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5. Financial Transparency – Weak
Goal – A well developed and transparent financial system that includes strong supporting institutions and highly trained and ethical professionals that contribute to effective financial intermediation and deep and broad access to capital and financial services
Core Question: Are market risks sufficiently transparent and diversified so that efficient capital allocation can occur? No – Very Weak, there is a low level of financial transparency in the market, which is a barrier to growth in investment and undermines the trust of credit institutions in real estate market participants.
5.1.1 What is the strength of the country’s auditing and reporting standards? Very Weak – 123th out of 144; Score 3.8 out of 7, information in financial reports is often inaccurate. The main reasons for this are the use of tax evasion schemes (due to high taxes, including property taxes) and incompetence in preparing financial reports.
5.1.2 Does the financial sector provide a wide variety of financial services to businesses? Very Weak – 117th out of 144; Score 3.7 out of 7
Source: The Global Competitiveness Report 2012-2013, World Economic Forum
Strong – Ranking – 53rd out of 185 Trend ↑
5.1.3 What is the average time to complete bankruptcy proceedings? 2 years
5.1.4 What is the cost of bankruptcy proceedings as a percentage of the estate? 9%
5.1.5 What is the recovery rate of bankruptcy proceedings? 43.3 cents on the dollar
Source: Doing Business 2013 – Closing a Business www.doingbusiness.org/data/exploreeconomies/russia
Core Question: Do trained, independent and ethical asset valuers exist for all types of assets? No – Weak, the value of real estate assets stated in financial reports does not reflect their actual value.
SQ 17 How easy is it to find a valuer who implements International Valuation Standards? – Strong – Several Russian valuation organizations belong to the International Valuation Standards Council.
Civil Society Resources: International Valuation Standards Council www.ivsc.org
The Russian Society of Appraisers www.sroroo.ru/
SQ 18 What is the level of training of valuers? Weak –while appraisers are required by law to follow various methodologies, there continue to be disputes with different valuers giving significantly different values for the same property.
SQ 19 Are opinions offered by valuers free of influence from parties to the transaction? No – Weak, tax evasion schemes make it impossible to appraise the true value of a company’s assets.
Source – The Chamber of Commerce and Industry of the Saratov Province
Core Question: Is accurate property information available electronically in formats that are consistent with international standards? No – Weak, there is no single electronic data base containing information on real properties.
Sales & Operating Data
SQ 20 A multiple listing service is an electronic exchange system where brokers and agents can widely share contracted real estate listings of properties that are for sale. Do multiple listing type services exist? No – Weak
SQ 21 Do resources exist for obtaining building income and expense estimates? No – Weak, although the Russian Guild of Realtors is working closely with international organizations to propose uniform legislation and regulate the market.
Civil Society Resource: Russian Guild of Realtors www.rgr.ru/
SQ 22 Do electronic data interchange formats conform to international standards (ebXML – electronic business using extensive markup language)? No – Weak, although the National Settlement Depository has recently launched an EDI service.
Source: National Settlement Depository www.nsd.ru/en/press/ndcnews/index.php?id22=87496
Civil Society Resource: Open Standards Consortium for Real Estate International www.oscre.org
SQ 23 Do building codes and office building measurement standards (ANSI/BOMA Z65.1) conform to international standards? Unknown
FQ19 How many independent valuers exist in the market? Can small businesses obtain fair valuations for property they want to buy or sell?
FQ20 What are the valuation standards and do they conform to international and regional standards?
A rapid transition to international financial reporting standards is currently underway.
FQ21 What valuation methods and techniques are used in the market?
The requirements that appraisers must meet and the manner in which they perform their work are regulated by law. Appraisers are required to follow various methods, the use of which can produce different values for the same property and give rise to disputes. As a result, the value of a property can fluctuate significantly, depending on the appraisal method. This all indicates that there is a low level of financial transparency in the market, which is a barrier to growth in investment and undermines the trust of credit institutions in real estate market participants.
FQ22 How available is information for commercial properties that are for sale or that have been sold?
Databases are currently being created to consolidate information used by appraisers, which in turn will make their work more transparent.
Source: The Chamber of Commerce and Industry of the Saratov Province