures concerning the real estate sector.

Of course, this is not just a matter of funds, of introduction of technological solutions and of modernization of processes. The big challenge is primarily the change of mentality and the adoption of a customer-centric culture in the public sector, without this meaning discounting the implementation of the relevant legislation and regulations. Only in this way will the country be able to move forward and gain prestige in the eyes of foreign investors but especially of its citizens, who are entitled to enjoy services to the best.


Table of Contents