10 February 2014
Foreign Real Estate Acquisitions in Turkey
Real estate acquisition of foreigners is governed by the Articles 35 and 36 of the Land Registry Law, Law No: 2644. A recent legal amendment introducing significant changes on the mentioned Articles was approved by the Turkish Parliament on May 3, 2012 and published in the Official Gazette dated May 18, 2012.
•The new Law abolished the reciprocity requirement in real estate acquisitions of real persons and the Council of Ministers, in compliance with legal restrictions, bilateral international relations and national interests, is authorized to determine the countries which are authorized to acquire real estate in Turkey.
•The former legislation stipulated that the maximum total area which a foreigner could acquire was 2,5 hectares (25.000 m²) in Turkey and the acquired total area of foreigners could not exceed 10 % of the improved land in the town. However, the new Law increased the total surface area of the land that can be acquired by a foreigner up to 30 hectares and eliminated the obligation to acquire real property only in the improved zones. The Council of Ministers is also authorized to increase thirty hectares up to twice. The new Law, similar to the former legislation, regulated that the total area of the real estates acquired by foreign real persons can not exceed ten per cent of the privately owned land in the town.
•According to the former regulation, foreign real persons were authorized to acquire lands or buildings for the purpose of using as a domicile or an office. This obligation has been abolished by the new legislation. On the other hand, in case that foreign real and legal persons acquire a vacant land (land without any building on it), they are required to develop a project within two years following the acquisition and submit it to the relevant Ministry for approval. The realization performance of the approved project shall be monitored by the same Ministry.
•Foreign companies established in other countries shall acquire real estate and limited real rights on real estates in Turkey according to the provisions of special laws. Relevant special laws are, Law for Encouragement of Tourism No: 2634 and Petroleum Law No: 6326. According to the Law for Encouragement of Tourism (Article No: 8) the real estate within tourism areas and tourism centres for which land use plans have been prepared can be allocated to the Ministry of Culture and Tourism by the public agency having ownership. The Ministry is authorized to allocate such real estates to real persons and legal entities of Turkish and foreign nationality. According to the Petroleum Law (Article No: 87), a holder of a petroleum right (either a Turkish or foreign company) is entitled to acquire a surface lease of such land in or in the vicinity of his license, lease or certificate area as required for his operation, by agreement or by expropriation if the land is privately owned or by recording it on his license, lease or certificate if the land is not owned by anybody.
•The new Law also introduced significant changes in the real estate acquisition regime of foreign capital companies. In principle, foreign capital companies established in Turkey shall freely acquire and use real estates to conduct business activities listed in the Articles of Association of their companies.
Within this context, the companies controlled by foreign investors (the companies in which foreign shareholders own at least fifty per cent of the shares or have the authority to assign or dismiss the majority of the managers) willing to acquire immovable and/or limited rights in-rem in Turkey shall apply to the Provincial Planning and Coordination Directorate (Prefecture Office) at the location of the immovable by presenting the required documents.
However, acquisitions in military zones and special security zones require permission from the Turkish military authorities and province governorships respectively.
“Directly or indirectly owned companies by the above mentioned foreign capital companies in Turkey will also be subject to the same legislation (Article 36 of the Land Registry Law) provided that the total share of foreign investors is at least 50%.
The foreign capital companies out of this scope, on the other hand, shall acquire and use real estates in equal conditions with the local companies.
Article 36 also grants exemptions to specific cases where flexibility is required for the effectiveness of implementation and where special regulations have been provided. Thus, Article 36 will not apply to the pledge on real estates, liquidation of such pledges, acquisitions of real estates within the context of mergers and divisions of the companies, acquisitions in the specific investment areas such as organized industrial zones, technology development zones or free zones and acquisitions of banks for the collection of their receivables (However, the banking regulation stipulates the liquidation of such properties within a specific period of time).
Consequently, within the frame of the favourable opportunities in the real estate acquisition regime of foreigners, a significant increase in the rate of acquisitions is expected in the following term. The new regime is also anticipated to provide support to the success of our new incentive package as the elimination of the barriers will encourage international investors to make new investments or to expand their current investments in Turkey.