Montenegro’s new construction law is slowing building-permit procedures and property legalization along the coast, while revenue from the infrastructure fee charged on coastal construction has declined. State-owned Regionalni vodovod said the transition to the new Law on Construction has affected both new permitting and the legalization of thousands of unregistered buildings, weakening collections from the special fee used to support regional water infrastructure.
Infrastructure-fee revenue declines
Revenue from the levy decreased to €4.33 million in 2025, from €5.10 million in 2024, representing a decline of about 15%. Collections reached €2.20 million in the first half of 2026. The fee contributes to financing regional water infrastructure as coastal tourism and property development increase pressure on existing supply networks. Montenegro’s coast is also facing capacity constraints involving water, wastewater, roads and parking.
Regionalni vodovod reported exceptionally high demand during the 2026 tourism season, with sections of the main coastal transmission system operating close to maximum capacity. The infrastructure levy is designed to direct part of the value generated by new construction toward the public infrastructure required to serve additional development. Municipalities currently receive 20% of the fee revenue. Their share is scheduled to rise to 40% from 2028, increasing the connection between construction activity and municipal finances.
Permitting delays affect developers
The mechanism depends on projects progressing through the permitting system. The transition to the new construction framework has slowed that process, affecting the flow of both development activity and related fee revenue. For developers, longer approval periods can generate additional costs because land and financing expenses continue while construction is delayed. Contractor, equipment and sales schedules may also have to be adjusted.
For larger tourism and residential developments, delays lasting several months can affect the timing of unit completions in relation to important sales or tourism periods. The uncertainty also affects foreign investors involved in Montenegro’s coastal real-estate market. Alongside property prices and market demand, investors assess the implementation of regulatory procedures. A change in construction rules can affect investment confidence when administrative procedures remain unclear during the transition.
Legalization creates another bottleneck
Property legalization represents another administrative bottleneck. Thousands of buildings remain outside the full formal planning and registration system, while their legalization has implications for property values, municipal revenue, mortgage financing and utility planning. The process also requires sufficient administrative capacity. In Budva, one of Montenegro’s largest property and tourism markets, the required legalization commission has not yet been established.
This leaves additional uncertainty for property owners seeking to regularize existing buildings. Delayed legalization can also affect banks because properties with unresolved planning or legal status may be more difficult to use as collateral, refinance or sell, increasing transaction-related risks. The effects therefore extend beyond construction companies to the broader real-estate and financial markets.
Water infrastructure faces rising demand
Regionalni vodovod’s financial data show the impact on infrastructure-fee collections. Revenue fell by approximately €770,000 in 2025 compared with the previous year and remained at a moderate level during the first half of 2026. Although the amount is relatively small at the national level, the infrastructure supported by the levy has an increasing role on the coast, where tourism generates particularly high water demand during a concentrated peak season.
Private construction can expand faster than supporting pipelines, reservoirs and pumping systems. If development continues while infrastructure financing fails to keep pace, capacity constraints can limit additional investment. At the same time, prolonged permitting procedures can slow construction activity itself. The new construction framework may eventually strengthen planning discipline, but its implementation has so far been accompanied by slower permits, delayed legalization and lower infrastructure-fee collections.
