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Property market will be hit by new Russian law

Cyprus’ beleaguered property market will shortly be dealt another blow when the Russian government passes a bill banning state officials and civil servants from owning overseas property, bank accounts or stocks and shares.

THE Cyprus property market is about to be dealt another blow, this time by the Russian government.

Late last year the State Duma (Russia’s Lower House) approved the first reading of a bill banning state officials and civil servants from owning property abroad.

This bill amends an existing law “On Countering Corruption” and it was passed by 437 MPs with no one voting against and just one abstention.

According to the draft law, the ban will apply to civil servants, MPs, those serving in the military, employees of the Interior Ministry, Federal Penal Service, Federal Drug Control Service, Investigation Committee, prosecutors’ offices and customs.

It will also apply to the spouses and underage children of the groups listed above – and the officials cannot own real estate, bank accounts or securities abroad.

Furthermore, civil servants who already own foreign property will have to get rid of it by June 1, 2013. If an official inherits foreign assets they must be sold or passed to another person within one year after the property rights come into force.

In addition, those leaving state posts will be banned from acquiring foreign assets for a period of three years after they leave office.

The draft bill imposes fines ranging from 5 to 10 million roubles (€125,000 to €250,000) or a prison term of up to five years for violations.

Although the bill still has some flaws, it has received the full support of President Putin who spoke about such measures in an address he made to the Federal Assembly late last year.

In his Duma speech MP Vyacheslav Lysakov of the majority United Russia party called the bill “new morals for the national elite” and emphasized that it had “a great virtue component” in it.

The bill is expected to pass its second and third readings unopposed.

Cyprus is a popular holiday destination for Russians and the 2011 official population census showed that around 9,000 of them are now resident on the island.

Readers' comments

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  • Simon says:

    Andy your answer is Ukraine.

  • @All – There’s an interesting article in RIA Novosti that says:

    “The government is currently in the process of introducing legislation which will ban all state officials from owning foreign real estate, bank accounts or stocks and shares. Russian officials are currently allowed to own property abroad, but it must be declared.

    More than half of the Russians buying property abroad are officials, real estate agents told the RBC Daily in December.”

    More information: Senior Russian Lawmaker Quits Over US Property Scandal

  • Richard says:

    Pavlos is correct – although someone, somewhere in Russian Government circles may already be well aware of this ‘loophole’ and monitor the interests of said officials participating in them. Don’t forget – old habits die hard and Russian people lived with decades of ‘watching’ on each other!

    As for banks and lack of finance – yes – very interesting times ahead – especially as more and more people are pushing very hard to get loans from the Troika ‘conditional’ on sorting it all out.

    Maybe now the pro-Russian stance led by MrC is illuminating itself as perhaps not quite the ‘easy road out’ many believed it would be.

    Be careful when you start hacking off all your friends – you end up old and lonely with no-one to love you.

  • Frank says:

    Lots of unfortunate people in Syria and Mali need somewhere to live. Time for the developers to learn a couple more languages.

  • M Anastasiou says:

    Everybody have banned themselves anyway from Investing in Cyprus, anybody that wants to pay 5+ Euros for a coffee ?

  • Denton Mackrell says:

    Interesting comments from Pavlos on how Russians and other third country nationals can circumvent apparent restrictions. Tak vsye pobyedityeli! So, everyone’s a winner then and plus ca change.

    He’s right that the real problem is the horrendous banking and finance mess here. On the property quagmire, the Troika’s memorandum of requirements does require the government to get the Title Deeds backlog of 130,000ish cleared to no more than 2,000 by end of Q4 2014. Interesting times indeed!

  • Fighting For Justice says:

    I’d thought this might be a rumour when I heard of a villa sale to a Russian doctor falling through last month for this very reason.

    Obviously not.

  • Pavlos Loizou says:

    This is unlikely to have any impact on Cyprus property.

    Non EU residents can only acquire one property (house for own use or land up to 4,000sqm) after the approval of the Council of Ministers. In order to acquire more property you create a Cyprus company to buy the assets, with its shares owned by (say) a German company. There are more complicated structures, but this is the general principle.

    Thus the “Russian official” owns shares in a company in Germany and there is nothing to get rid off.

    What will have an impact is the mess with the banking system and the lack of finance. Interesting times ahead…

  • andyp says:

    Answers on a postcard please.

    The next Cyprus property road show will be held where?

  • Costas Apacket says:

    Oh dear, now that’s such a shame isn’t it?

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