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Implementation Completion Report (ICR) Review - (Serbia)Real Estate Cadastre & Registration Project (serbia)


  
1. Project Data:   
ICR Review Date Posted:
11/12/2012   
Country:
Serbia
PROJ ID:
P078311
Appraisal
Actual
Project Name:
(Serbia)Real Estate Cadastre & Registration Project (serbia)
Project Costs(US $M)
 39.4  36.5
L/C Number:
C3908
Loan/Credit (US $M)
 30.0  29.3
Sector Board:
Agriculture and Rural Development
Cofinancing (US $M)
   
Cofinanciers:
Board Approval Date
  05/25/2004
 
 
Closing Date
10/31/2010 03/31/2012
Sector(s):
General agriculture fishing and forestry sector (30%), Housing finance (30%), Information technology (20%), Sub-national government administration (15%), Law and justice (5%)
Theme(s):
Land administration and management (33% - P) Personal and property rights (33% - P) Other urban development (17% - S) Other accountability/anti-corruption (17% - S)
         
Prepared by: Reviewed by: ICR Review Coordinator: Group:
John R. Heath
Judyth L. Twigg Soniya Carvalho IEGPS1

2. Project Objectives and Components:

a. Objectives:

“To increase confidence and lower transaction costs by building a more efficient property registration and cadastre system, with the purpose of contributing to the development of effective real property markets.”
(Project Appraisal Document [PAD], p. 3)

(The Credit Agreement contains an almost identical statement of objectives.)

The following outcome targets were specified in the PAD (p. 21): by Year 6, relative to the 2003 baseline, there will be a 25 percent increase in (i) the number of registered transactions, (b) the proportion of registered transactions involving mortgages, and (c) reported customer satisfaction.

b. Were the project objectives/key associated outcome targets revised during implementation?
No

c. Components:

(1) Operational Development and Support (Estimated cost at appraisal, US$29.0 million; Actual cost at closing, US$32.4 million). Comprises: Geodetic reference framework; Digital cadastre mapping; Real estate cadastre execution; Real estate cadastre completion (Belgrade); Improved registration services for the public; Modernization of information and communication technology; and Legal extension services;

(2) Capacity Building and Institutional Strengthening (Estimated, US$5.0 million; Actual, US$4.1 million). Comprises: Strategic and business plan development; Information and communication technology strategy; Legal framework completion; Customer information and publicity campaigns; Training and human resource development; Project management; Research and development; and Monitoring and evaluation.

d. Comments on Project Cost, Financing, Borrower Contribution, and Dates

Project Cost

At appraisal, the estimated cost of the two components totaled US$34.0. On top of this, physical and price
contingencies were estimated respectively at US$1.4 million and US$5.0 million. Thus, the total project cost was US$39.4 million. At closing, the actual total project cost was US$36.5 (equivalent to the sum of the two components).

Financing

At appraisal, the IDA contribution was estimated at US$30.0 million; the actual contribution was US$29.3 million. Funds were reallocated between disbursement categories in 2010 and 2011 but neither restructuring altered the scope of the project.

Parallel financing. There was no appraisal estimate of funding from this source but the actual value totaled US$19.2 million. Parallel financing was provided by the following partners: European Union (US$6.5 million); Norway (US$3.3 million); Sweden (US$5.9 million); Germany (US$2.5 million); France (US$0.6 million); and Japan (US$0.4 million). These funds were used to complement the project's activities in support of land administration but they did not form part of the project financing plan at appraisal or completion, and the activities financed were not included in the project results framework.

Borrower Contribution

At appraisal, the Borrower was expected to contribute US$9.5 million to the project. The actual contribution was US$7.2 million. The ICR does not explain this discrepancy; exchange rate changes may account for it.

Dates

The credit closing date was extended on three occasions (by one year, in 2010; by four months, in 2011; and by one month, in 2012), amounting to 17 months in all. This was partly because it took more time than expected to finalize the real estate cadastre. Also, cancelation of the information and communication technology contract required funds to be reallocated, which took time. Finally, heavy snow hampered delivery of goods in the final month of execution of the Project, requiring the third extension.


