"Real Estate and Investments. Legal Regulation", the journal

Issue 1, 1999

Extracts from the "Concept of the State Property and Privatization Management in the Russian Federation", approved by the RF Government Resolution ¹1024 of 09.09.99

The Government of Russian Federation

The Decree ¹1024 September 9, 1999

Conception about State Property Management & Privatization in Russian Federation

The Government of Russian Federation orders:

1. To confirm the attached Conception about State Property Management & Privatization in RF.

2. Federal Executive Authority to organize work on realizing the Conception about State Property Management & Privatization in RF.

The Chairman of the Government of RF

Conception about State Property Management & Privatization in RF


1. State Property Management


4. Federal Property Management

Evaluation of property management’s quality

The total area of indwelling premises in federal property is 337 mln. sq. m. It was gotten 95,5 mln rubles in 1995, 223 mln rubles in 1996, 305 mln rubles in 1997, 466,6 mln rubles in 1998 (in the prices of 1998) from the rent of those premises. Thus, there is a stable tendency of a rise in property’s profit.

Number of laws gives the privileges in sending rental payments to the federal budget. The privileges are evaluated at 1150 mln rubles including 600 mln rubles of privilege to the Railway Ministry; 200 mln rubles to the Educational Ministry of RF; 85 mln rubles- to the Scientific & Technological Ministry; 150 mln rubles to both the Russian Academy of Medicines & the Russian Academy of Agriculture; 90 mln rubles – to the Ministry of Culture.

The existing property management system in RF is needed to be improved considering that:

  • The full list of state property is not formed. It doesn’t let to draw a line between state & private property; to control real money flow; to analyze the efficacy of using the realty; to make a forecast of the federal budget’s entries;

  • There is no market objects’ evaluation system & clear rights’ definitions in using the property. It causes (especially in the conditions of inflation) the constant property cost lowering; lack of rental payments; corruption, because being the biggest proprietor the state gives the property for rent at the rates which are much lower than the market ones;

  • Authority of the state as a real estate proprietor belongs to different Federal branches & their activities are often not coordinated;

  • The state rights for the state property are not registered in the order required by a low. It makes hard to use those rights;

  • Multiway & individual approach to realty using is poorly used;

  • Big member of refinished construction’s objects is not involved in a turn & consequently is loosing the attraction to investments;

  • Local self-government Authorities are in charge the federal land. Federal Realty User has to sign two unrelated to each other agreements. That contradicts to the world practice;

  • The land Legislation development is in the back of the development of other legislation branches, which regulate a real estate turn. It causes non-joint regimes of legal using the lands & buildings & premises situated there.

Thus, in spite of a stable tendency of a realty’s income rise, the income is far in the back of the current market indexes. That is the point to change approaches to real estate management.

Aims & objectives of real estate management

Improvement of the real estate management system should provide reaching the following aims:

  • Maximally possible rise in federal property profits;

  • Most effective carrying out the social functions by the State in the process of using the federal property;

  • Stimulating the development of the real economy sector with the help of real estate;

  • Providing maximally easy & convenient assessment of businessmen to real estate;

  • Excluding a possibility for corruption in the process of realty management;

  • Involvement of unfinished construction’s objects in an economic turn.

To reach the aims listed above it is essential to:

  1. Form the full list of the state property (real estate balance); which includes cost, quantitative, technical & legal characteristics of property objects, including unfinished construction objects;

  2. Divide & to coordinate the authorities between all state branches participating in the process of real estate management;

  3. Form the objects of management excluding the possibility to be in charge of a part of the object when it makes an integrity (land & buildings & premises on the land);

  4. Define the cases & rights for providing land to people & companies.

    The land should be provided to commercial organizations as a property or for a rent to increase budget income from using lands & to stimulate organizations for optimizing the areas of their land

    Land for permanent using should be provided only to organizations, which are financed from the budget; and to the citizens for non-commercial use;

  5. provide applying of the market evaluation’s mechanism when using the property; make rental rates (taken for using the state realty) & the rtes on the market equal;

  6. work out essential legislation, that let use different ways of federal property management such as: pawn, trustful management, etc.

