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. Last Updated: 07/27/2016

When the State Dictates The Use of Private Land

Legislation granting private land ownership is considered a highlight of Vladimir Putin's presidency. But Putin could soon be signing off on a bill giving authorities the power to dictate how the land is developed.

The real estate community is buzzing with worries that the legislation will harm construction and open the door to corruption. Many major players, however, refused to discuss the bill on the record, saying it was "a touchy subject" or "too political."

Supporters of the bill, which is expected to be approved Friday by the Federation Council, say federal and municipal authorities need the right to take land for roads and other projects. The Economic Development and Trade Ministry, which initiated the bill, said Moscow City Hall was already grabbing land and the bill was needed to get the situation under control.

"We have wanted to limit the Moscow government's freedom to reserve any land plots it wishes," said bill co-author Andrei Ivakin, deputy head of the ministry's department for property and land relations.

Although Ivakin helped write the bill, he dropped his support after it was revised by the State Duma's Property Committee.

"A number of provisions that we considered crucially important, and that really secured land owners' rights, have vanished from the bill," Ivakin said.

The legislation would allow authorities to reserve land for their own use. An option of up to seven years could be taken out on land leased or owned by individuals or companies, while an option of up to 20 years could be taken out on unoccupied land.

The bill, a copy of which was obtained by The Moscow Times, says landowners and leasers may not be compensated for construction or any other improvements on reserved land.

The restrictions that can be imposed on the use of reserved land are very broad, right down to a complete ban on construction, Ivakin said.

The bill also says reserved land plots "are not subject to estrangement," meaning, Ivakin said, that an ordinary person with rights to a land plot cannot privatize it.

The chairman of the Duma's Property Committee, Viktor Pleskachevsky, defended the bill and advised critics like Ivakin to wait to see how it would be implemented.

The legislation is ripe for corruption, and authorities could use it to cheat or seek bribes from landowners or leasers, said Oleg Levchenko, head of IRN, which offers property-consulting services.

He said everything would depend on how the bill was implemented.

Miel, one of the top three real estate agencies in Moscow, warned that the changes would pose a threat to the construction market.

"There are few construction sites in Moscow for private investors as it is," said Vladislav Lutskov, head of Miel's analytical and consultancy department.

He said a prime investment opportunity for private investors was industrial land.

"I suppose the authorities would want to get their hands on these land plots most of all, so there is a real threat to [construction] projects," Lutskov said.

Mayor Yury Luzhkov indirectly confirmed Lutskov's concern, saying during a City Hall meeting last month that when the city ran out of land for its construction needs, it would inevitably turn its attention to industrial zones.

Moscow's main architect, Alexander Kuzmin, denied that the city had been reserving land already. He said in a brief interview that the city planned to reserve land for the construction of roads in the near future.

Chances are high that city authorities will set their sights on occupied land. No profitable unoccupied land plots remain in the capital, said Strabag, the foreign construction giant.

"There are two variants for new construction projects: either clearing land plots beneath five-story apartment buildings or using industrial land plots," Strabag general director Alexander Ortenberg said.

He said more than half of all construction projects in Moscow are implemented with private investments.

Four leading foreign developers, two foreign consultancies and a foreign insurer for construction projects -- all working in Moscow -- refused to comment for this report.

Out of seven Russian developers contacted for comment, two refused and four failed to return multiple calls over the past two weeks. The seventh, Krost, said in an e-mailed statement that it believed the bill would not influence private developers, without citing any reasons why.

Putin pushed the Land Code, which allows private land ownership, through the Duma early in his presidency, fulfilling a constitutional requirement that eluded President Boris Yeltsin as he fought with a Communist-controlled Duma in the 1990s.

Although Western countries also have laws that allow the government to seize land in certain circumstances, land ownership is a touchy issue in Russia after 70 years of Soviet state ownership. Also, Western countries do not face the same challenges with corruption as Russia.

If approved Friday by the Federation Council, the bill will go straight to Putin's desk for his signature.