Komnenic & Partners Managing Partner Milos Komnenic and Partner Nemanja Radovic talk about real estate in 2025 in Montenegro.
CEELM: Looking ahead to 2025, which segments of the real estate market do you anticipate will see the most activity in 2025?
Komnenic: Tourism and construction – particularly, real estate development – represent Montenegro’s two most significant industries. These industries are closely interlinked, as the largest construction projects are typically developed within the tourism sector or serve tourism-related purposes.
CEELM: How do large-scale tourism-related projects influence broader real estate development in the country?
Radovic: The development of major tourism projects such as Porto Montenegro, Porto Novi, and similar projects has had a far-reaching impact beyond the construction of these complexes, contributing to the development of entire regions or even cities where they are located. This has been achieved through the development of numerous residential, commercial, infrastructural, and other facilities. Consequently, the growth of tourism in recent years has significantly driven the expansion of the real estate industry.
CEELM: What are the main legislative updates, whether recent or on the horizon that will impact real estate in Montenegro in 2025?
Komnenic: Certain measures were undertaken by the Government of Montenegro in the past year, and some are planned for the current year, which will impact real estate in Montenegro. Some pose a potential threat to the real estate sector and particularly further development of the tourism sector, which could, in turn, have a detrimental impact on real estate development.
Specifically, in the previous period, the value-added tax rate applicable to the hospitality sector was increased from 7% to 15%, directly affecting the competitiveness and attractiveness of Montenegrin hospitality businesses compared to rival destinations. Additionally, the VAT exemption on the supply of goods and services for the construction and furnishing of five-star hotels has been abolished. Moreover, a new charge for utility infrastructure development for four- and five-star hotels is currently under consideration, along with the potential rumor about the abolition of the condo-hotel model – both of which would serve as further disincentives for investors in the tourism sector.
The issue of the utility infrastructure charge is particularly contentious since, despite being legally obligated to pay these fees, investors are frequently compelled to develop their own infrastructure, endure lengthy administrative procedures to obtain necessary approvals, and bear substantial costs to ensure the provision of essential utilities for their properties.
Radovic: The cumulative effect of these adverse regulatory changes could and will significantly affect the development of high-end tourism, which, as previously mentioned, is a key driver of growth across multiple industries, including real estate.
In the following days, the Parliament of Montenegro will adopt the new Construction Law and Planning Law – after decades, dividing them into two regulations. Rumor has it that there are hundreds of amendments so we cannot yet comment on the final text.
It is evident that these new regulations aim to replace the current construction notifications with construction permits, return usage permits instead of supervisory final reports, and overall return to an old approach that was ineffective in many aspects, particularly in terms of administrative delays.
CEELM: What are other challenges faced by developers in Montenegro at the moment? How likely is it in your view that these challenges will be addressed in 2025?
Komnenic: In addition to these regulatory challenges, Montenegro faces a serious shortage of urban planning documentation necessary for development. The prolonged delays in adopting new spatial plans, new changes in the planning law, and the frequent changes in the decision-making practices of competent authorities create further obstacles, making it increasingly difficult for investors to proceed with real estate projects.
Furthermore, geopolitical uncertainties on the global stage could have a negative impact on small markets such as Montenegro, particularly regarding foreign investments, which are essential for continued growth and development.
Radovic: Given the current market demand, it is likely that the number of residential real estate projects will continue to grow in 2025, despite the aforementioned challenges. However, in the long term, adverse effects on tourism could significantly impede further real estate development.
Therefore, it would be advisable for policymakers to implement measures that incentivize investment rather than introduce regulatory changes that could further deter investors from committing capital to the Montenegrin market.
This article was originally published in Issue 12.1 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