3. Relevance of Objectives & Design:

a. Relevance of Objectives:

The Results Matrix for the FY12-15 Country Partnership Strategy (pp. 40-44), which was current when the credit closed, does not include real estate cadastre and registration among the issues and obstacles that the CPS will tackle. This could mean that, thanks to the project under review, the previous obstacles have been removed. Alternatively, irrespective of whether land registration was still problematic, the Bank could have decided to address other issues. As Section 4 below demonstrates, the project amply exceeded most of its targets, suggesting that it was successful enough to remove land registration from the list of major development constraints.

There is ample evidence that the project's objectives were relevant to Bank and Borrower strategy when the project was approved. The Transitional Support Strategy (TSS) update of March 2004 identified the requirements for stimulating growth and creating the basis for a sustainable supply response: these included recognition of property rights, enforcement of contracts, and stronger institutions for real property registration. The project’s objectives were in line with the TSS, helping to make real property rights more secure, institutions more transparent, and contracts more enforceable (PAD, p. 2). The FY05-07 Country Assistance Strategy (CAS), which was issued six months after the project was approved, included land registration among the constraints that the Bank proposed to address: among the expected CAS outcomes was "improved land titling" (p. 65). Project objectives were consistent with the thrust of legal reform in Serbia. In 2002, the Law on State Land Survey, Cadastre and Registration of Real Estate Rights was amended to cover many of the functions necessary for the introduction of a secure cadastre and real property registration system (ICR, p. 1).

The relevance of objectives is rated high.

b. Relevance of Design:

At project startup, more than 40 percent of Serbia (mainly rural areas) was already covered by the real estate cadastre and the thrust of legal reform was supportive. Building on these foundations, the design of the project enabled a rapid acceleration of cadastral coverage, particularly in towns where development of the cadastre was more complicated and took longer.

The many sub-components fitted together well, providing good support for attainment of the objectives. There were two potential flaws in the design, both identified as a substantial source of risk at appraisal. First, an amendment of the 2002 law enabled courts to continue registering property, creating separate agencies for registration and cadastre, which tends to lower efficiency of service provision. Second, the technology package was elaborate, calling for the integration of alphanumeric and graphical information in the same database. There was a concern that the expected upgrading could not be completed in the allotted time. The first potential flaw was removed in 2009 when the law was revised to introduce the single-agency model. The second potential flaw proved to be an actual design weakness because part of the technology package was not delivered: the software contract was canceled when the graphical component was found to be inadequate.

The relevance of design is rated substantial.


4. Achievement of Objectives (Efficacy) :


Statement of Project Development Objectives: “To increase confidence and lower transaction costs by building a more efficient property registration and cadastre system, with the purpose of contributing to the development of effective real property markets.”

Note: This review assumes that "increasing confidence" and "lowering transaction costs" are necessary corollaries of "building a more efficient property registration and cadastre system." Thus, progress toward two discrete objectives is assessed.

Objective 1: Build a more efficient property registration and cadastre system (Rating: Substantial)

Outputs: Sixty-six offices were equipped with new hardware and infrastructure; the target was to equip 52 offices with software, hardware, and infrastructure, but the software contract was cancelled. Thirty-three geodetic reference stations were established, compared to the 27 that were expected. Digital cadastre maps were prepared for 2.0 million hectares, exceeding the target of 103,000 hectares. Sixty-three offices were providing legal extension services by credit closing, double the target. A strategy and business plan for 2011 was completed as expected. The target for the area covered by the real estate cadastre was exceeded by 100 percent in 50 towns, and by 65 percent in Belgrade.

Outcomes: Confidence in the registration and cadastre system appears to have increased, with caveats. In the second customer satisfaction survey (2008), 87 percent of customers expressed satisfaction with registration services, compared to 62 percent at the baseline: this increment exceeded the expected 25 percent increase in the proportion of customers that were satisfied. Moreover, the 2008 survey found that "80 percent had faith in what RGZ [the registration and cadastre agency] was doing" (ICR, p. 48). The third customer satisfaction survey "ranked RGZ third among the most trustworthy institutions in the country, immediately after the church and the police" (ICR, p. 48). However, the same surveys also picked up some customer concern about the cost of the service and the complexity of the procedures.