  7. Create conditions for attraction of investments to the real economy sector by maximal property involvement in a turn including unfinished constructions objects’ providing to the investors under privileges.

  8. Regulate the questions of the state buying the real estate & define goals the state would like to reach by doing that.

  9. Provide a strong control over the property use define legal possibilities of seizing the property from the private companies (f. e.: in case of illegal property management);

  10. Find out extra unused or used in a wrong way state property. Seize this property;

  11. Apply the mechanism of spending compensation to property management (including inventory & evaluation) for the most effective management. Define the norm of payments to the Realty Management Authorities with its following registration as financing from the budget.

  12. Change the existing mechanism of real estate selling because it lets buy realty at low prices. A certain group of people has the right to buy real estate like that in accordance with the legislation. The right has to be saved but for the limited period of time. A selling price has to be set according to the market evaluation.

  13. Set the same order in making decisions to use the federal property (esp. For rent) for everyone in RF;

  14. Provide the professional preparation of state employees who manage the federal realty.

Mechanism of Real Estate Management

Reaching the goals of realty management is possible when all management functions are concentrated in one department.

A complex object is the main object of management that consists of land & all buildings on it (or parts of the buildings).

The first step should be inventory of property objects. The result of it is the information that lets to evaluate realty on the basis of important characteristic & of rising the methods of considering the statistic information about cost characteristics of real property objects. The State should register its rights for inventoried & evaluated property objects taking the real estate balance into account.

The next step should be working out the rules & procedures in making decisions to manage the realty. They should be based on the following principles:

  • a priority of compensatory kind of using with exclusions to give the real estate without compensation;

  • using the profitable real estate for commercial aims;

  • forbidding the rent of real estate at the rates lower than the market ones in the region;

  • reducing the privileges in real state use;

  • clear actions in giving the realty for use with the required publishing of the list of all interested people. It is essential to give property in use on auctions when there are two or more applicants;

  • making the procedure of getting the rights for using the real estate easier; reducing the terms of the procedure. Lessees, who pay the rent according to the market cost & follow the terms of agreement, may be allowed to give the property for sub-rent;

  • at the market cost selling the unfinished construction’s object under terms of investment. Objects without market cost can be giving to investors without compensation for investment’s projects, which are in accordance with the state interests.

The principles above should be realized in the normative acts listed in the Appendix to the Conception.

Control over the efficacy of real estate management

Control over reaching management goals can be realized in the following directions:

  • an increase in budget income from state property using;

  • working out & ratifying the normative & legislative bases;

  • equality of state property rental rates & market rental rates;

  • full real estate balance.

II. The “Privatization” of the state property

1. Aims, & objectives, & principles of the state policy of the “privatization”

Despite the fact that 58,9% out of state companies became private the aims of “privatization were not reached:

  • a big class of effective proprietors was not formed;

  • the economic restructuring did not cause the needed rise in effective activities of companies;

  • there were not enough investments for technological & social companies’ development;

  • in some industries the competitive status of companies couldn’t be saved on the home & world market.

It is necessary to change priorities of the state policy in the sphere of “privatization”, to work out & realize new approaches to solving the problems in state property management. According to the conception.

The aim of state policy in the sphere of “privatization” is a cardinal increase in the effective functioning of Russian companies & economy.


3. Methods of state policy realizing


Concerning the federal property & the land it is necessary to:

  • carry out legislative regulations in establishing integral property complexes which consist of the land with buildings & premises & elements of production’s infrastructure;

  • provide organizational conditions for real estate “privatization”, including companies with land; & also to provide a possibility for registration of the land as a proprietorship’s share capital. The result of it should be an increase in companies’ shares’ cost, &, as a consequence a possibility to attract investments for perspective companies’ development;

  • make private an extra, unused or used in a wrong way realty of unitary companies;

  • delegate real estate in the federal property to the property of regions in Russian Federation at the expense of budgetary financing & covering federal budget m,

  • attract investors to participate in the activities of saving the historical & cultural monuments. It helps the state to control reconstruction of the historical objects.