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Diligence Due

Date: 20.01.2010

Jacky Mukmel, CEO of MAN Properties, adds that many an Israeli businessman seeking his fortunes in far-off lands finds that a juicy-looking deal is rotten at the core.

Bulgaria has shaped itself as a tourist destination, and a lot of Israelis got involved in its tourism industry. That was one thing, Mukmel says, but the real estate market was hammered by the global economic crisis.

Also, a lot of Israelis bought property there and in other areas of Eastern Europe based on hearsay - whereas when investing in Britain and the United States, they check their information, which is also more reliable. Eastern European standards, when it comes to permits and ownership of land, remain in their infancy, Mukmel warns.

The situation of documentation in the Eastern European municipalities remains weak, he warns. Moreover, Israelis have a tendency to cut corners. They tend to skip the tediousness of doing market research and investigating the antecedents of a property properly.

For instance they might neglect to check whether a city is prepared to rezone a given property as the seller claims, or whether claimed building rights actually exist. All are sources of terrific trouble, Mukmel warns.

Yet some remain confident that the Bulgarian real estate market will deliver rich fruits. Naftali Halevy, CEO of Israeli real estate company HGS, which operates in Bulgaria, says the regulatory system in the country enables investors to reap their fruits with relative speed.

"There's no question that when an investor comes to make his first deal, he's easy prey for crooks," Halevy says.

The first rule in Bulgaria: Study the history of the property going back 15 years, says Halevy. Check who bought and who sold. The best deals are between private individuals, not companies, he says, and adds: the property registration system is fast.

Ownership can be registered within a matter of days. And start small. Get to know the system. And when you hand over money, give it to a notary representing the buyers and even that, only after registration has been completed.

Shlomit Tzur, haaretz.com (Israel)

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