Investment in property has been recognized as the unfailing means of acquiring wealth. The phrase ‘safe as a house’ is clichéd. Yet, it is the only truth in the context of return on investment scenario. Return on investment in property is a slow process. However, it is an investment that never fails. History also testifies to the fact that investment in property is a minimal risk investment. The return from the property, services the investment. The net worth grows over time and generates income for further investments in property.
Like any other investment, Property investment is a skill which has to be learned. The investor must be aware that there are risks attached to any kind of investment. He must also consciously acknowledge the fact that during the process of investment the risks attached seem to be magnified. He must also accept that, the right choice of property, combined with considered management are absolute essentials in any property investment. Property investment is a serious business that requires the right kind of commitment.
Before actually launching into the purchase of a property, the investor must be clear as to the purpose of investment. If investment may be for:
-
Personal use
-
To buy and Let
The purpose will determine the type and location of the property. In the former instance property may have to be located close to the place of work or near an educational institution. The type of property may not per se be of importance. Its location may be important. In the latter case all aspects of the property assumes importance. It is a property purchased as an investment and the investor expects a return on property investment.
Investment Property should be selected keeping in mind the following environmental factors:
-
High employment area
-
Attractive buildings and surroundings
-
Public Transport facilities
-
High capital growth
-
Developing areas
-
Low maintenance costs
-
High demand by letting agents
The Return on Investment (ROI) expected will include factors such as
-
Appreciation of the asset
-
Regularity of rental income
-
Long term stable tenants
-
Care by property managers.
-
Tax benefits
Investing in foreign countries requires an understanding of the laws and systems as it impacts on investment by foreigners. It also requires an understanding of the socio-economic fabric of the country as it will have a bearing on the value of the property. Therefore, before investing in property in a foreign land requires the investor to stay in the country for some time or a study of the socio-economic-demographic and political setup of the country in so far as it impacts on foreign investment in the country.
Foreign investment Climate in Lithuania
The Lithuanian Government has worked to establish a legal institutional and regulatory framework for an independent, democratic state and have shown a commitment to market economics. The country has consequently developed a business friendly environment. The privatisation moves have also speeded up the over all economic growth of the country and increased the inflow of foreign capital investment. The market reforms, coordinated by the IMF and the World Bank, have contributed to the overall favourable climate for investment. The reasons for investing in Lithuania are as follows:
Lithuania is a member of the European Union and NATO and has a stable economic and political climate.
It is strategically located bridging the EU and the CIS
Availability of well trained and competitive labour force
Attractive operating and living costs.
Well developed transport networks
Free economic zones and industrial parks
World standard Export production
Multinational investor satisfaction
Strong FDI growth
Rapid growth of e Business and development of a knowledge economy.
The Law and restrictions on foreign investors.
The law of investments regulates the investment activities in Lithuania. Foreigners are allowed to establish companies and acquire part or all of the equity of the company that is registered in Lithuania. They can acquire fixed assets for such a company including land. They can lend money to companies against a security of fixed assets including land. They can lease land from such companies. However, they cannot acquire any asset that directly or indirectly impacts on the national defence of the country. Even here companies complying with the European and Transatlantic integration criteria and approved by the State Defence Council may acquire such property.
Purchase of land
Article 47 of the Lithuanian constitution permits the purchase of non agricultural land by foreign investors for the purpose of carrying out business in Lithuania. Foreign persons are defined as
-
Companies or branches of companies registered in Lithuania and acquired by foreign companies or individuals.
-
Foreign individuals engaged in economic-commercial activity registered in Lithuania.
Procedure
Permission to acquire land can be obtained from the office of the County Governor. A formal application for the same must be submitted. The plot must be identified and designated for construction of buildings that will be used for commercial purposes. This permission is not transferable and the property cannot be sold without a fresh permission being sought by the purchaser. The permission given is valid for an unlimited period if the buildings are already constructed and being exploited for commercial purposes. If the land designated for commercial purposes is to be acquired, the permission is valid for three months only. It is extendable at the discretion of the County Governor for a further period of three months.
Land and buildings designated for commercial use can be taken on Lease for a maximum period of 99 years. The period of lease will determine the level of official who has to give the permission—the County Governor or the municipality.
The amendment of January 23rd 2003 allows foreigners purchase agricultural land. Foreigners have been given the right to acquire land earmarked for farming seven years after Lithuania joins the European Union. The precondition being that the farmer should have been living and farming in Lithuania for three years preceding Lithuania’s ascension to the European Union.
Dispute Resoulution
Disputes between foreign investors and the Republic of Lithuania on land rights can be resolved in a Lithuanian court, by international arbitration or by such other institutions as are authorized to resolve them. The foreign investor can apply to the International Centre of Investment Disputes.
Expropriation of private ownership
The State can expropriate property for public interest. A monetary compensation will be given to the owner equivalent to the market value of the property on the date of announcement of the expropriation or the date of taking over the property whichever is earlier. Otherwise State institutions are not allowed to interfere with the owners rights of enjoyment and exploitation of the property.
Mortgage of Property
Property can be mortgaged in accordance with the laws of the land and a contract in writing must be executed. |
