The Real Estate Market and Interest Rate in Armenia


There is a directly proportional connection between the real economic condition and the real estate market of a country. In other words, essential dynamics in a market can be expected only when there is a favorable and predictable business environment in the country, when the country supports the development and expansion of businesses and doesn’t hinder them. Thus, by examining the real estate market of the country, it is possible to gain an understanding into the strong and weak sides of the country’s economic problems.

The hypothec interest rate in Armenia in 2017 gives an insight into Armenia’s major economic problems. Especially the interest rate of hypothec in drams in 2017 is 10 percent, with dollar currency it is 12, while in developed European countries it is 2 percent. Perhaps, this is one of the reasons, why according to the president of one of the biggest corporations in Armenia this percent should descend to 7 in 5 years, based on the market price formed as a result of the balance between the offer and demand in the market.

According to the data provided by the state committee of the real estate cadaster, which is inseparable from the government of Armenia, the average market price of 1m2 of living space has declined by 0,1 percent in the first 3 months of 2017, compared to to the same period in 2016. The deflation in the real estate market is connected with the relatively essential decline of prices of apartments in residential buildings of the provinces, the decline is 1,2 percent, which is on average 88,4 thousand drams, while in Yerevan the price of apartments has declined by 0,6 percent, which is 272,8 thousand drams per square meter. There has been no essential decline in the prices of personal houses either. In Yerevan their prices have declined by 0,4 percent, which is 285,6 thousand drams per square meter, while in provinces by 0,1 percent, which is 93,5 thousand drams.  Below is its graphic reflection in the last 5 years:

It can be seen in the graph that during the last 5 years the prices of habitable sites have not changed greatly, a relatively visible change is the decline of prices between 2016 and 2017.

During the first three months of 2017 there have been in general 35 946 deals of real estate, which have been reduced by 6,3 percent compared to in the first three months of 2016. The majority of the implemented deals were alienations, 26,6 percent (9562), the amount of which has declined by 8,5 % compared to the same period in 2016. The 69,8(6674) percent of the alienation deal constituted transactions. The 65,5 percent of real estate transactions in Yerevan concerned apartments, the amount of which has increased by 11,1 percent in a year.

Not being a subject of transactions in Armenia during the Soviet period of planning economy, real estate was not fully included in the real estate market as a property object. Moreover, even the concept “real estate” was not defined in Armenia. Land belonged exclusively to the country and being seen as a means of production n agriculture, was only given for usage rights. There was no need for recognizing property rights, as well as market evaluation. In case of houses, buildings there was only citizens’ ownership in the form of personal houses, and certain amount of ownership of cooperative and collective gardening companies. There was no system for registering rights of users and owners of territories and buildings, and only accounting and inventory were done.

After the independence ofrmenia the process of privatization of plot, housing fund, and other branches of economy began, for the first time (1996) the concept “real estate” was defined incorporating the territory and the property registered on it in one property complex. The real estate market began to be formed, the alienation deals for property began to be formed.

A need for adjusting the property ownership rights of subjects for every real estate, for registering their rights, for ensuring the registered rights, for creating a system of an objective and available bank of data for rights and restrictions, for physical and qualitative data of property and a system for evaluating property arose. The evaluation of real estate began to be realized through cadaster prices, prices of land value tax, of creating property tax stock and market prices for making transactions for real estates. With the N 234 decree of the Armenian government from June 30th of 1997 a real estate system of state united cadaster was created.

In 1998- 2001 the Civil Code, the Land Code, the law of the RA “on State Registration of Rights to the Property”, the law of the RA “on Urban Development”, the law of the RA “on Property Tax” and other laws and regulative documents based on them, through which the relations concerning real estate and jurisdictions of participant subjects were regulated and defined, were adopted.

Taking into consideration the current condition of this field in Armenia, at the initiative of the Ministry of Finance and as a part of tax improvement program of  USAID, since 2014 the work on joint tax code has been discussed, as an important stimulus for the improvement of our country’s business world and for the increase of investment attractiveness of our national economy. During the sitting held on October 8th, 2015, the package of law projects of the RA “on Tax Code of the RA” was discussed and accepted by the government of the RA.

As a result, starting from January 1st, 2018, the “Tax Code of the RA” will function, which will regulate all processes concerning taxes in Armenia. On the occasion of the code, starting from January 1st, 2018 some laws of the RA, including the laws “on Land Value Tax” and “on Property Tax” will no longer function. According to the above mentioned, in Armenia, for real estate which is considered an agricultural territory, works only the 15% of the income/decided by cadaster evaluation/ and for real estate that are meant for residential plot construction only 0,6%/of the cadaster price/.

To the question “what is the controlling power so far, through which improvements in real estate market are implemented”, the government of Armenia notices that with the N 465 decree of the government of RA from October 22, 1997 an order of coordinated monitoring of real estate was defined, based on which coordinated monitorings by the cadaster state committee, including studies on the condition, the price of the real estate and the influence of qualitative criteria on it are carried out. The purpose of the latter is to support the development real estate market, ensure the creation of real estate information bank and trustworthy information in the market, etc. These studies corroborate facts, that can be seen even without research, especially the fact that the activation of real estate’s civic circulation is greatly influenced by the implementation of urban and investment projects, the improvement of legislative framework, the reduction of the terms for completing transactions, the legalization of unauthorized constructions and so on.

Nowadays we often come across commercial buildings with phrases like “for sale” or “for rent” both in Yerevan and in provinces of Armenia, which means that these places are emptied and are not up for rent. This is not accidental, as according to the above mentioned data, the number of real estate transactions in Armenia has declined, at the same time stability of prices can be seen as well. In the best case the prices in the market are reduced by 10-20 percent, which is not a sufficient requirement for increasing the number of transactions in the real estate market, while reducing the number of empty and non functioning buildings. We think that the best explanation of the above mentioned is that small and medium-sized enterprises cannot survive; the territories are emptied and are not rented, because most wealthy owners of commercial territories do not agree to give the area for rent at a lower price, as they don’t have the need to. As a better solution, they wait for a new client who will be ready to pay more.

An important factor assisting the development of the real estate market in Armenia can be the development of the business world in the country, because only in this case will the investor/both citizens of RA and foreign investors/ be tempted to carry out a business activity and also as a result they will acquire a corporate or residential property. Only in this case, radical economic reforms can be expected in the near future.

One of the distinctive improvements of recent years is the return policy of income taxes equal to the interest payed for hypothec, payed by hired employees, sole proprietorships and notaries, approved by the government of the RA in 2015.


  1. ՀՀ կառավարությանն առընթեր անշարժ գույքի կադաստրի պետական կոմիտեիկայք –
  2. ՀՀ կառավարության որոշում հիպոթեքային վարկի սպասարկման համար վճարված տոկոսների գումարների չափով վարձու աշխատողների,անհատ ձեռնարկատերերի և նոտարների կողմից վճարված եկամտային հարկի գումարների վերադարձման կարգը սահմանելու մասին –

Author: Anahit Zurabyan © All rights are reserved

Translator: Liana Papyan