A look towards the territories for long-prospect development of Sofia

The strong demand for residential and non-residential areas in Sofia naturally resulted in fast-paced urban construction. This trend created the need for new opportunities for the realisation of investment incentives in the real estate sector. In this context, we will focus  on the territories for long-prospect development [1] of Sofia Municipality.

There are specific development and construction rules in force on the territory of Sofia. They are included in the Sofia Municipality Planning and Development Act (SMPDA) and in the appendix thereto under Article 3, paragraph 2. Their provisions are special in relation to the Territory Development Act (TDA) and therefore, they regulate the rules and norms for the implementation of the General Development Plan of Sofia Municipality (adopted by the Council of Ministers with Decision № 960/16.12.2009). The rules lay down the structural and functional purpose, the construction restrictions and the development parameters of the separate types of territories, development zones and independent terrains.

Article 6 of the SMPDA provides for the delimitation of the territories for long-prospect development in Sofia's surrounding areas. These areas cover the territory between the borders of the city of Sofia and the administrative and territorial boundaries of Sofia Municipality (Article 6, paragraph 1 of SMPDA).

The purpose of the delimitation of territories for long-prospect development is for them to be utilised after the exhaustion of potential short-prospect expansions and opportunities for recycling of already urbanised territories within the time interval of the projections of the General Development Plan of Sofia Municipality. The construction of these terrains ensure the planned and balanced development of Sofia Municipality in case of population growth above estimated values. In addition, they respond to specific investment interests, which are important for the municipality and subject to certain requirements. The designation of territories for long-prospect development also contributes to the timely management of infrastructure construction.

Territories for long-prospect development fall into different groups of development zones: residential, public services, mixed multifunctional, industrial and others. They are designated with the letter "д", marked after the letter index of the relevant development zone, with a stripe in the relevant colour. These territories cover a fairly large area of about 6000 hectares and include:  

► expansions of areas of cultivation of the villages of Lozen and German (to the south) and in Bozhyrishte (to the west)  

► territories for housing construction in the Suhodol district   

► almost all settlements in the surrounding areas Krivina, Mramor, Mirovyane, Novi Iskar, Voynegovtsi, Svetovrachene   

► the road node to the northeast, connecting Sofia Ring Road, "Botevgradcko shose" Blvd. and "Kpemikovsko shose".

The provision of Article 15, paragraph 1 of the SMPDA prohibits the utilisation of the territories for long-prospect development in accordance with the new designation initially until 2020, and with the latest amendments to the Act - until 2025. However, this prohibition is not absolute.

Pursuant to Article 15, paragraph 2 of the SMPDA, the development and construction of the terrains for long-prospect development before 2025 are allowed on the basis of a positive decision of the Sofia Municipal Council (SMC), for the receipt of which three preconditions must be met:      

► the investment initiative must comply with the provisions of the GDP for the respective development zone  

► the investment initiative must cover the respective development zone completely or to a significant extent

► the investment initiative must prove secured financing, including for the construction of the necessary technical infrastructure.

The first precondition does not create difficulties, but the second and third one are not so problem-free. It turns out that the Bulgarian legislation and case law do not contain a legal definition of what is meant by "significant degree of the respective development zone" and there is no explicit specification as to how the provided funding should be proven.

To a certain degree, a solution to these problems can be found in decisions of the SMC under Article 15, paragraph 2 of SMPDA, which are over 15 to date. In each specific case, the SMC has defined different areas as "significant" and has rather developed other guidance criteria arising from whether the property was in proximity to an enacted detailed development plan and an official street. When it comes to proof of financing, in most cases permission has been granted on the basis of a notarised declaration for financing on behalf of the investor.

Despite the aforementioned ambiguities, over 90% of the decisions of the SMC under Article 15, paragraph 2 of the SMPDA are positive, and the urbanisation of the territories for long-prospect development in most cases could prove to be a good financial investment.

(1) Territories designated for development after a certain period.