Transaction costs fell significantly. The average time taken to register a transaction dropped from 60 days to 7 days, almost achieving the target (5 days). According to the survey of property registration costs in Doing Business 2012, in one year, Serbia leapt from 97th in the world to 38th. The cadastre agency (Republic Geodetic Authority) ranked third among Serbian institutions for citizens’ confidence (ICR, p. 21). (However, on p. 8, the ICR notes that many customers reported that registration was still too complicated, despite the attempt by a 2009 law to simplify procedures.)

Objective 2: Contribute to the development of effective real property markets (Rating: Substantial)

Outputs: These are the same as for Objective 1.

Outcomes: The number of transactions in land increased by 27 percent, exceeding the 25 percent target. The proportion of transactions involving mortgages rose from 3 percent to 24 percent, exceeding the expected increase of 25 percent. Any assessment of the project’s contribution to these changes needs to take into account the buoyant economy. In 2008, when the second customer satisfaction survey was conducted, the GDP growth rate was 7.5 percent and the majority of interviewees were of the opinion that Serbia was moving forward. “Net wages had doubled since the survey held in 2004 and the number of persons entering the residential property market was growing” (ICR, p. 48).

5. Efficiency:

Economic rate of return

The economic rate of return (ERR) estimated at closing was about four times higher than the appraisal forecast, partly because there were 140,874 registered transactions in 2011, compared to the 26,322 that had been projected for that year. The ICR makes conservative assumptions about the proportion of the increased transactions that can be attributed to the project. It also provides full details of the ERR calculations.

Other measures of cost-effectiveness

The project took 18 months longer to implement than expected. Targets were met or exceeded eight years after the 2003 baseline, rather than the six years forecast at appraisal. On the other hand, output targets substantially exceeded expectations but the project remained within the original budget envelope (actual project costs were 98 percent of expected costs).

Administrative efficiency

Following a delay in obtaining land book data from the courts (data that were essential for the cadastre of towns), the commissions redirected their efforts to periurban areas which, because they were not subject to land books, could be completed quickly. When the land book data became fully available in 2009, the commissions switched back to the towns. By taking this flexible approach it was possible, with only a small extension of the credit closing date, to increase coverage from 89 municipalities (the appraisal target) to 225 municipalities (ICR, p. 4).

Efficiency is rated high.

a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:


Rate Available?
Point Value
Coverage/Scope*
Appraisal:
Yes
30%
100%
ICR estimate:
Yes
128%
100%

* Refers to percent of total project cost for which ERR/FRR was calculated

6. Outcome:

The project objectives were highly relevant: the issues addressed do not feature in the CPS that was current at closing, arguably because the project was sufficiently successful to ease the constraints that had existed when it was approved. Design relevance was substantial because the many sub-components fitted well together and supported the objectives, the only shortcoming being the insufficient time to achieve the ambitious technology upgrade that was proposed. Output targets were, for the most part, amply exceeded and there is credible evidence that outcome targets were also met to a substantial degree for both objectives. Efficiency was high, because the rate of return was four times higher than expected, output targets were amply exceeded while the project remained within the original budget envelope, and there was flexibility in the use of project funds.

a. Outcome Rating: Satisfactory

7. Rationale for Risk to Development Outcome Rating:

Passage of the revised Law on State Land Survey, Cadastre, and Registration of Real Estate Rights in 2009
makes it more likely that the project's achievements will be sustained. In particular, the legal backing for a single-agency model of registry and cadastre makes it more likely that further efficiency gains will be reaped.

The hardware and infrastructure installed under the project are operating soundly and, given the lessons learned from the project and the information technology strategy that has been prepared, it is probable that the software deficit will be made up before long. The new information technology strategy takes into account the ever-changing pace of software and hardware development and makes the most of open-source software (which was not available in the early years of the project).

The cadastre agency (RGZ) is not fully self-financing. There were two main constraints, neither of which now apply, improving the agency's solvency prospects. First, it took longer than expected to get the courts to relinquish control over the Land Books, delaying collection of fees by RGZ in towns (where Land Books prevail). Second, the worldwide financial crisis that erupted in 2008 depressed the property market in Serbia, leading to a fall in fees collected. So far this has proved to be a temporary downturn and there was solid growth in the market in 2011 and 2012.

