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Stroke of Putin pen gives Russians land ownership
By Richard Balmforth
MOSCOW, Oct 26 (Reuters) - With a dash of his Kremlin pen, President Vladimir Putin granted Russians the right to own land for the first time on Friday, overturning a Soviet-era ban.
Brushing off communist opposition, Putin signed into law a Land Code that, while excluding Russia's vast farmlands from any change, will open up for sale mainly urban land for private ownership, building and development.
The Land Code, which sailed through the upper house of parliament on October 10, allows the sale of about two per cent of Russia's 1.7 billion hectares (4.2 billion acres) of land.
Proponents of the legislation, which marks a historic break with Russia's communist legacy, say it will boost economic reform and draw in foreign investment.
"We see this as a big step forward in the land legislation situation in Russia. For the first time Russia has an umbrella piece of legislation codifying the right to purchase land," said Sergei Riabokobylko, director of a Moscow real estate company.
Land reform has been an emotive issue for Russia's leaders ever since serfdom was abolished by Tsar Alexander II in 1861.
Attempts by former President Boris Yeltsin to legalise land sales were frustrated by his communist opponents and the absence of clear legislation gave rise to a property black market.
Putin has said the Land Code will end shady deals involving corrupt officials in which thousands of apartments, dachas and commercial land have changed hands over the past 10 years.
Putin himself will be able to reap political capital from the new legislation when he addresses a World Economic Forum on Russia's investment climate in Moscow next Monday.
GROWTH OF NEW PROPERTY-OWNING CLASS SEEN
Western economists said with time it could spawn the growth of a new property-owning class in a country where home ownership is still a novelty despite 10 years of economic reforms.
The law will allow many Russian citizens to buy the land under lease-held dachas or houses at a favourable price hitched to a property tax. Authorities pledge to keep the tax low for some time to encourage purchases.
Many privatised firms, some enjoying long leases on prime real estate in Moscow, St. Petersburg and other cities, will also have an option to buy the land under their factories.
"This will increase the capitalisation of our companies. It will improve the investment climate because it gives clearer guarantees to investors that if they invest in capital stock the land under the enterprise belongs to them," said Andrei Trapeznikov, spokesman for the national electricity monopoly UES (EESR.RTS).
Experts said foreigners also appeared to have a right to purchase -- though they would be subject to restrictions such as not being able to buy land near national borders.
It was still unclear however how encouraging municipal authorities across Russia would be to aspiring land owners given the stubborn resistance to change in many conservative regions.
LAND PROVIDING COLLATERAL FOR LOANS
Many privatised companies sitting on substantial plots in the cities could use their purchased land as collateral to raise loans for fresh operating capital.
Experts were divided on whether privatised Russian firms, many of whom are suspicious of owning land as a tax liability, would leap to seize the opportunity.
However, Adrian Moore, a partner in Baker and McKenzie real estate practice, told a business gathering this week that foreign investors were more likely to be attracted to doing business with a Russian company that owned land as a capital asset. The fact that foreigners also had the right to buy would boost foreign investment interest, he said.
James Cook, who heads a U.S.-financed mortgage lender Delta Credit in Moscow, expected a surge in mortgage applications for buying single-family houses or dachas.
"We could see housing starts become a key indicator for the Russian economy in the future," he said.
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