Who benefits and how?
Commercial real estate is very popular among foreigners in Bulgaria, especially if it is located on the Black Sea coast or in Sofia. First of all, this is tourism-related infrastructure: hotels, restaurants, bars, and entertainment venues. However, in the last two or three years, foreigners have been increasingly buying up industrial and agricultural properties.
The most active investors in Bulgarian commercial real estate are individuals and legal entities from Greece (32% of all foreign investments), Austria (13%), and Italy (12%). Our firms and private individuals, however, are still weakly represented compared to other foreigners. Although we share much in common with Bulgarians - Slavic roots, a common religion, a similar language, traditions, and long-standing historical ties dating back to the 10th century.
Why are investments in Bulgarian real estate so attractive to foreigners? First of all, this is explained by the low prices. For example, a comfortable one-bedroom apartment in one of the major coastal cities (Burgas or Varna) can cost from $15,000, a house from $30,000, a restaurant from $50,000.
However, the X-hour is inexorably approaching, after which prices for not only commercial but all real estate will rise significantly. It has already become an axiom that as EU accession approaches, real estate prices in all candidate countries skyrocket. This is currently happening in Cyprus, the Czech Republic, Poland, Hungary, and Slovakia. The effect of this rule is gradually spreading to the "second tier" of EU candidate states: Romania and Bulgaria. So far, this price increase of 5-10% per year does not seem very large. But even if price growth continues at this pace, by 2006, when Bulgaria is admitted to the EU, real estate here will have risen in value by at least half.
The second reason for Bulgaria's attractiveness is its excellent natural conditions, particularly its mild climate, transitional from temperate to subtropical. It resembles the Crimean climate somewhat, but the contrasts between seasons are less pronounced. The terrain is diverse: sea and mountains, wide sandy beaches, hills with vineyards, rose valleys, thermal mineral springs.
The third argument in favor of Bulgaria is its rapidly developing economy (annual economic growth of 5%), low taxes, and absence of crime. Moreover, unlike its neighbors, primarily Yugoslavia and to a lesser extent Romania, Bulgaria has no interethnic conflicts. Bulgaria's population is largely bi-ethnic: approximately 84% of the country's population are Bulgarians, and 14% are Turks. However, there have never been calls for self-determination from national minorities here.
Finally, another important reason, particularly attractive for citizens of the former USSR, is the possibility of immigrating to Bulgaria quickly and legally.
How to Become a Landowner
Land in Bulgaria is divided into several categories: state (government-owned), mountain (natural lands), municipal (land belonging to local authorities), and private. Of these, land of any category can be used for construction, except for mountain land. However, only private or state land is suitable for agricultural work, with private land accounting for 80%.
Agricultural land, in turn, is further subdivided into ten categories. The first and second categories are irrigated chernozem (soil with a high humus content). Its cost averages $30-40 per sotka (100 sq. m). At the other end of the price spectrum are lands of the seventh to tenth categories. These are pastures and rocky soils costing $10-20 per sotka. You can purchase no more than three hundred hectares of such land, and you can rent any amount of it.
When purchasing land, a notarial deed of ownership is issued. All land in Bulgaria is entered into the land cadastre and, by law, must be used strictly for its intended purpose. That is, construction on agricultural land is prohibited, with the exception of light temporary structures. The law classifies as such unheated temporary shelters up to 35 sq. m, livestock pens, and agricultural buildings themselves (grain dryers, wineries, and so on).
Harvest
Agricultural activity in Bulgaria can yield a decent income (this sounds strange to us, as we are accustomed to agriculture being a "black hole" in our country). Traditional Bulgarian agricultural products are well known beyond the region: grapes and wines made from them, tomatoes, rose oil, and brynza.
Businessmen from traditional "wine" countries - Italy and France - are now investing huge sums in Bulgarian vineyards. And the results of their activities have not been slow to appear: Bulgarian wines are gradually conquering the Western European market. By the way, winemaking in Bulgaria can yield up to 35-40% profit and allows investors to recoup their investments in an average of three to four years.
Estimate
As for land for development, depending on location, distance from the sea, and the availability of infrastructure, the price averages from $3 (in rural hinterland) to $100 (at a resort) per 1 sq. m. The minimum plot size for construction outside the city is usually 600 sq. m, and within the city limits, 350 sq. m.
The construction itself, provided local materials are used, costs an average of $200-250 per 1 sq. m. Building luxury housing (what we call "Eurostandard") costs a maximum of $300-400 per 1 sq. m. Thus, building a house with an area of 200 sq. m with all utilities will cost a maximum of $75,000-85,000, including the cost of the land.
It is clear that building a house takes considerable time - together with finishing, it can take 9-12 months. Therefore, many of our compatriots, like other foreigners, prefer to buy ready-made housing.
