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December 1st, 2008
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Zoned out

Prague Council fast-tracks land use plan to aid ailing developers

By Claire Compton
Staff Writer, The Prague Post
August 13th, 2008 issue

MICHAEL HEITMANN/The Prague Post
Masarykovo nádraží in Prague 1 is one of the sites slated for a new housing development, pending City Assembly approval.
MICHAEL HEITMANN/The Prague Post
A majority of the proposals would redevelop former industrial areas, such as the Žižkov freight railway station.
The Prague City Council is bracing itself for a possible real estate crunch by speeding up key changes to the city’s zoning plan.
The council approved extensive changes to the zoning plan Aug. 6 in an effort to fast-track nearly 43 developments, including a housing development in what is now Masarykovo nádraží rail station, new parks in Strašnice and Záběhlice, a railroad corridor between Prague and Beroun and cycling paths in Vinohrady.
A majority of the proposals would redevelop former industrial areas, or brownfields, in Modřany and Sedlec, the Žižkov freight station and the Smíchov train station. These proposals indicate a growing momentum of land speculation in the city’s obsolete industrial zones, a previously uncommon practice.
The proposed zoning changes merely anticipate developer interest and carry no guarantee of the projects’ realization. Before taking effect, the plan will be subject to approval by the Prague City Assembly, which will vote on the council’s recommendations at a Sept. 18 meeting.
If the assembly approves the plan, it may be another year before City Hall starts accepting developer bids for the individual projects.
“The fact that the council agreed on this only means that it recommended the City Assembly to approve these changes,” said Jaroslav Dvořák, a City Hall spokesman and secretary of the governing Civic Democratic Party’s City Assembly offices. “Changing the zoning plan is a long process. Before it can be finally approved, it must be debated and discussed by all relevant state institutions in accordance with the current building law.”
City Hall collected the 43 proposals from Prague’s 13 districts, whose governments gave feedback regarding possible zoning changes on their territories. These suggestions were completed in mid-April of this year.
In total, the potential investment value of the projects resulting from these zoning changes could amount to 20 billion Kč, according to City Hall.
Getting ahead
Martin Langmajer, the city councilor in charge of zoning, said the initiative sprouts from a need to implement extensive zoning changes outside of regular zoning plan reviews held by City Hall every six months.
“We decided to change the procedure,” he said of the Aug. 5 meeting. “The City Assembly decided that, before the new zoning plan comes into effect, only changes that are important for the whole city can be assessed and debated. This currently needs to happen because there is a group of proposed changes that cannot wait until the new zoning plan is approved.”
Part of that urgency comes from a need to find new solutions to the city’s railroad infrastructure, he added. 
The proposed changes could help local developers get ahead of any local fallout caused by the global real estate crunch.
Investment on the domestic real estate market has already fallen 68 percent since last year, according to an Aug. 8 report by real estate consulting company CB Richard Ellis. Analysts attributed the slowdown to higher construction costs caused by the appreciating crown and a growing difficulty in accessing bank loans.
Through the zoning changes, City Hall hopes to bolster investments in industrial property, the sector currently experiencing the sharpest decline. In the first six months of 2008, only a single transaction worth more than 110 million Kč was made in this sector, a 22 percent decrease since last year. 
The proposals would ostensibly increase the value of the plots by transforming nonconstruction areas into construction plots, causing land value to double in some cases.
While plots not zoned for construction on the outer areas of Prague have sold for an average of 50–300 Kč per square meter, construction-zoned plots in the same area can sell for as much as 2,000–5,000 Kč, according to the Czech News Agency (ČTK).
In April, Langmajer told online news server Aktuálně.cz that he anticipated a growth in speculative purchases upon the zoning plan concept’s completion in September, although he admitted the initiative did not guarantee investor profits.
“For now, these deals are very risky because the land may or may not appreciate,” he said.
As City Hall attempts to create new opportunities for struggling developers, real estate analysts expect the global crisis will cause the market to stagnate.
Investors are becoming more cautious and shying away from speculative purchases, Ferdinand Hlobil of real estate consulting firm Cushman & Wakefield told ČTK July 23. The strong crown, coupled with more stringent loan requirements, contributed to this year’s real estate slowdown and will likely continue to do so through the rest of the year, he said.
Should the new zoning plan receive assembly approval and survive the public input process, it will take effect in 2012. An affirmative vote by the assembly would result in at least three public hearings as defined by the building law, Dvořák said.
“[A new zoning plan] must involve all the representatives of our society, ranging from state authorities, local governments, civic groups, the affected land owners and individual citizens,” he said. “In Prague, this process usually takes about a year.”
—Hela Balínová and Naďa Černá contributed to this report.

Claire Compton can be reached at ccompton@praguepost.com


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