During project implementation RGZ took over responsibility for supplying certain public goods (railway cadastre, forest cadastre) which do not lend themselves to cost recovery. It is appropriate for these services to be funded from the government budget, meaning that RGZ is likely to remain partly financially dependent.
Providing it keeps the right balance between fee-generating and non-fee-generating services, the risk to RGZ will be low. RGZ's long-run strength is much enhanced by its entitlement to retain a share of fee revenues sufficient to cover the replacement and upgrade of hardware and software.


a. Risk to Development Outcome Rating: Negligible to Low

8. Assessment of Bank Performance:

a. Quality at entry:

Project identification and preparation was based on a judicious appraisal of the legal underpinnings and the progress already made by Serbia in developing the cadastre, factors that made it likely that a Bank-supported project could substantially build on these foundations. Through the promise of its own funding, the Bank was able to leverage support from Sweden, Norway, Germany and the European Commission, for well-defined and independently manageable activities that supported components of the project. Careful use was made of a project preparation grant. The Bank staff involved in preparation were highly experienced. The provision for monitoring and evaluation was thorough.

Quality-at-Entry Rating: Highly Satisfactory

b. Quality of supervision:

Supervision missions were staged at regular intervals. Ratings of implementation progress and progress toward development objectives were realistic, with progress downgraded to moderately satisfactory at appropriate moments during implementation. Bank staff provided expert advice in a timely fashion. Fiduciary and safeguards policies were diligently managed and reported. As a result of Bank encouragement, the implementing agency stepped up its performance on monitoring and evaluation. The one supervisory shortcoming was the excessive delay in canceling the information technology contract once the provisions of the contract were found to be inadequate.

Quality of Supervision Rating: Satisfactory

Overall Bank Performance Rating: Satisfactory

9. Assessment of Borrower Performance:

a. Government Performance:

The government provided solid support for the project, from preparation through to implementation. It helped create an enabling environment for the project to succeed by backing the necessary legal reforms, by limiting the scope for political interference, and by setting up the Project Council, a high-level, inter-ministerial committee which included the Ministry of Capital Investments, Ministry of International Economic Relations and the Ministry of Finance. By lobbying the Minister of Justice, the Project Council ensured that the municipal courts transferred the land books to the cadastre agency (RGZ), thus making it possible to complete the coverage of towns. The government convened a donor conference for land administration in 2002, thereby helping to lever funds from several sources. It contributed to good donor coordination by organizing follow-up meetings after project startup.

Government Performance Rating: Highly Satisfactory

b. Implementing Agency Performance:

The project was implemented by the Republic Geodetic Authority (RGZ). RGZ had a clear vision of Serbia's land administration needs, and helped to realize that vision by making ready use of the technical advice from the Bank and other donors. It consistently stepped up its performance in response to the Bank’s recommendations. In the early phase of implementation, the management of RGZ changed three times, leading to some delays, but there has been no such disruption since 2007. RGZ showed strong commitment to strengthening business processes, planning for cost recovery, outsourcing, launching publicity campaigns, and pushing for accelerated transfer of land book data from the courts. Although at project startup RGZ's commitment to monitoring and evaluation was limited and reports were poor, with Bank encouragement, this deficit was remedied early on, so that for most of the implementation period reporting was satisfactory. However, RGZ shares some responsibility with the Bank for delays in canceling the unsatisfactory software contract. Also, RGZ was occasionally slow to respond to contractors when problems arose, and management was complicated by frequent changes to procurement plans.

