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

Issue 2-3 (3-4) 2000

At the Editorial Body

June 12, 2000 in the editorial office of a journal the scientific discussion on problems of investment practice in Moscow was held.

The members of an editorial board of the journal, outstanding scientists studying the metropolitan market of the real estate, businessmen, builders, employees of the Moscow Mayoralty have taken part in the discussion.

The subject of the discussion was a complex of problems linked to a multifold valuation of a combined conjuncture in interaction of the subjects of investment process in Moscow.

In the introduction the editor-in-chief of a journal S. O. Bochkov has underlined an urgency of a discussed subject in a context of common problems of raise of effectiveness of urban economy, rise of an output from usage of the urban property, activation of investment process - those problems, at which solution the journal is aimed.

In statements of the majority of the participants of a discussion the large importance of this problem, necessity of activation of operation on engaging the investors for the purposes of further development of municipal economy of Moscow was underlined.

The academician A. S. Jolkov, opening a discussion, has underlined, that with the purposes of improving attractiveness of the metropolitan investment market the urban authorities permanently improve the city procedure of contacts with the investor. Thus there is an acute necessity of adjusting of the mechanism of engaging of the capital in a sphere of metropolitan economy in a view of the new tendencies and realities of development. In this direction the large work is being done in a Council on study of productive forces of the Ministry of economy and RAS under the direction of the professor A. N. Gladyshev.

The large significance, in the opinion of A. S. Jolkov, has a problem on share participation of the commercial investors in realization of programs of social development of city and its engineering facilities. A. N. Gladyshev has studied this problem with details. In the his speech he has given the detailed analysis of evolution of the normative - legal documentation regulating the coordination of interests of the city and the investors, estimation of these documents from the point of view of the demands of today, development of the approaches to perfecting the mechanism of engaging of the means to the development of a social and engineering infrastructure of a city.

The normative - creative work of urban authorities:

à) Testifies of huge volume (about 50 governmental orders of Moscow, orders of the Mayor and his deputies on this problem have been passed for the last 10 years);

á) Reflects the search for more efficient paths of balance of interests of city and investor;

c) Displays the movement from a separate system of indexes to a uniform index (decision of the Vice-mayor of Moscow ¹159 dated March 03 1992 on 60% of assignments on the development of a social and engineering infrastructure, governmental order of Moscow ¹15 dated 13.01.98 on repayment of 100 dollars for 1 sq. m of living space on the development of an engineering infrastructure; order of the Mayor of Moscow ¹951 dated December 1997 on 40% of a capital output for the sum of the means, invested by the investor, etc.);

d) Is referred on raise of responsibility for the quality of drafts and estimates, that allows to reduce an amount of the additional agreements to the investment drafts.

To the present time the following methods of the coordination of interests of the city and investor have appeared:

à) Administrative (governmental order, orders of the Mayor, normative - legal act of federal authorities), providing state regulation of investment processes;

b) Contract, including realized on the basis of auctions and competitions providing direct interaction between city and the investor within the framework of an acting normative - legal field;

c) Managerial-financial and economic (creation of the mechanism of warranties of Government to the investors, organization of investment-branch bank, creation of social fund for compensation of additional expenditures by the investor, not foreseen by the draft).

According to our opinion, today the mechanism of the coordination of interests of city and investor is rather complicated, not always clear and, what is most important, does not allow the investors already on the start to define the results of their activity. In these conditions the investor does not want to invest.

It is necessary to create a system of the normative - legal documentation operating in new conditions. Each of the considered normative - legal document reflects the most acute problems of the time, is directed on the solution of acute problems and, undoubtedly, plays an important role in perfecting the mechanism of interaction of city and investor. So, a normative - legal base, operating in practice was being created. Therefore on the basis of the multifold analysis it is necessary to select from these documents the most efficient elements — "bricks" and to create with their use an integrated system, which, from our point of view, can work in modern conditions. Naturally, the system should be supplemented by missing "bricks". Thus it is necessary to pay special attention to:

• To the coordination of the normative - legal document of Moscow with the federal acts and other normative - legal act;
• To the justification of indexes of share participation of the investors in development of an engineering and social infrastructure of the city in view of functionality and deposit of investment plant (miscellaneous rent);
• To a correct solution of this problem, on which appreciably depends the effectiveness of capital, and consequently, interest of the investor to invest in development of an engineering and social infrastructure;
• To the creation on the basis of present various techniques of the calculation of costs of the investor of a common technique with the affirmation of it as the obligatory normative - legal document;
• To augmentation of the stability of a normative - legal document with the purpose of raise of confidence of the investors to them;
• To the differentiation of the status of normative - legal document.

