In the Central and Eastern Europe (CEE) region, economic growth and loose economic policies have led to a housing price boom and made access to housing much less affordable, which means that rental accommodation is becoming an increasingly popular option. This trend is expected to continue as residential developers consider built-for-rent as an attractive alternative to built-for-sale.
“As the world emerges from the pandemic, we have witnessed new ways of living. Real Estate investment is shifting as the sector looks to respond to new expectations from consumers. Affordability issues and population growth will force the CEE market to adapt and slowly but steadily, to follow the pattern of Western Europe in terms of living sector structure,” stated Lukas Hejduk, Head of the CMS CEE Real Estate Practice.
A favourable legal framework is also a crucial factor driving PRS investment in the CEE. Although the legislation affecting PRS projects is still under development, it is generally flexible and meets the dynamic requirements of this asset class. Special investor-friendly regulations affecting PRS projects have been implemented in recent years and provided auspicious conditions for growth in this new sector.
“The overall economic situation and new consumer behaviours, especially between new generations of professionals in terms of mobility and attitudes towards owning or renting properties, will most likely force the Romanian market to adapt to the model of Western Europe in terms of built-to-rent, just as other countries in CEE have. Romania does not have specific legislation to cover the development and financing of built-to-rent structures, but this is not necessarily detrimental to investments in this segment. On the contrary, our laws are in general flexible and favour institutional investors, so the first to invest in the Romanian living sector structure, based on the current legislation, may actually benefit from the lack of such projects on the market and produce steady rental yields long-term, as well as new sources of income. In turn, tenants would have rentals and maintenance that are managed professionally rather than in the traditional renting system, which is currently mostly managed by private individuals and small sized real estate companies with only several projects in their portfolio. As Romania remains a real hub for high credit IT & BPO businesses, we are seeing that the development of the built-to-rent segment may make sense at least, for now, in the proximity of office premises from the main cities around the country,” stated Roxana Fratila, CMS partner and Head of the Real Estate & Construction practice in Bucharest.
The report also argues that Environmental, social, and governance (ESG) is as important a consideration in the private renting sector as it is in other real estate sectors. ESG strategies adopted by residential developers include specific carbon footprint reductions in the production of new facilities, measuring performance according to international standards, implementing the principles of the “closed loop” economy and analysing opportunities to optimise investments in terms of emissions and resource consumption.”