Friday, July 01, 2005
Using Real Estate as Collateral in Ukraine: Issues and Options
By: Paul Holden. The Enterprise Research Institute, 2002.
The purpose of this note is to discuss the main questions related to property rights and real estate financing in Ukraine. There is now substantial evidence that the evolution of clearly defined property rights in land is a necessary condition for long term economic development. Looking at the industrial countries, it is difficult to argue against this claim. Most countries in this group have strongly protected property rights, particularly for immovable property, and well functioning land markets. Financial markets that support the purchase and improvement of property exist in virtually all the industrial countries and constitute a major portion of the assets of their financial systems. Secure property rights for fixed property encourage investment in land and buildings, support financial market development and promote more equal distribution of wealth. By contrast, in many developing and transitional economies, property rights are insecure, often held by tradition or occupational right, and do not allow borrowing using property as security. In this, Ukraine is no exception. The current system of titling and registration used in Ukraine, which has evolved from the land distribution program, is not yet working efficiently and the institutions that underlie the system are similarly not yet performing well.
The purpose of this note is to discuss the main questions related to property rights and real estate financing in Ukraine. There is now substantial evidence that the evolution of clearly defined property rights in land is a necessary condition for long term economic development. Looking at the industrial countries, it is difficult to argue against this claim. Most countries in this group have strongly protected property rights, particularly for immovable property, and well functioning land markets. Financial markets that support the purchase and improvement of property exist in virtually all the industrial countries and constitute a major portion of the assets of their financial systems. Secure property rights for fixed property encourage investment in land and buildings, support financial market development and promote more equal distribution of wealth. By contrast, in many developing and transitional economies, property rights are insecure, often held by tradition or occupational right, and do not allow borrowing using property as security. In this, Ukraine is no exception. The current system of titling and registration used in Ukraine, which has evolved from the land distribution program, is not yet working efficiently and the institutions that underlie the system are similarly not yet performing well.