Government wants to resolve rental disparities in industrial areas

The government is moving towards imposing rents on state-owned properties based on usage rather than market value, in an attempt to resolve any discrepancies observed in industrial areas and zones, according to Energy, Commerce and Industry Minister George Papanastasiou.

“There is a serious distortion between zones and areas. Zones determine the rental cost of land based on market value, while in industrial areas, the Ministry of Energy determines the rent based on usage,” Papanastasiou said in statements following a session of the House Trade Committee, which examined this issue.

As mentioned during the committee meeting, the current responsibilities regarding this issue are divided between two ministries. The Ministry of Energy, Commerce and Industry oversees industrial areas and enforces a rental policy based on usage.

Meanwhile, the Ministry of Interior is responsible for industrial zones, where rents are determined according to the property’s market value.

This division leads to discrepancies that undermine fair competition. Additionally, municipalities and communities also play a role in managing industrial zones.

Both the Minister of Energy and the Permanent Secretary of the Ministry of Interior Elikos Elia provided assurances that rents based on market value will not increase for all parties.

Moreover, the Energy Minister requested additional time, until September of this year, for an evaluation to be carried out for each area separately and the rents in force.

Updating the committee, Papanastasiou said that an advisory committee was established, with representatives from the Energy Ministry, the Land Registry, and the Department of Town Planning, which examined the issue to identify where the problem lies in order to find a solution.

He said that two areas with very large differences in rent were identified. Specifically, in the Strovolos industrial area, the rent is around €1.15 per square meter, compared to €11 per square meter in the Strovolos industrial zone.

In Limassol, the rent is €1.15 per square meter in industrial areas compared to €8 per square meter in industrial zones.

He further explained that industrial zones have both state-owned and private properties and there are no infrastructure and government services.

He noted that the change in policy regarding properties is not easy because there are legal obstacles, and therefore the consideration for changing the rent concerns new contracts or building leases and rental agreements.

What is more, Elia mentioned that from the initial analysis conducted, they identified the differences that are currently in place.

“Exactly what we want the two ministers to establish is a framework for the smooth or gradual sorting of any discrepancies, because when there are already signed contracts, it is difficult to change or modify the rent,” he said.

He assured that “the goal is not to increase rents for everyone”.

“What we are examining is to normalise some of these rental amounts. For example for those with very low rents or to provide assistance for those with very high rents, through the de minimis subsidy scheme, to cover the price difference in industrial zones,” he stated.

Responding to a question about converting industrial zones into industrial areas under the responsibility of the Ministry of Energy, Elia said that the study focused on rental amounts and not on the conversion of zones into areas.

During the session, all the stakeholders who were called expressed concerns about the significant difference in rent between industrial areas and industrial zones.

On behalf of the Employers and Industrialists Federation (Oev), Michalis Gregoriou said that the problem lies in the rents for the properties located in industrial zones.

“We agree on having one policy, but what we are deeply concerned about is not to increase rents in industrial areas to match those in industrial zones,” he said, adding that “we need to move away from the market value principle”.

Finally, Andreas Andreou, on behalf of the Cyprus Chamber of Commerce and Industry (Keve), said that it is difficult for the whole issue to fall under the umbrella of one ministry.