The Armenian Real Estate Association (AREA): a feasibility study for establishment of an association of real estate professionals in Armenia

Abstract

The process of transition to a market economy is very complex and ambiguous. Several industries are dying while reality forces to establish new ones which meet the purposes of restructuring the economy. One such industry that has to develop in the nearest future is the one related to real estate. This industry includes real estate management, maintenance, service, brokerage, insurance, as well as some other services. Previously, 75% of housing stock was State-owned, but after adoption of the Law of the Republic of Armenia “On Privatization of the State and Public Housing Stock” in September, 1993, a significant part of housing stock is already privatized. The possible legal forms of housing stock are expected to be State/Public co-operative, single-family housing stock (all presently existing), and “condominium” which is a new concept for Armenia. After the privatization of residential units, new problems have occurred due to the resultant heterogeneous housing stock. The Government of Armenia is now preparing to move on to the privatization of not only housing stock, but also privatization of management and maintenance organizations. The current condition of residential housing stock disastrous. In the past, maintenance expenses were covered by subsidies from the State budget. Due to rapid price increases for construction materials and services, this budget has been depleted and the Government is now unable to execute basic required maintenance, further contributing to the deterioration of the housing stock. Presently, the maintenance, utilization, and service of the housing stock is conducted by the State through “ZSHEK”s (State Housing Maintenance Organizations). The “ZSHEK”s implement, manage, and supervise utilization and servicing activities. That is, “ZSHEK”s act as client and contractor simultaneously. This, no doubt, leads to major inefficiencies and many inherent risks.