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Investing in Kazakhstan

Investing in Kazakhstan

Kazakhstan is a country in Central Asia stretching from the Caspian Sea in the west to the Altai Mountains in the east, bordering China and Russia. Almaty is its largest metropolis and is a former commercial center.

Kazakhstan is bordered by China to the east, Russia to the west and north, and some central Asian countries such as Kyrgyzstan, Uzbekistan, and Turkmenistan to the south. In addition, to the west, it is bounded by a stretch on the banks of the Caspian Sea.

Astana (Nur-Sultan, is its new name), has been the capital since 1997. It has a rapidly growing population and in 2017 it hosted the World Expo.

In Kazakhstan, the climate is continental, as the country is far from the open sea (except for the Caspian Sea area, where temperatures moderate somewhat, but in the rest of the country, they are extreme. Summers are very hot, especially in the center of the country, with temperatures that can reach 40º, and drop to 20º at night. Winters are very cold, even in the desert, and temperatures can reach -40º. In the steppe the dry wind is short. And from November it snows and leaves the mountains white until the months of April-May.

The rains are more frequent and have a higher level in the mountains (1500 mm/year), while in the desert they have a level of 100 mm per year. In the steppes, summer rainfall comes in the form of storms that can cause unexpected flooding

10 reasons to invest in Kazakhstan:

Investing in Kazakhstan
  1. Rich and abundant natural resources. Kazakhstan is the sixth-largest country in the world in terms of natural resource reserves. In fact, one of its pioneering industries is the refining and development of oil and gas infrastructure. In addition, among other materials, the country extracts uranium, gold, silver, copper, coal, or chromium iron. These raw materials are also the basis for important chemical industry.
  2. Geographical readiness. The country is located in the heart of Eurasia, on the territory of the Silk Road. Through Kazakhstan, the main transcontinental routes linking the Asia-Pacific region with the Near and Middle East and Europe pass. In addition, three of the emerging BRIC countries are close to it (Russia, China, and India).
  3. Political stability. An example of the success of its foreign and domestic policy is Kazakhstan’s chairmanship of the OSCE (Organization for Security and Cooperation in Europe) or that in 2011 it became the first Central Asian country to host the World Islamic Economic Forum.
  4. Favorable business climate. There is a favorable business climate for investors. In fact, it is the leading country in the Commonwealth of Independent States (CIS) in terms of the volume and quality of its reforms, in areas such as the reduction of administrative barriers or good customs and tax control. Kazakhstan is 49th in the Doing Business Index (China, for example, is 91st) and 32nd in the International Institute for Management Development Index (Russia is 48th).
  5. Investor protection. Kazakhstan has also signed an Agreement on Mutual Investment Promotion and Protection with 45 countries, which provides guarantees to protect the rights of investors such as the right to resolve disputes in international arbitration courts.
  6. Presence of multinational enterprises. Due to these favorable conditions, several multinational companies are already present in Kazakhstan, such as Microsoft, Siemens, Nestle, Toshiba, Danone, LG, or the Dutch aviation and space expert EADS, as this country also has the largest space complex in the world (Baikonur).
  7. Foreign Direct Investment (FDI) volumes Thanks to this favorable business climate and political stability. Since 1993, the total amount of FDI attracted by this country has been over $160 billion. The Netherlands has invested the most money ($40.47 billion).
  8. Economic development. Over the last decade, the country’s GDP has increased by eight (from $24.6 billion to $188.05 billion). According to the World Bank index, Kazakhstan belongs to a group of middle-income countries and has one of the best GDP indicators among ICE countries. Its GDP per capita, as of 1 January 2012, is $11,356.
  9. The markets of the Customs Union. Kazakhstan’s entry into the Customs Union, with a market capacity of about 170 million people, opens up new opportunities for investment in the country. For example, through this territory, products will be able to move freely to the markets of Belarus and Russia.
  10. Industrial and innovation development. In 2010, the Government of Kazakhstan approved its State Programme on Accelerated and Innovative Industrial Development for the period 2010-2013, with the aim of creating new export-oriented high-tech industries, developing infrastructure, and strengthening innovation.

Real estate investments in Kazakhstan

Can foreigners buy a home in Kazakhstan?

In accordance with the Law of the Republic of Kazakhstan “On the Legal Status of Foreigners”, foreigners permanently residing in the country with a permit have the same rights and obligations as citizens of Kazakhstan. Foreign citizens who have not received a special permit in the form approved by the Government of the Republic of Kazakhstan, i.e. a permanent residence permit, for a limited period of time, may not purchase real estate there. Once they receive this document, they may purchase a house anywhere in Kazakhstan.
Citizens who do not have such a permit must obtain the documents necessary for permanent residence in Kazakhstan.

Is it profitable to invest in resort real estate in Kazakhstan?

Kazakhstan’s domestic tourism is not yet fully developed. The lack of infrastructure and the low level of service make it necessary to think carefully about selling private real estate in the resort area.

Many people think of the sea, the vast steppes, the two capitals with beautiful architecture, and investing in resorts. It is necessary to promote domestic tourism. However, Kazakhstan does not have a clear development program and no overall source of funding has yet been found. Tourism development will depend on the help of investors.