The ratio of housing stock on average in Bulgaria is as follows: 60% of people live in detached houses, 40% in apartments. But depending on the area, these figures can vary. In large cities and in Sofia, the share of apartments in the housing stock increases to 75-80%. On the Black Sea coast resorts of Bulgaria, on the contrary, residential houses predominate (75-80% of the total housing stock).
Foreigners perceive housing prices in Bulgaria as fantastic - from $150 per square meter in a typical multi-story building (panel from the 70s) to $600 per square meter in a house that would be called elite in our capital (good apartment finishes, security, parking, etc.). But these are prices in Sofia and resort towns. As in other resort countries, in Bulgaria real estate prices fall with distance from the sea. Therefore, in the continental part of the country, housing can be another 20-30% cheaper.
Two-room apartments in coastal resort towns - Varna and Burgas - are sold at $15,000-25,000 depending on the distance from which one can admire the coast from their windows, as well as the size. In Sofia, housing costs are about the same. Three-room apartments with an area of 80-100 square meters on the seashore cost $30,000-40,000.
Utility rates in general are not higher than domestic ones: water costs $0.7 per cubic meter ($8-12 per month for a family of four), electricity - $0.05 per 1 kWh, $2-10 will have to be paid for local phone calls.
Local realtors advise not to delay purchasing real estate. According to their forecasts, the lifting of the moratorium on the sale of land to foreigners, which will likely be removed in 2003, will immediately lead to a 20-25% increase in the price of both the land itself and everything built on it.
Taxes in Bulgaria are relatively low, and the tax system itself, unlike ours, is quite simple. The annual tax on land and real estate is 0.6% of the value recorded in the notarial deed. This 0.6% also includes the fee for household waste. Thus, with a property value of $30,000, taxes will amount to $180 per year. They can be paid in a lump sum - once a year or quarterly.
Is it easy to be a businessman?
If we compare commercial real estate that is similar in all parameters in Bulgaria and in our capital, it turns out that in this Balkan country it will cost three to five times cheaper. For example, a store with an area of 100 sq. m without equipment, in the center of Sofia, can be rented for $600-800 per month, a restaurant for $1,200-1,800. In large seaside cities, rates are another one and a half times lower.
The range of real estate for sale in Bulgaria is unusually wide. These can be four-star hotels with 300 beds and seaside family-type hotels of 1-2 stars, restaurants and cafes, factories and oil presses, car service stations, shops, offices. The price range is also diverse: shops - from $3,000 (a tobacco shop) to $100,000 (a supermarket or boutique), offices - from $2,000 (a travel agency) to $80,000. In Sofia or a large coastal city, a cafe with a well-promoted name can be bought for $60,000, and a restaurant for $200,000.
The most money in Bulgaria is made on tourists. And buying or building hotels at the Black Sea resorts of Albena, Golden Sands, St. Constantine and Helena, Sunny Beach, as well as in small coastal towns (Balchik, Obzor and others) today is perhaps one of the surest options. For example, buying or building a hotel consisting of 10-15 bungalows (well-maintained, equipped houses with an area of 60-80 sq. m) will cost a maximum of $250,000. In season, a bungalow rents for $100 per day. A simple calculation shows that with an average hotel occupancy of 75%, the monthly income will be at least $15,000-20,000. From this amount, 25% should be subtracted for maintenance (utility bills, salaries, etc.). That makes $12,000-17,000, with the annual total profit tax not exceeding 23-28%. The total monthly profit comes to $10,000-12,000.
To eliminate seasonality, it makes sense to purchase commercial real estate in the capital of Bulgaria, Sofia, or in large coastal cities - Varna and Burgas.
Business in Bulgaria still has many free niches. The country clearly lacks restaurants, discos, beauty salons and other entertainment venues of European level. Production has also become in steady demand among our compatriots. They are actively purchasing mini-plants for processing sunflower seeds, grain crops, dairy products, for producing cheeses, canned meat, and alcohol mini-plants. All these objects can realistically be acquired for $60,000-200,000.
Citizenship
Obtaining Bulgarian citizenship is a lengthy process, but quite realistic.
The first step on this path may be registering your own company. Owning residential real estate gives no rights to citizenship. In addition, having your own company also allows you to solve the visa problem - as is known, a visa regime has been introduced between our countries. However, by registering your own company in the country, you can obtain a residence permit. And holding a residence permit for five years (provided that you live in the country at least six months a year) gives you the opportunity to apply for citizenship.
The cost of processing a package of documents required for company registration when contacting Bulgarian specialists will be about $700. Assistance in obtaining a residence permit is $1,500.
The authorized capital of a company of any form of ownership cannot be less than $2,500 (5,000 leva). This money is 'liquid', that is, when creating a company, it is deposited into your bank account. After registering the company with the tax service and the local statistical agency, you can withdraw it at any time.
There is also a second way to obtain citizenship, and in a shorter time. The condition for using it is the presence of Bulgarian roots or Bulgarian origin of yourself or your ancestors. In this case, the entire procedure for obtaining a residence permit will take no more than six months, and obtaining citizenship - no more than one year.