Montenegro’s new construction law is slowing building permits and property legalization along the coast, reducing infrastructure-fee revenue and adding another delay risk for developers in the country’s most active real-estate market.
State-owned Regionalni vodovod said adaptation to the new Law on Construction had slowed both new permitting and the legalization of thousands of unregistered buildings, weakening collections from the special fee charged on coastal construction.
Revenue from the levy fell to €4.33 million in 2025 from €5.10 million in 2024, a decline of about 15%.
Collections reached €2.20 million in the first half of 2026.
The slowdown is significant because the charge helps finance regional water infrastructure at a time when coastal tourism and property development are putting increasing pressure on supply networks.
The problem is therefore circular.
Developers face slower approval procedures, while lower construction-related collections reduce the funding available for infrastructure needed to support further development.
Montenegro’s coast is already dealing with capacity constraints in water, wastewater, roads and parking.
Regionalni vodovod reported exceptionally high demand during the 2026 tourism season, with parts of the main coastal transmission system operating close to maximum capacity.
That makes development-fee income increasingly important.
The levy is effectively intended to ensure that part of the value created by new construction contributes to the public infrastructure required to serve it.
Municipalities currently receive 20% of revenue from the fee.
Their share is scheduled to increase to 40% from 2028, strengthening the link between local development and municipal finances.
But that mechanism works only if projects move through the permitting system.
The transition to the new construction regime appears to have interrupted that flow.
For property developers, delays create direct financial costs.
Land and financing expenses continue even when construction cannot begin, while contractors, equipment and sales schedules may need to be rescheduled.
For larger tourism and residential projects, a delay of several months can affect whether units are completed before a key selling or tourism season.
The uncertainty also affects foreign investors.
Montenegro continues to attract substantial foreign capital into coastal real estate, but investors increasingly compare regulatory execution as well as property prices and market demand.
A law intended to improve construction governance can undermine investment confidence if administrative procedures are unclear during implementation.
Legalization creates a second bottleneck.
Thousands of properties remain outside the full formal planning and registration system.
Bringing those buildings into compliance is important for property values, municipal revenue, mortgage financing and utility planning.
But legalization also requires administrative capacity.
The problem is particularly visible in Budva, one of Montenegro’s largest property and tourism markets, where the required legalization commission has still not been established.
That creates additional uncertainty for owners seeking to regularize existing properties.
For banks, delayed legalization can also limit collateral quality.
Properties with unresolved planning or legal status can be more difficult to finance, refinance or sell, increasing transaction risk.
The issue therefore extends beyond construction companies to the wider real-estate and financial markets.
Regionalni vodovod’s figures provide an early indication of the economic effect.
Fee revenue declined by roughly €770,000 in 2025 and remained moderate in the first half of this year.
That is not large at national level, but the infrastructure financed by the fee is increasingly critical.
Montenegro’s coastal tourism economy depends on reliable water supply during a short period of peak demand.
Private development can expand much faster than pipelines, reservoirs and pumping systems.
If construction continues while infrastructure financing lags, system constraints eventually become a limit on further investment.
If permitting remains slow, however, development itself stalls.
The government therefore needs to solve both sides of the equation.
The new law may ultimately improve planning discipline, but the transition cost is already visible in slower permits, delayed legalization and weaker fee collection.
For developers, the immediate market issue is approval time.
For coastal municipalities and Regionalni vodovod, it is whether those delays begin to reduce the infrastructure revenue needed to support the next construction cycle.
The test for the new framework will not be the rules on paper, but whether Montenegro can restore predictable permitting without returning to the planning weaknesses the reform was designed to fix.
