AZE.US
Compensation for properties demolished under redevelopment projects in parts of Baku has risen from 1,500 manats to 2,700 manats per square meter, but property experts say a fixed rate may still leave residents unable to buy replacement housing in the same area.
The new rate is equivalent to about $1,590 per square meter, compared with roughly $880 previously.
Vugar Oruj, chairman of the Azerbaijan Society of Appraisers of Azerbaijan, said the 2,700-manat rate had been approved for the area of central Baku commonly known as Sovetsky. Compensation in other parts of the capital could be higher or lower depending on local real estate prices.
Demolition work is being carried out as part of the Baku General Plan through 2040, which calls for the renewal of the city’s aging housing stock and the construction of major infrastructure projects.
Plans include new transport corridors, tram lines, metro facilities and tunnels, as well as the expansion of parks and public spaces. Dilapidated and unsafe buildings, including properties that have reached the end of their usable life, are also expected to be demolished.
Oruj said compensation should not be based on a single rate across different neighborhoods. Each property should instead be assessed separately, with the calculation reflecting the market value of comparable new housing in the same area.
Residents should receive enough money to purchase a replacement apartment close to where they already live, he said.
Such an approach would help protect property owners and prevent residents from being pushed out of central neighborhoods because they cannot afford homes there after demolition.
Oruj said compensation can currently be determined through several mechanisms. In some cases, an appraisal company is selected through a government procurement process and asked to establish the market value of the property.
In other cases, the amount is negotiated directly between the investor and the property owner.
He said the process would be more effective if the valuation were assigned to an independent appraiser acting as a neutral party. The assessment should take into account the property’s location, condition and current housing prices in the surrounding neighborhood.
The timing of the valuation is another concern.
In practice, compensation rates are sometimes set six months to one year before demolition. Because Baku’s real estate market can change rapidly, housing prices may rise before residents receive the money and begin searching for a new home.
As a result, compensation that appeared sufficient when it was calculated may no longer cover the cost of a replacement apartment.
Oruj said properties should be valued shortly before demolition begins. Other administrative procedures should move forward only after the current market value has been established.
Large-scale projects under the Baku General Plan will require both state support and private investment. Oruj said investor participation is important, but redevelopment should not leave owners of demolished properties in a worse financial position.
AZE.US