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. Last Updated: 07/27/2016

City Maps Strata of Lease Zones, Prices

The Moscow City Council has set up a leasing system that divides the capital into 48 price zones and, according to one city council member, charges foreign companies about 50 times more than Russians.

Council member Sergei Chernyak, a member of the council committee on land policy, said the new system could mean that as many as 30 existing land leases with foreign companies could be canceled if the fees are not in line with the new rates.

"There were no fixed currency prices before", Chernyak said, "so if the contracts are obviously unprofitable for the city they will be canceled".

He estimated that there are about 50 land-leasing contracts in Moscow with foreign companies, of which his committee had reviewed less than 20.

It is still unclear, however, when the new pricing system will take effect and who will be in charge of leasing in the city.

Both the Mossoviet and the mayor's office, locked in a power struggle over political authority in the city, have claimed the final word on such contracts.

City council deputies announced Friday that minimum prices for foreigners will range from 111, 000 to 413, 000 ECUs per hectare ($137, 000-$508, 000), depending on which of 48 zones the plot is located in.

The most expensive zone covers the property inside the Garden Ring. Distance from the center was a major factor in the pricing, Chernyak said, though certain suburbs, such as Kuntsevo and Yugozapadnaya, will be relatively expensive.

The regulations were passed in anticipation of upcoming lease auctions, which had been scheduled for December. But Chernyak said they would probably not start until spring.

The Mossoviet rules allow foreigners to compete freely in such auctions, as long as they announce their intention in advance. Foreign will have to pay hard currency at the rates issued for each zone while Russian firms will pay much less -- twice the present land tax.

Chemyak said that, on average, foreigners could be paying 50 times more for their leases than Russians.

Foreign companies will have to make a down payment on the lease for 10 to 50 percent of the total lease sum, which can cover as many as 49 years.

The land use law, adopted by the Moscow City Council on Oct. 12, may still run into opposition from the mayor's office, which has been fighting a drawn out power struggle with the city council. The conflict is likely to focus on which body has the right to approve leases and collect revenues.

Chernyak said the city council law mandates that foreign companies with existing leases get their contract approved by his committee before the lease is considered binding.

The Mossoviet has set up accounts for the lease revenues, which would give it control over substantial hard currency earnings.

Payments to accounts other than those of the Mossoviet, such as those to the Moscow Land Committee which handles land leases for the mayor's office, will not be valid, Chernyak said.

But Anatoly Kruglyak, member of that committee, countered that "the Mossoviet has legislative, not executive power". Kruglyak said his committee has been re-registering land leases with foreigners, and will continue to do so.

He said that a decree by Yeltsin had authorized the mayor, not the Mossoviet, to decide on issues related to land reforms. His committee, called Moskomzem, has been drafting regulations on land leasing all year, and Kruglyak said that the Mossoviet law could contradict many of these regulations.

Although his committee still had to study the decisions taken by the Mossoviet, Kruglyak said he did not see any real differences on the lease policy itself. The zoning system, and the pricing, had been worked out by his committee together with the Mossoviet, he said.