Russian observer, on U.S. tour to study private real estate markets, is dazzled

CHICAGO — CHICAGO -- Olga Kaganova, a leader in the movement to revolutionize -- or re-revolutionize -- real estate in Russia, finds a lot to like about real estate in Chicago.

The view from the Michigan Avenue bridge dazzled her. "There's a unique connection of downtown skyscrapers and life in the river," she said. "It's absolutely outside of my experience."


And the skills and dedication of the many real estate professionals she talked with in her study of American real estate impressed her.

"Private activity makes the quality of efficiency in this country," she said. "Good for all is the activity of people and personal responsibility."


Ms. Kaganova's task, in a four-week study tour, is nothing less than to prepare a report that will be used to help shape a private Russian real estate market, which now exists only in embryonic form.

She was nominated for the project by Russia's first deputy housing minister and will also report back to the mayor and City Council of her home city of St. Petersburg, for which she acts as a consultant on real estate laws and procedures.

Ms. Kaganova, 43, who has a doctorate in applied mathematics, turned 11 years ago to making mathematical models of urban development. A member of St. Petersburg's State Institute of Architectural and Urbanistic Theory, she embarked on a study of European and U.S. real estate practices about three years ago, as the liberalizing spirit of perestroika began to sweep the country.

As legal efforts toward a return to private property gathered steam last year, Ms. Kaganova became a leader in developing concepts for new regu

lations and procedures.

It is a daunting task. Before perestroika, all land was owned by the state. The state could confer an irrevocable right of use to land, she said, but the right could be rescinded, so it really wasn't irrevocable.

There was no central record of who had rights to use the land. Many occupiers of land and buildings had no documents stating their rights of use. Rights to buildings were separate from rights to land containing the buildings. And actual ownership of all land was vested in the state.

Ms. Kaganova's story of her family's efforts to relocate illustrates the near-impregnable complexities of that system.


Eighteen years ago, she and her husband were living in Novosibirsk, which Ms. Kaganova describes as a frigid, unpleasant city in Siberia. They wished to move to St. Petersburg, then called Leningrad.

To obtain a permit to move, they had to find someone in Leningrad who would exchange apartments with them -- someone who wanted to move from a sophisticated metropolis to Siberia. It was the only way.

It took them seven years.

Finding a new job was no problem, Ms. Kaganova added. Arranging an apartment exchange was almost impossible.

In the last two years, real estate brokers have begun to spring up, dealing almost solely in privately owned apartments. (Even so, apartments are enormously expensive to buy. A 500-square-foot St. Petersburg apartment, she said, typically costs about 30 times the average annual family income.

Full ownership of land has been introduced, but it exists only for farmland and single-family homes, Ms. Kaganova said. Russians can now buy such land from the state or from communal authorities, which since the revolution have owned all the land. But a 10-year moratorium on the resale of such private land is intended to prevent quick profits from land-flipping.


Now, she said, four forms of land possession exist: Ownership, lease, right of use and inheritable life tenure. And land possession is still separate from building possession, though Ms. Kaganova said there was hope that that would be changed.

To bring such a system in line with U.S. and European real estate practices, simple procedures Americans take for granted must be set up from scratch. Recording of titles, taxation, appraisal, housing finance, private development and brokerage is all new.

"It's mind-boggling to think of a country being at ground zero in privatization of real estate," said James Stokes, president of the industrial real estate firm Nicolson, Porter and List, who guided Ms. Kaganova through the complexities of U.S. industrial development. "It's a point in history."