Real Estate and Construction

Real Estate and Construction. The Construction Process in Kazakhstan: A Brief Overview for Foreign Companies

Introduction

In this guide, we provide a comprehensive overview of the key steps and legal requirements for foreign companies seeking to engage in construction activities in Kazakhstan. We cover the entire process, from business registration to final facility acceptance and commissioning, with a focus on regulations affecting foreign entities. Our goal is to help you understand the general legal framework governing construction in Kazakhstan, excluding specific cases like state procurement or projects in adverse conditions such as marine construction.
Constructing a facility in Kazakhstan involves navigating through extensive bureaucratic procedures, which can be time-consuming and costly. Proper planning is essential for project success. One of the most important stages in construction planning is determining how to manage and share land and common utilities, especially if multiple buildings are being developed on the same plot.
Planning ahead for land parceling and shared property usage can save costs and avoid future legal disputes. In cases where multiple owners are involved, such as office or commercial complexes, it’s crucial to establish clear property-sharing agreements early in the process to prevent litigation or operational difficulties.

Key Considerations for Foreign Construction Companies

At the planning stage, foreign investors should consider the following:
  1. Land Parceling and Permits: Establish timelines and procedures for obtaining construction permits and parceling the land for sale or lease.
  2. Management Company Involvement: Engage a management company early, especially for complex projects with multiple facilities.
  3. Shared Property and Common Areas: Clarify how shared property (e.g., roads, utilities) will be managed and maintained.
  4. Municipal Agreements: Decide what parts of the property, if any, will be transferred to municipal authorities.
  5. Legal Agreements: Prepare a comprehensive set of legal documents including sales contracts, easement agreements, condominium bylaws, and management protocols.

1. Entities Engaged in Construction Activities

Foreign companies may operate in Kazakhstan through a local subsidiary or a branch office. These entities typically take the form of a Limited Liability Partnership (LLP) or a Joint-Stock Company (JSC). A newly registered company cannot immediately start construction on complex projects due to licensing restrictions.
Foreign companies can also operate through a branch without forming a legal entity in Kazakhstan. The branch can rely on the parent company’s experience to obtain the necessary licenses, as long as it meets local formalities like obtaining a business identification number (BIN) and opening a local bank account.

1.1. Branch and Representative Offices

A foreign company may establish a branch or representative office to engage in construction activities. Changes in Kazakh law now allow foreign companies to obtain construction licenses without needing to set up a local branch, as long as they acquire a BIN and fulfill certain banking and tax registration requirements.

1.2. Licensing for Construction Activities

A construction license is mandatory for any company, local or foreign, wishing to engage in construction in Kazakhstan. The Kazakh government categorizes construction licenses into three levels based on project complexity. To obtain a higher-level license, companies must demonstrate relevant project experience.
Foreign companies can use their international project experience to apply for a license in Kazakhstan by establishing a branch office, which allows them to leverage their portfolio of completed projects.

2. Acquiring a Land Plot for Construction

Foreign companies can acquire land through two main methods: purchasing from the state or acquiring from private individuals. Buying land from the state involves a lengthy bureaucratic process, but it is often more cost-effective than purchasing through the secondary market. Foreign ownership of certain land types, such as agricultural land, is restricted.

2.1. The Process of Acquiring State Land

To acquire state-owned land, companies must go through several steps, including submitting an application, obtaining a pre-selection decision, and developing a land project. The local governor (Akim) makes the final decision to allocate the land, after which the rights are registered.

3. Project Documentation

Kazakhstan is transitioning from its traditional building codes to European standards (Eurocodes). Project documentation must comply with these new regulations and be approved by the relevant authorities. Additionally, an expert examination of project documents is mandatory for technically complex or hazardous projects.

3.1. Expert Examination

All project documentation undergoes expert examination to ensure compliance with safety and environmental standards. The examination process varies depending on the complexity of the project, and expert organizations certified by the government conduct these reviews.

4. Construction Process

Once land and project documentation are secured, companies must notify the State Architectural and Construction Supervision Body before beginning construction. The entire construction process is subject to supervision, ensuring compliance with safety, environmental, and labor standards.

4.1. Supervision and Quality Control

Both designer and technical supervision are required during construction. Designer supervision ensures that the project is built according to the approved design, while technical supervision monitors the quality of construction and materials used.

5. Shared Construction

Shared construction in Kazakhstan is strictly regulated. Foreign investors can participate in shared residential construction through three legal pathways: after erecting the building frame, obtaining a guarantee from the relevant Guarantee Fund, or participating in a second-tier bank project. These regulations ensure that residential projects are completed and delivered to participants.

6. Facility Acceptance and Registration

Once construction is complete, the facility must be accepted and registered with the relevant authorities. This involves an expert review and an official acceptance act. The facility cannot be used or sold until this process is finalized.

6.1. Legal Registration of Property

After the facility is accepted, the owner has six months to apply for property registration. The fee for this service varies depending on the type of facility, and expedited registration is available.

Conclusion

Navigating the legal framework for construction in Kazakhstan requires careful planning, compliance with licensing regulations, and coordination with local authorities. Foreign investors are advised to work with experienced local professionals to ensure the smooth execution of their projects. For more information on legal services related to construction in Kazakhstan, visit the BOND STONE Law Firm.