Ahmet Ismaili: Approximate market value and sale, and purchase
prices of immovable properties
Opening speech by Mr Ahmet Ismaili, Governor of the Central Bank of the Republic of
Kosovo, at the Conference "Approximate market value and sale, and purchase prices of
immovable properties", Pristina, 27 October 2023.
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Dear Mr Bauer, Director of the Office of Democracy and Governance, USAID Kosovo
Dear, Mrs Ober, Head of USAID's Property Governance Activity
Dear panellists
Dear participants
It is with great pleasure that I address you with this introductory speech, underlining the
importance of the appraisal of immovable property, which affects many dimensions and
important aspects of society and is one of the key factors for the development and
economic potential of the country.
Investments in construction for residential and commercial properties on average
account for a significant share of the Gross Domestic Product, therefore, the
establishment of regulatory acts for the adaptation of International Standards and Best
Practices for the appraisal of immovable property is of special importance for the
Republic of Kosovo.
The financing of properties, residential and commercial facilities, but also of businesses
depends a lot on the possibilities of immovable property mortgages, which directly
affects the credit level of a country's economy. The quality of the collateral used, and
especially the quality of its appraisal for an adequate coverage of the risk, has an
impact on the stability of the financial system.
The Central Bank of the Republic of Kosovo attaches special importance to the
appraisal of immovable property from the financial sector, also through a
comprehensive regulatory framework that is related to several aspects of this sector.
Therefore, the CBK has regulated the appraisal of immovable property through specific
regulations that apply to banks, other lending institutions and insurers that rely on
immovable property as collateral for any purpose.
Appraisal of immovable property and the quality of market value data have a significant
impact on all the following aspects related to financial institutions, such as:
Presentation of the real state of financial statements of the financial institutions;
Fair presentation of health indicators of financial institutions related to reserves for
covering losses, solvency, and liquidity;
Accurate presentation of the value of exposures, preparation and monitoring of
the Residential Property Price Indices for macroprudential supervision;
Proper presentation of issues related to the field of formalization of the economy
and prevention of money laundering; and
The correct presentation of tax obligations from immovable property ownership.
The Regulatory Framework applied to financial institutions aims to determine the
minimum requirements and standards that must be applied by every licensed financial
institution. Appraisal of immovable property in relation to transactions in which
immovable property is used as collateral for any credit instrument issued by financial
institutions, as well as determining which immovable property transactions require the
services of a licensed appraisers is of primary importance.
Property appraisal potentially affects capital allocation through Risk-Weighted Assets,
for loans that are collateralized by immovable property.
Once we have managed to have this process finalized, we will also look at the
possibility of considering Commercial Immovable Property collateral to be weighted with
a smaller weight in Risk Weighted Assets.
Currently these collaterals are weighted with a risk of 100 percent according to our
Regulation, so that when the appraisal is more accurate/fair, they will be able to be
weighted with a lower weight. This would also enable the release of capital and
therefore the possibility for more lending.
The CBK cooperates closely with the Supervisory Council on Licensing of Immovable
Property Assessors, established by the Ministry of Finance, Labour and Transfers, in
which it also participates with its representative.
In addition to the licensing by this Council of a number of immovable property
appraisers who carry out appraisal for the needs of the financial sector, the CBK has
also licensed a number of its personnel engaged in the examination of financial
institutions, who assess reports prepared by appraisers engaged for financial
institutions.
The CBK is committed to further advancing the regulatory and supervisory framework
related to the appraisal of immovable property. We expect that through this
USAIDsupported Project, we will be able to advance the existing legal and regulatory
framework of the appraisal of immovable property, including establishing the necessary
mechanisms for quality control of appraisal and adequate monitoring of appraisers.
In this regard, the Central Bank of the Republic of Kosovo, through its involvement in
the Inter-institutional Working Group, within the framework of the International Monetary
Fund program, has been involved in the preparation of the Residential Property Price
Indices, a project which is being led by the Kosovo Agency of Statistics.
We expect that these changes will directly affect banks and other financial institutions to
correctly implement the applicable regulatory requirements, as well as to advance their
policies and procedures related to the appraisal of immovable property, in accordance
with international best practices and European Union standards, known as TEGOVA
Standards.
Therefore, we expect them to increase the quality of the data, to reflect the real value of
the immovable property market in order to respond to all the needs and demands
mentioned above, with the final goal of maintaining the financial stability of the country.
I wish you fruitful panel discussions on such an interesting and tangible topic.
Thank you!