A Real Estate Investment in Tashkent, Uzbekistan?

Making a real estate of the realm investment in Tashkent, Uzbekistan, is an attractive suggestion. One can find core business district properties at about $ 1,000 per m2, and crude yields that can reach 8-11 %. In a world of negative interest rates and depleted yielding actual estate, the opportunity to buy low into the capital of a smash nation ( read this article ), with big demographics and prospects is alluring. It ’ sulfur surely one of the reasons that made me fly over to Tashkent to wander about and try to figure out how to make a property conduct. accordingly, I noticed some arbitrage opportunities .

1. Not a big difference in price between Soviet buildings & new construction

What ’ sulfur interesting is that there international relations and security network ’ thyroxine much of a deviation between the Soviet buildings and the new structure prices. In core business district you can get an unrenovated soviet apartment for about $ 650- $ 800 per m2. A full renovation, which implies destroying everything and re-doing the pipe, electricity, removing/adding walls, etc would set you back about $ 250 per m2.

Compare this with a normal off-plan building in the concentrate or mighty adjacent to it a curtly walk away to the metro, at $ 1000- $ 1,200 per m2. What is important to know is that as interest rates are identical eminent ( over 20 % in local currency and +-6 % in USD ), paying cash upfront gets you great discounts. typically, for a project due for completion in 18 months, you can get 15 % -20 % off. Of course, this means taking on developer hazard, but choose your developer carefully and you should be ticket. In this part of the global new apartments are handed over as empty “ boxes ”. You need to add the bathroom, kitchen, tiles, etc. pretty much only the windows and doors are there. In some cases, tied the walls within the “ box ” are not. To complete your “ box ”, add in about $ 150-180 per m2. So you can end up with an apartment in a newfangled building for about $ 1000, per m2. however, do bear in mind that there is the opportunity monetary value of waiting for 2 years including the renovations. That said, your opportunity cost is not that big with treasuries yielding barely above 2 % and decreasing. indeed, for a small premium, you can end up with a trade name modern building of dependable standing as opposed to a dilapidated soviet build. If you want to do anything other than a little cash cow Airbnb, go for the new build when you make a real estate investment in Tashkent, Uzbekistan .

2. Most new construction is weighted towards large 3-4 bedroom apartments

A fortune of the developments seem to focus on large apartments. The report the salemen will tell you is that “ We Uzbek people like big apartments ”. sure. We all do. But for now, merely the rich Uzbeks can afford to buy apartments cash so yes they are going to buy big apartments for themselves. however as the country grows, the expanding middle class will seek to buy apartments that they can afford. Expect to see much stronger demand in the future for studios, 1 & 2 bedroom apartments. evening the 1 bedroom apartments on the marketplace are big, at total 50-60 m2. presently, you can get the minor apartments for about the lapp m2 price as the large apartments. That premium between the two will grow over the years, and you ’ ll get better yields with smaller surfaces .

3. City center real estate comes at a smaller than usual premium

construction costs are about $ 400 per m2. Add in the state cost & gross profit. consequently the cheapest you ’ ll get in Tashkent is about $ 600 per m2 cash upfront identical far away from anywhere. But somehow, new “ box ” apartments that are 3-4 metro stops away from the center can be priced a $ 700- $ 800 per m2 cash upfront, and their equivalents in the center or 1 stop away are at $ 800-850 cash upfront. Over time, the gap will increase between kernel & not congress of racial equality .real estate investment uzbekistanFull disclosure: I took a picture of this Soviet building in Tbilisi, Georgia, but Tashkent has plenty of these 🙂

4. Ground and first floor apartments are more expensive than top floor apartments

typically the higher you go the higher the m2 price. But not here in Uzbekistan. People pay a premium to be on the lower floors. When asked why sales people will tell you “ because Uzbek people like the domain ”. sure, but that will change. At some point people will realize that having a see of the city is nice than being on the beginning floor without any view and with added noise/smell from the streets .real estate investment uzbekistanA surprising logic…

What about luxury developments?

There is a massive project going on with the full subscribe of the government. It is called “ Tashkent City ” and is located in the center. The Hilton & multiple other hotels, a boastfully conference center, a massive promenade, the future fiscal center, a big public park, and loads of luxury developments are partially of the plan. You can get lavishness “ boxes ” for about $ 1,500 – $ 2,000 per m2. Add in the common renovation costs, possibly a spot more to keep the standards – $ 200- $ 250 per m2. At this price you ’ ll get perplex timbre, in a futuristic environment. however your yields will be poor as there just isn ’ thyroxine any enough demand for such an amount of lavishness rental property. It sounds expensive for Tashkent, but objectively it ’ s not for the quality and localization you ’ rhenium getting. I seriously doubt prices will go down. You won ’ t make great money with such an investment, but you ’ ll have a great apartment and good capital preservation .Real estate investment uzbekistanTashkent City – more exciting than the sleepy gentleman behind

What real estate investment should I make in Tashkent, Uzbekistan for the best combination of capital gains & rental yield?

