EVERYTHING HAS ITS VALUE

The development of private enterprise in Azerbaijan, in particular the growth of the banking sector, is giving rise to a demand for high-quality services in the sphere of valuation activity. However, this market is only just taking shape in the country and at the current stage of its development it is incapable of meeting existing demands in full measure. A particularly vivid example of this is the big difference which can be seen in the valuation of a building by different companies.

A problem area

It has to be said that today the majority of valuation companies operating in the country put together a portfolio of orders basically from a valuation of collateral. Other types of services account for no more than 35% of the whole orders portfolio. And the biggest need is in real estate valuation rather than other types of property, because this is what banks usually accept as collateral. At the same time, the Azerbaijani Mortgage Fund is more in need of a valuation of residential apartments and commercial banks need a valuation of commercial buildings, land plots and apartment blocks. We should also add that bank credit organizations are particularly reluctant to accept land plots as collateral, pointing to the reduction in land liquidity in recent years.

With the development of mortgage and other types of credit in the country there is an increasing demand for valuers, but this area has not been as popular as it should have been, and there are objective reasons for this. Today there are 11 valuation companies actively operating in the Azerbaijan Valuers Society, which certifies the experts in this field and in the system of mortgage borrowing, although there are over 50 of them in this sphere as a whole. Experts say one of the main factors that is delaying the development of the valuation market is the insufficient level of professionalism among its participants, despite regular courses to improve qualifications organized by the society.

Furthermore, despite the fact that national standards in this sphere were adopted back in 2010, there have been problems in implementing them. These nine standards clearly define who can engage in valuation activity, but consumers, including banks, do not always observe them, resorting to the services of companies which have no proper certificate and which can take biased decisions in favour of their customers. 

Another problem is a shortage of guidelines for valuers to work with in the market. Apart from this, the development of the market is being seriously hampered by delays in the adoption of an updated version of the law "On valuation activity", which was approved in 1998. The new version of the document is currently being debated in the committee for economic policy of the Milli Maclis, and experts believe that the changes proposed in the draft bill will play a key role in solving the above problems and in ensuring a growth in the valuation market in Azerbaijan.

Everything according to the law

We should point out that the main innovation following the adoption of the draft bill will be the creation of the Azerbaijani Chamber of Valuers - an independent self-governing organization established by valuers with the aim of regulating and controlling valuation activity, shaping a single valuation practice and a suitable environment of valuation services and coordinating the activities of valuers.  The chamber will keep a register of valuers in the country and where necessary provide interested parties with information from this register. The chamber's functions include drawing up proposals on defining and implementing state policy in the sphere of valuation activity, improving its legal and economic regulation, and so on. The chamber will also prepare valuation standards, the rules of working and professional ethics of valuers and protect their rights and lawful interests, etc. Supervision of valuation activity will be carried out in the form of scheduled and ad hoc checks by the structural departments of the chamber. 

An equalization fund of the Azerbaijani Chamber of Valuers is also to be set up. It will be formed from compulsory contributions by members of the chamber which have been set at a level of AZN 850. The money from the fund will be used to pay compensation to customers who have suffered damage as a result of the activities or lack of them by the valuer.

In addition, an important innovation of the draft bill is the introduction in Azerbaijan of compulsory insurance of the responsibility of valuers. An insurable occurrence is one where damage has been caused as a result of the actions or lack of actions by a valuer as recognized by a court or the valuer himself. With a total of up to 75 members of the chamber the contribution for this type is set at a level of AZN 2,500, more than 75 at AZN 1,500.

In the opinion of experts, the draft bill is destined to eradicate cases of a biased valuation of property, which will ultimately lead, among other things, to an increase in tax revenue to the state budget. Furthermore, the development of valuation activity is also important from the political point of view. The Azerbaijani government is continuing work on assessing the damage caused by the Armenian armed forces during the occupation of Azerbaijani territory, and has not yet prepared its final results. Highly qualified valuation companies could be a great help in this matter.

In short, the continuing intense activity in Azerbaijan's economic life will continue to generate great demand for the services of valuation companies, which testifies to the rosy prospects for this area of business in the country.