On average, the process of obtaining a construction permit for new residential property development projects in Prague takes seven years. The complete process from the first phase of the pre-project preparation to the completion of the construction then takes almost nine years. In addition, various institutions may enter into the complicated process at any time and postpone the project realisation by several years. At the same time, authorities involved in the process often fail to meet the deadlines stipulated by law without being subject to any sanctions. These are the findings of Deloitte’s Analysis of Projects in Preparation.
The analysis focused on all residential property development projects of various sizes that were put up on the public noticeboard of the Municipal City of Prague in the period from 1 January 2014 to 31 March 2018 and have not been completed yet – in terms of construction and the underlying legal process. The analysis examined the approval process of the project preparation which includes three main phases – initiation and completion of EIA (ie Environmental Impact Assessment), the issuance of a land-planning decision and a construction permit. The individual phases were determined based on the date of the issuance of the relevant decision.
“In the past ten years, the period necessary for granting a permit to build new flats has been prolonged significantly. In addition, the market suffers from other problems. For example, the deadlines for administrative processing are not respected. The problem arising from the lack of new flats that can be offered to the market is thus further aggravated,” as Miroslav Linhart, Partner and Leader of Real Estate Advisory at Deloitte, stated.
“In addition, the approval process is further influenced by organisations that can enter into it at any time. These include so called preferential petitioners, ie the public affected by the relevant project, which defend various interests based on the restrictive conditions stipulated by law. Other players that may influence the process are all participants of the construction proceedings based on the construction law, namely claimants and owners of the adjacent lots,” Petr Hána, senior manager at Deloitte, adds.
There is a relatively long period of time preceding the initiation of the construction proceedings as such. In reality, investors initiate the project construction approval process only after several years upon gaining the lot for property development. On average, it is about 1.7 years. If it is necessary to make changes to the zoning plan, then the period prior to starting the approval process is significantly prolonged. At the moment, there are 400 requests for rezoning that have not been debated by the representation of the City of Prague. Most of these have been halted as part of the political decision-making process.
The study does not include potential appeals filed against the decision issued by authorities. If a legal action is taken against an issued decision, the period is prolonged further. According to investors, the average period for legal proceedings is two years.
The length of the individual phases of a project:
- The average period between the initiation of the EIA process and its completion is 0.5 year;
- The average period between completing the EIA process and issuing the land-planning decision is 1.7 years;
- The average period between issuing the land planning decision and issuing the construction permit is 2.9 years;
- The length of the cycle from EIA initiation to EIA completion, through the issuance of the land planning decision and the issuance of construction permit is 5.1 years;
- Pre-project preparation: 1.7 years;
- Construction: 2 years;
- However, Prague recorded some extreme examples: Deloitte’s analysis revealed a project that has been in the construction approval process for more than 24 years.
Projects in preparation in numbers:
- As part of approximately 730 residential property development projects, more than 42,000 flats have been recorded.
- Most residential projects in preparation are located in Prague 5 (168).
- Most flats in preparation are in Prague 4 (8,898).
- In terms of the average number of flats, the largest residential projects are planned in the ninth city district.
- Most flats in preparation based on the relation to 1,000 citizens are in Prague 19 (88).
You can readDeloitte’s Analysis of Projects in Preparation here.