Probably, it is necessary to differentiate precisely the documents introduced into a turnover by the governmental order, order of the Mayor or its deputies. It is hardly correct, when the governmental order is cancelled or is completely changed by the order of the Mayor, and the order of the Mayor changes by the order of its deputy. It may be, that the base documents should be passed by the governmental order, their private improvements — by the order of the Mayor and managerial-executive — by the deputy of the Mayor. Only in this case an investor will know, where, when and how to defend his interests, only in this case it is possible to save him from long and without any results walking a circle.

Further A. S. Jolkov has explained the substantive provisions of the concept of economic interest of the investor in the development of municipal economy.

1. The capital recovery factor of financial resources of the investors invested in the development of municipal economy, should provide his interest in view of continuous rise in price of construction, tendency of a falling of prices on housing, risk. At burdening an investor it is necessary to take into account the tendencies in cost of housing, fix costs of construction, capital recovery factor of building production.

Capital recovery factor of invested plant more preferable, than in other spheres of capital investment, — is a main condition of engaging of the means of the investor on development of a social and engineering infrastructure of the city. In the order of the Mayor of Moscow ¹951, as it was already marked above, the index of 40% of a capital recovery factor for the sum of the means, invested by the investor is suggested (in the developed countries this index does not exceed 12-15%). It is possible, that the norm of a capital recovery factor in construction should be presented in a form of a scale, which lower point is defined by the interest rate of state bank, and upper — by a maximum capital recovery factor in any branch of economy. However this index requires serious scientific justifications and practical approbation.

2. The burdening of an investor by city should be defined by one understandable and transparent standard (for example, percent of deductions from financial resources directed by an investor on a housing construction) not lowering the preset capital recovery factor and not resulting in the rise in price of a housing construction. This standard should:

• substitute tens of indexes regulating economic mutual relation of city and the investor and by that to simplify all system of the payments between them, to make them clear and understandable;
• provide a harmonization, balance of interests of city and investor, as a domination of interests of this or that party decreases a possibility to accomplish the investment project;
• solve a problem of similarity of the conditions of realization of the investment projects in different districts of Moscow; with this purpose the percent of deductions in the fund of the city on the invested capital should be differentiated in view of the differential rent of the land lots selected for the purpose of building on the territory of city, importance of the plant for municipal economy, its functionality etc.;
• provide stability of economic mutual relation of city and investor, reviewing the indexes are not more often, than 1 time per 5 years.

• Grant by municipal authorities to the investors of the land lots (with all communications) for the purpose of building, provided that 15-20% of introduced housing fund will be given to municipalities, the investors will receive individual share in construction of a urban infrastructure;
• Ensuring of interests of the investor by means of a legislatively introduced limit of total percent of the raised tax, which should not be exceeded.

3. The common standard of burdening can be differentiated depending on the rent of location and functionality of investment plant. This index should be included into the parcel of the competitive documents.

4. The payment to the investors of a share in construction of an engineering and social infrastructure, should probably have 2 periods: first — at a phase of receiving of the permit on the constructional works conducting; second — at a phase of maintenance. Appropriate justifications and calculations are necessary here.

5. The size of the agreements on additional operations, not foreseen by the draft, should not exceed definite parameters and be indemnified at the expense of the participant of the investment draft, who has admitted mistakes and violation.

6. Creation of investment structures:

• Body for issuing of warranties of the Government;
• Investment-insurance bank;
• Indemnification fund.

According the opinion of investors and original contractors, which was stated by the Chairman of building co-operative "Contribution" M. G. Salkov, the mutual relation of investors and city still remains complicated, not so clear and constrain the inflow of the private capital in the development of municipal economy.

The participants of a discussion have favored the conducting of business meeting of the investors on this problem in the capital. The idea was supported by urban authorities, organizational preparing of such meeting is initiated, approximate periods of its conducting — September — October 2000.