I. Intro
The Regulation on the Implementation of Turkish Citizenship Law (“Regulation”) has been amended by the “Presidential Decree No. 418” (“Decree”) which is published on the Official Gazette dated 07.12.2018 and numbered 30618 and entered into force as of its publication date.
II.Investment
Decree implements an additional provision to the second paragraph of 20th Article of the Regulation that develops a new aspect with regard to the Turkish citizenship application by real estate investment.
Unlike the usual method that the applicant is obliged to invest at least USD 250,000.00 in real estate and register the title deed in his/her name with putting an annotation to such deed, stating that the one who purchases the property for the citizenship application shall not sell it for 3 (three) years; the new method enables the applicant to commence application procedure by transferring at least USD 250,000.00 to the seller and signing a “Preliminary Agreement to Sell” before a notary public, that states the purchaser shall neither transfer, nor assign such preliminary agreement to any third parties for 3 (three) years. According to the Decree, the real estate or the real estate development project is obliged to provide construction servitude or condominium, at least.
To understand the amendment in a broad sense, it is substantial to know “Construction Servitude” and “Condominium” concepts in Turkish law. There is a brief explanation of two concepts, below:
Construction Servitude is a right that can be established in respect of a real estate that has not yet been built or completed. Such right is certified by a special type of title deed that bears the owned share of the prospective building that is in the planning or construction phase. After the building is completed, construction servitude should be converted to a condominium.
Condominium (Apartment Ownership) is a right that is established after the planned building is completed and built successfully. For the issuance of condominium deed, the permit of occupancy must be collected from the competent municipality.
The investment can be made in USD 250,000.00 or in the equivalent foreign currency or Turkish Lira.
III. Real Estate Development Projects
Turkey has a great potential in terms of real estate development projects and a very active real estate market. The real estate sector accounted for approximately 8.4 percent of GDP in the last decade. On the investment side, foreign direct investment (“FDI”) inflows stood at USD 10.8 billion, with real estate and construction garnering USD 4.6 billion (42.9%) of total FDI in 2017.
According to the Knight Frank Global House Price Index, Turkey ranked 6th in the 57-location index in Q3 of 2018 in terms of the annual price growth index.
But investing in real estate development projects may pose some risks, listed as:
Incomplete projects can only have construction servitude deeds as a proof of ownership. A further inconveniency between the building and the project plan detected by the municipality may lead to demolishing.
If the project is completed successfully but there is no condominium deed to be transferred, there may be differences between the construction plan and the completed building which prevent municipality to issue an occupancy permit. Such inconveniency may lead to the demolishing of the real estate.
The “Preliminary Agreement to Sell” in respect of the unbuilt project must be extensively detailed on the features of subject the property to avoid unpleasant surprises.
The contractor who undertakes the construction and paper work of the project must be reputable. After the sales are completed with construction servitude deeds; the contractor may leave the project without applying for an occupancy permit and it may impose a pecuniary obligation on the new owners.
IV. Conclusion
It can be profoundly profitable to invest in real estate development projects in Turkey, but the above listed risks must be considered carefully. For the sake of investment and application; it is highly suggested to receive consultancy services from a lawyer who is competent in the law of Turkey.
We are pleased to inform you that we have rebranded our Turkish Citizenship by Investment Services. We are looking forward to meeting you in our new website and YouTube channel.
