On December 17 2010 a draft law on urban planning, as developed by the Ukrainian Building Association, received its first reading in Parliament. The draft law envisages a complete transformation of the permit system for urban planning and makes fundamental changes to liberalise the structure of existing legal relations in the areas of planning and real estate.

The cornerstone of the draft law is the introduction of a zoning model, which is used in many jurisdictions. The Ukrainian territory will be divided into nominal zones, each with strict parameters for construction that will set a maximum height for buildings and other criteria for design and construction, including energy efficiency requirements.

Thus, an investor seeking to plan a real estate investment project in a given district will know from the outset what type of building can be built and what problems it must solve in planning the development. This will significantly facilitate projects by improving investment processes and eliminating bureaucratic obstacles - in particular, waiting times for approval of documentation are likely to be significantly reduced.

The draft law represents a radical change and is expected to increase international interest in Ukraine's investment opportunities by providing a planning framework with which foreign investors and financial institutions are more familiar. However, it will also have a number of unpopular effects, particularly the imposition of a moratorium on investment activity until the development of the necessary urban planning documentation and the introduction of the zoning system. Nevertheless, the moratorium is clearly the right approach - it will motivate the relevant government authorities to find the resources to finance the drafting of planning documentation. Without transitional provisions, local government authorities and the state administration will have no stimulus to implement such processes.

For further information on this topic please contact Timur Bondaryev at Arzinger by telephone (+380 44 390 5533), fax (+380 44 390 5540) or email ([email protected]).