Turkey: Recent Developments on Real Estate Acquisition by Foreign Persons
Real estate and limited real rights acquisitions by foreign nationals, either natural person or legal entity, are regulated by Land Registry Law numbered 2644. In this regard the Land Registry Law article 35 and 36 has a great importance for foreign nationals who wish to purchase real estate within the borders of Turkey. The Turkish government has been working on a draft law which will restructure the current articles concerning the foreign acquisitions.
As a result of the government’s motion the Turkish parliament has enacted the aforementioned draft law on May 3rd, 2012 which makes immovable acquisitions easier by foreign nationals. The previous form of the law used to restrict the foreigners by reciprocity principle and by the real estate’s acreage. Namely, a foreign national had to be a citizen of a country which should have reciprocity with Turkey and secondly the acreage of the real estate should have an acreage up to 2,5 (two and a half) hectares. Particularly, the reciprocity principle’s rigid practise caused a great deal of obstacles for foreigners and therefore foreign nationals had to find solutions such as establishing companies in Turkey whose only reason for establishment is to purchase a single real estate. These obstacles caused time and money waste for both seller and buyer and additionally discouraged the foreign investors to invest on the Turkish real estate market.
B. THE LAW ON THE AMENDMENT OF LAND REGISTRY AND CADASTRE LAW
Law on the Amendment of Land Registry Law and Cadastre Law (“the New Law”) which has enacted on May 3rd, 2012 has changed the Land Registry Law articles 35 and 36. The New Law introduced two important changes;
I. The new form of article 35 does not mention reciprocity principle anymore and grants an authority to Ministry of Environment and Urban Planning and Ministry of Finance to jointly determine the countries whose natural person citizens can purchase real estates in Turkey. In this way these aforementioned ministries, by having the Ministry of Foreign Affairs’ opinion, will decide on the country list whose nationals can acquire immovable properties and limited real rights. There will be no need to have reciprocity between these countries in the list and Turkey; the only important point to be considered is Turkey’s national interests which seems to be an easier requirement to be met when compared with the reciprocity principle.
II. The second significant amendment is made on the total acreage of the immovable and limited real rights that a foreign natural person can acquire. As it is indicated in the above paragraphs foreign natural persons can only acquire real estates and limited real rights country-wide up to 2, 5 hectares. This restriction is changed by the New Law and the limitation is increased up to 30 (thirty) hectares; thus now a foreign real person can acquire country-wide real estate or limited real rights up to 30 hectares. Ministry of Environment and Urban Planning and Ministry of Finance may jointly decide on to double this acreage limitation; namely they may increase it up to 60 (sixty) hectares when it is deemed necessary from the point of national interests.
With regards to foreign legal entities the New Law - similar to its predecessor - stipulates that only foreign commercial companies, which have legal personality and established in a foreign country pursuant to the local law of that foreign country, are permitted to purchase immovable and limited real rights in Turkey. Article 36, as amended by the New Law, stipulates that in the event a foreign commercial company incorporates or become a shareholder having more than 50 (fifty) % (per cent) of the total shares or have administration rights in a Turkish incorporated company then the restrictions in article 36 shall apply on such Turkish companies for their real property and limited real rights acquisitions.
The recent developments on Real Estate Acquisition by Foreign Persons are publicly welcomed and they are likely to have positive impacts on the Turkish real estate sector. Since, these amendments ease the way to acquire immovable or limited real rights by foreigners it is expected to increase the foreign investments, especially from Gulf countries, and cash inflow into Turkey.
As of the date of this article written the New Law has not been published on the Official Gazette however it is expected to be published in the upcoming days. We also expect the country list, which will be prepared jointly by the aforementioned ministries, to be published in the next days; following the publication it will become more of an issue