Ukrainian Real Estate in 2017: Investment Opportunities and Risks

As any Ukrainian real estate agent will confirm: now is the best time to invest in residential properties in Kiev.  The prices for apartments are at their lowest since 1993, ranging from $800 to $3,000 per square meter (depending on the location and condition of the unit).  At the same time, no bank financing is available, which gives prospective purchasers with cash a tremendous negotiating advantage.  Last, but not least, in June 2017, Ukrainian citizens have been granted visa-free entry in any EU country, which means that Ukraine will surely become a European nation in 5-10 years, and prices for real estate will increase over the next few years.

When viewed together from an investor’s perspective, this is the perfect time to buy an apartment (or two) and rent it out while real estate prices increase.  For a mid-size investor, who does not have enough cash to buy an apartment in London or New York, investing in Kiev is an excellent option, especially considering low expenses associated with property (taxes, condo fees, etc).

But how does a foreign investor go about buying an apartment in Kiev?

First, you have to decide whether to purchase an old apartment or invest into new construction.  The center of Kiev has comparatively few newly constructed residential buildings, and they are all rather expensive.  For that reason, most investors who insist on living in the center of Kiev usually buy older apartments (with or without repairs).  It is vital to conduct full inspection of the property, since many old apartments have legal and practical problems such as unregistered construction, undiscovered fungus (showers), leaky pipes (sewage, water, gas), etc.

Other investors prefer to live in newly constructed residential buildings, where they have the opportunity to design the lay-out of their apartment to their taste.  Such construction is classified as either (a) unfinished; or (b) finished.  We briefly review both options below: 

(a)  Unfinished Construction (no exploitation permit).  There are several options for an investor to acquire an apartment in an unfinished building, including: (a) investment into special purpose bonds; (b) creation of a construction financing fund that partners with a developer; (c) creation of a cooperative that will jointly own and finance the construction. 
Unfortunately, it is always time-consuming and risky to invest into unfinished construction for several reasons.  For instance, there is no guarantee that the building will be “put into exploitation” on time, or that there will be enough funds to finish the construction in the first place.  For those reasons, most foreign investors insist on buying apartments in buildings that have completed construction.
(b) Finished Construction (exploitation permit).  In all cases involving real estate, questions of security in the property’s title and ownership rights predominate the agenda.  The reason is simple: fraudulent transactions are abound and, as a consequence, all issues connected with title transfer and the identity of the true owner must be flushed out before the actual execution of a sale-purchase agreement before a notary public. 
To avoid the pitfalls, any potential buyer must review the background documentation that serves as the ultimate proof of ownership, including:
(i)   if the ownership was acquired prior to 2013, you will need to obtain the title document (confirmation of ownership) that is registered with BTI (Bureau of Technical Inventory); if the property was bought after 2013, you will need to obtain an extract from the State Register of Immovable Property Title (issued directly by notary prior to certification of a sale-purchase agreement or by the state registrar upon the owner’s request);

technical passport (submitted if it is inalienable from title document);


list of household members (issued by a housing management authority or other relevant authority for the issues of residence registration);


in case the property owner has underage children, the consent from the child custody and guardianship agency should be provided in the name of the minor; the birth certificate of the minor; obligatory presence of parents with passports and tax ID codes at the sale;


waiver from all co-owners of the right to exercise their preemptive purchase rights;


an independent expert evaluation of apartment price for taxation purposes. 

Furthermore, the foreign investor can be either a physical person (an individual) or a legal entity (usually an LLC).  Below we review additional documents required in both cases:

(a)   Individual investors:

passports and tax identification numbers of the parties (if executed via a legal representative, he/she should present a notarized PoA, his/her passport and tax identification code);


notarized confirmation of consent to the sale or acquisition of property from a spouse;


 marriage certificate (if applicable).

(b) Legal Entities/Investors:

the founding documents of the legal entity (Charter, Extract from the Unified State Register of Legal Entities and Natural Persons-Entrepreneurs);

(ii)  the passport and tax identification number of the representative authorized to act on behalf of the legal entity, and the document confirming the authorities of the representative (usually general director – minutes on appointment to the position, or other representative – a notarized PoA);
(iii)  minutes of participants’ meeting with the approved decision to alienate or acquire property;
(iv)  company seal (if applicable).

Last, but not least, the investor should negotiate with the seller the following expenses related to notarization of the sale-purchase agreement: (a) 1% of the purchase amount indicated in the agreement, but not lower than 1% of the evaluated price (this is usually split equally between the buyer and the seller); and (b) 1% of the purchase amount indicated in the agreement (contribution to the Pension Fund, paid by the buyer).

After we collect and review the above documents, the actual purchase procedure is fairly straightforward: first, the parties and the notary review and verify the aforementioned documents.  Next, the sale-purchase agreement will be signed (caution: you should pay close attention to the property’s technical characteristics, correct spelling of names of the parties, tax identification numbers, dates and amounts, etc.) and all taxes and notary fees will be paid.  Finally, the settlement will occur (usually, but not necessarily, by a wire transfer).

After signing and notary certification of the main agreement, a seller will receive a notarized copy, and the buyer receives the original and a notarized copy, an Extract from the State Register of Immovable Property Title confirming his/her registration as the new owner, and the property’s technical passport.

In conclusion, with all the new construction (both finished and unfinished) flooding the Kiev housing market, there is a tremendous surplus of apartments.  The political and economic risk has decreased due to the EU visa-free regime.  Couple that with impossibility of obtaining credit, and anyone with a little extra cash can enjoy a wonderful investment opportunity in Ukraine that provides instant rental income and capital appreciation. 


Frishberg & Partners 2022