Prague studios may be reclassified as flats

New construction regulations will allow changing some nonresidential studios in Prague into residential flats. This means that the studios can now be used as official permanent residences. The new Prague Building Regulations (PSP) should take effect in the fall.

The sale value of the flats once they are reclassified is expected to rise some 5 to 10 percent.

The legal change applies mainly to buildings under construction, but could also be applied to older buildings.

The new rules must still be approved by the European Commission, which is expected by mid-October. Then they must be approved again by the Prague City Hall, which already approved the changes this July. According to the Prague Institute for Planning and Development (IPR), the rules should be in effect by mid-November at the latest.

Once the studio is reclassified, the buyer will have fewer complications arranging a mortgage, real estate experts claim. The amount of VAT and other taxes paid for a nonresidential space is also higher than for a residential space.

In general, nonresidential studios are 10 to 15 percent cheaper than residential units at the same location. The price difference is due to the legal status and also the fact that some studios have a technical deficiency.

Even with new rules, nonresidential studios will not disappear from the market. Some still will not meet standards for sunshine, noise or ventilation.

Developers with flats under construction are planning to change the classification of some of them before they hit the market, but not all of them as there is still a demand for nonresidential space.

The amendment could also help homeowners in old buildings in the center of Prague, where offices were established in the 1990s but companies have long since relocated to more modern spaces. The conversion of real estate back to flats has been difficult under the current rules.