Get small 40m2, 1 bedroom apartments, off-plan, near the city congress of racial equality, in one of the acme floors. That said, don ’ thymine buy the top as you don ’ thyroxine want ceiling issues. Overall, urbanization and increasing incomes will result in you constantly having tenants and the headline price of the apartment will make it liquid. Expect such an apartment to reach $ 1,500 USD per m2 within 5 years in line with Almaty in Kazakhstan. In the interim, you ’ ll be making gross yields of about 8-11 %

Great, let’s do this. I want in. How do I get started?

This was besides my reaction. unfortunately, the politics does not make it easy to make a real estate of the realm investment in Uzbekistan as a foreigner. here are your options

  • Buy an apartment worth at least $400,000 and you can not only get it in your own name, but also get a residence permit. At this price you’ll get some massive apartment in Tashkent City. Expect very low yields.
  • If you are already a resident, then you can buy an apartment worth at least $150,000 in your own name. However, this comes with a special government stamp duty tax of 10%.
  • Create a local company and buy the real estate through it. As a foreigner, you must deposit a starting capital of at least +-$42,000 (400 million Som). Creating a company solely for the purpose of real estate holding is not permitted so claim you are starting a consulting company and get some hours billed, or if you want to do Airbnb say it’s a tourism business. Easy, right? Not so fast:
    • If your turnover is less than 1 billion Som – about $100k, you qualify for the simplified tax regime and get taxed 4% of turnover. This is fine for Airbnb (for which you need a license), however, if you want to switch to long term rentals you get taxed 30% of turnover (!). On top of this you have to pay taxes & social contributions on your director fees. You must also pay non resident dividend taxes and your accounting fees.
    • Also, there is the usual corporate tax regime of 12%, but apparently one cannot simply elect it. All accountants & lawyers I spoke to were clear that if the turnover is under 1 billion Som one must go for it. I’m a little skeptical still.
    • Importantly, the whole tax & VAT system is being reviewed, so things are changing very fast. Some accountants say one will have to pay VAT for Airbnb. There is also the possibility that a company would have to pay VAT on sale of immovable property (!). To top it off, there are rumors of the government wanting to ban Airbnb.
    • If Airbnb gets flooded with apartments and yields drop, or the government bans it, and you must revert to long term rentals, the 30% tax would be a killer.

Real estate investment UzbekistanThe Tashkent Metro

A real estate investment in Uzbekistan is doable. But it’s risky in many ways.

– buy through the company is possible and is done, though is in a bit a of a grey zone. – the option of buying A LOT of place to have a rental turnover of 1 billion Soms to timbre for the corporate tax rate of 12 % is a possibility, but then it would be hard to argue that your company is not a veridical estate holding company. You could get away with it if you did lone Airbnb as it would be a tourism business, but if you must revert to long term rentals you ’ d find yourself in a very uncomfortable situation. – The tax & VAT arrangement are undergoing a massive overhaul. It keeps changing. It could get better, or worse. The government doesn ’ t seem keen on taiwanese speculators impacting the local market so things could identical well get worse for not house physician real estate investors. – then, indisputable, the gross yields and das kapital gains prospects are good. But in the end the taxes are unfavorable to foreign investors in the sector, there is a batch of doubt, and maintaining a company in Uzbekistan is extra paperwork. If you ’ re willing to go through all the loops and face the uncertainty to chase the numbers, go for it. If not, rather invest in the Tashkent Stock exchange for good yields and potential capital gains without any of the headaches. Get in tint with me if you want the contact information of a effective english speak broker. If you ’ ra Uzbek, go for it. very estate in Tashkent, Uzbekistan, though up over the end few years, is distillery a bang-up investment compared to all big capital cities worldwide. More articles on uzbekistan : If you want to read more such articles on other very estate markets in the world, go to the bottom of my International Real Estate Services page. Subscribe to the PRIVATE LIST below to not miss out on future investment posts, and follow me on Youtube, Instagram, Twitter, and Facebook. My favorite brokerage to invest in external stocks is synergistic Brokers. To find out more about this low-fee option with access to enough of markets, pawl here. If you want to discuss your internationalization and diversification plans, book a consulting session * or send me an e-mail. *a consulting school term is a discussion about your portfolio and objectives. It does not constitute legal, fiscal, tax or investment advice .

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