CTK reported that market rents for flats in Prague dropped by 10-20% y/y and are expected to fall by another 50% y/y after deregulation of state flats’ rent. The drop in rent can be attributed to cheap mortgages and privatization of state and companies’ flats. The impact on Orco should however be limited as its revenues from residential renting formed only 2% of total sales in 2004 and the company targets higher end of the market where rents are not falling that dramatically. In addition, the company is well exposed to the growth in mortgages and tendency to purchase new flats through its 100% daughter company IPB Real, residential developer. Sales from development amounted to 80% of total sales in 2004.