Several bold steps have been taken in this direction, for example, the construction of the Rixos Hotel in Borovoye or the creation of an international class tourist town “Kenderli” in Aktau, however such innovations are still insufficient.

Investing in Kazakhstan

Real estate prices in Kazakhstan’s tourist areas vary. This can be explained as follows: for example, an apartment and house in Schuchinsk or Borovoye cannot even be compared to Almaty. Despite the danger of an earthquake in the bustling city, real estate agents are investing in other areas.

One of the most touristy areas is the Almaty region. Real estate in the resort area is known to be an investment in the first place, and investment generates income. The payback period for real estate investment is 5-6 years. If we talk about important resort real estate: resorts, vacation homes, hotels will start to pay off in twenty years, and even more. Why? Because, most of these investments are made through loans, and the loans are issued for 10-20 years. It is too early to discuss the development of the real estate market in Kazakhstan. It is related to the commercial real estate market, which is still small, if the banks lend, it will revive, if not, it will freeze.

What about Karkaralinsk, one of the most picturesque resorts?

It has a number of advantages. Because of its proximity, residents of Karaganda and Astana prefer to rest here. The cost of real estate here depends on its quality and location. There are not many properties for sale. In Karkaralinsk, Kazakhs have the opportunity to own a private hotel room in a mountain hotel.

Hotel room sales programs have long been successful in Turkey, Spain, Bulgaria, and other countries.
Buying a hotel room is doubly beneficial: you can come and relax at any time, a certain amount is allocated to the owner each month – the rent. As a general rule, 50% of the total amount of the rent is transferred to the owner’s account, and 50% is spent on utilities, i.e. service bills and maintenance of the room.

Real estate, including that in the tourist area, is purchased by entrepreneurs who are expanding their businesses. They want to increase their income by renting out real estate.

If we consider the purchase of the real estate in the resort area from a commercial point of view, investing here generates 30-40% more income than real estate in Karaganda or even Astana.

If you want to buy real estate in a resort, it should operate without interruption throughout the year. However, during the fall and winter months, the number of tourists in these areas decreases. If you plan to make money in the summer, you should invest in Balkhash and Alakol. Leasing is a very complex business that requires constant monitoring, supervision, and investment. It is advisable to have a manager deal with the issue of leasing, but in Kazakhstan, this system is still being developed.

If you consider leasing, there is a general formula for obtaining future income from the sale of real estate. Approximately 1% of the total cost will go to you in the form of rent. If you buy an apartment in the resort area for 100 thousand dollars, you can rent it for one thousand dollars a month. In Karaganda, this percentage is lower: not 1%, but about 0.6-0.7% of the total cost. If you invest 100 thousand, you will get a net income of $700. Through the company manager, the owner gets a little more than the rent when buying a hotel room: 1.2%, not 1%, but he will have to deal with advertising, repairs, working with clients, etc.

The other coast

Investing in Kazakhstan

Tourism in Kazakhstan is still not at the same level as the Baltic countries, Ukraine and Russia. Its tourist areas are a business that has been established since the Soviet era. Therefore, real estate there is very expensive, but the price is right for the resort.

However, in Kazakhstan, measures are being taken to expand the tourism business: roads are being built, the ski resort is being improved. It is necessary to plan the construction of a hotel. In Turkey, the state reimburses the owner of any hotel for 40% of the cost of construction. Its construction includes the construction of 5-6 new hotels per year. We do not have such a program, the state does not plan to build several hotels a year in different regions, on the contrary, investors would follow the same path. If we have something, everything is busy and in a hurry. Rixos Hotel invested a lot of money and did the job. However, nobody wants to buy a room for $500 a day, because in Borovoye you can live in a tent.

The price of real estate in tourist areas depends on its location, infrastructure, climate and quality of construction
First of all, the investor should take into account the short duration of the summer season in Kazakhstan. For example, in the northern regions of the country, summer lasts only two months. And during the long winter, a lot of money has to be invested to maintain the real estate. Therefore, it is necessary to study and calculate everything, and then the potential investor will make his choice. For example, the price of an apartment in the Azura Park complex in Alanya, Turkey, is much lower than in the capital and in Almaty. The infrastructure is well developed in Turkey: from restaurants to kindergartens and clinics, there are several swimming pools, as well as private beaches on the Mediterranean coast. In addition, the company offers comprehensive solutions for real estate management, i.e. when you rent this apartment, you will inevitably generate income. Therefore, foreign offers are very convenient for investors.

Kazakhstan Residence by Investment Program

Kazakhstan is set to announce its investor visa programme. Details are not finalised at this stage but the investment limit is expected to be in the region of USD$100,000 to $200,000.

The newly established Astana Financial Center (AIFC) of Kazakhstan is set to be the centre for any investment for HNW investors seeking a residency visa. Astana International Financial Center (AIFC), will be a hub for the region, on the gateway between East and West. Part of the AIFC plan includes the development of a residence by investment program.

The investment requirement will be between US$100,000 and US$200,000 invested in either:

  • A fund listed on the Astana stock exchange
  • By buying securities listed on the exchange
  • By buying real estate within the borders of the AIFC

The program would grant applicants instant permanent residence in Kazakhstan, with rights such as health insurance, social security, and retirement benefits. At this stage the program appears limited to permanent residency in Kazakhstan. There are no details of any citizenship by investment programme for Kazakhstan.