Implementing Agency Performance Rating: Satisfactory

Overall Borrower Performance Rating: Satisfactory

10. M&E Design, Implementation, & Utilization:

a. M&E Design:

There was good baseline information. A project preparation grant was used partly to fund a customer satisfaction survey and a social assessment. The Bank also supported a land market study. The results from these studies were used to develop baseline indicators on the real estate market, social conditions in the housing sector and the quality of services. Institutional capacity was soundly appraised during project preparation. The implementing agency, RGZ, had a solid record of input and output monitoring, providing a good foundation to build on. A monitoring and evaluation plan was developed and extra training in M&E was built into the capacity building component of the Project. The output and outcome indicators in the PAD were measurable and sufficient in number, and they were backed up by precise targets.

b. M&E Implementation:

At first, RGZ’s approach to monitoring recorded implementation progress, with scant regard for tracking outcomes (trends in the real property market). But, with strong encouragement from the Bank, RGZ’s approach evolved to address outcomes, a shift that was reinforced by the appointment of a full-time M&E officer in 2009. Independent customer satisfaction surveys were conducted in 2008 and 2011. A land market study was prepared during the last month of implementation. The study found that understanding of the law had improved, helping to speed-up procedures and improve service quality.

a. M&E Utilization:

Results from the customer satisfaction surveys helped RGZ to improve its service. By credit closing, RGZ was providing on-line data about the real estate market to both government and the private sector. There is a reasonable expectation that RGZ will extend this service by providing, for example, geo-referenced selling prices, and information on the gender and age of buyers, learning from the experience of other countries.

M&E Quality Rating: Substantial

11. Other Issues:

a. Safeguards:

This was a Category C project, so no environmental assessment was required. However, in 2009, a Bank environment specialist conducted an assessment, concluding that all the civil works financed under the project were environmentally safe and complied with local legislation and standards. Other than construction and renovation of office space, the project did not support other civil works, land conversion, resource extraction or any activities that could potentially damage the environment. Although not required, the Bank carried out a social assessment. This uncovered significant illegal building and squatting by Internally Displaced Persons (IDPs). These problems did not reduce the relevance of the project because a comprehensive registry and cadastre provides the information needed to address irregularities in building and IDP settlement.

b. Fiduciary Compliance:

Transactions between the project account, RGZ and the Treasury were complex, calling for close scrutiny of financial statements and, at one stage, auditing of several regional centers each year. It would have been simpler if Treasury had set up a sub-account for RGZ counterpart payments. Accounting was suitably automated, the staff was well qualified, and reporting was systematic. No irregularities were found and all audits were unqualified. Procurement was challenging, calling for the implementing agency (RGZ) to manage 700 contracts. There were some management shortfalls but RGZ's performance improved as it learned from experience.

c. Unintended Impacts (positive or negative):

d. Other:

The project collected data on service use by gender but no steps were taken to improve the proportion of registrations accounted for by women. On the other hand, studies conducted by the Bank during project preparation, found no significant gender barriers. Although the male partner is more likely to be registered as the owner, there is no legal discrimination against women, and female spouses are protected in law even if they are not registered.



12. Ratings:

ICR
IEG Review
Reason for Disagreement/Comments
Outcome:
Satisfactory
Satisfactory
 
Risk to Development Outcome:
Negligible to Low
Negligible to Low
It remains to be seen if RGZ will adjust its fee structure to recover all of its costs, and if a law will be passed separating RGZ from government.  
Bank Performance:
Satisfactory
Satisfactory
 
Borrower Performance:
Satisfactory
Satisfactory
 
Quality of ICR:
 
Exemplary
 
NOTES:
- When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006.
- The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate.

13. Lessons:


IEG draws the following lessons from the ICR:

  • Registry and cadastre projects are more likely to meet their objectives if they have firm foundations to build on: competent institutions, workable laws and long-term government commitment.
  • Good coordination of parallel funding makes it more likely that land administration goals will be met.
  • Information technology upgrades take a long time to implement and contracts call for close supervision to make sure that the proposed packages are in line with the country's needs, and that the government gets sufficient external support.
  • Projects may be more likely to attain their objectives if preparation and implementation arrangements allow for public/private dialog on the development of real estate markets.

14. Assessment Recommended?

No

15. Comments on Quality of ICR:

The ICR is very well written. It manages to be both concise and comprehensive, providing just the right amount of information for a full assessment of the project's achievements. The ICR's success in this respect was undoubtedly facilitated by the sound results framework and monitoring framework, developed in the PAD and reinforced by the Bank's supervision effort. The economic and financial analysis is very thorough, with assumptions clearly spelled out and full details of how the ERR was estimated.

a. Quality of ICR Rating: Exemplary

(ICRR-Rev6INV-Jun-2011)
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