In the wake of the failed coup attempt in Turkey on 15 July, and despite rising global security concerns due to a wave of terror attacks in 2016, the Turkish real estate market, especially the housing sector, is proving resilient. The Turkish market remains one of the best performing in the world, with home prices doubling in five years and rising by 12.22 % in 2016.
Turkey continues to work to boost the housing sector. Recently, the parliament and the government passed a number of new laws foreseeing new incentives to the market mainly aimed at creating more investment opportunities for foreigners. Among these incentives are stamp duty adjustments in respect of various types of agreements commonly used by land owners, developers and buyers; reduced land registry fees and VAT exemptions for foreigners who purchase real estate in Turkey.
Such incentives coupled with the hard drop in the value of the Turkish lira might offer the perfect time for foreign investors to benefit from such an environment.
What are the new incentives?
- Stamp duty adjustments: The stamp duty arising from the execution of a real estate "promise to sell" agreement ("gayrimenkul satış vaadi") has been decreased from 0.948 % to 0 by Council of Ministers Decree numbered 2017/9759 and dated 3 January 2017. Real estate promise to sell agreements are widely used by buyers in practice, in case the real estate is to be transferred in a projected time, upon completion of conditions precedent. Such agreements are preferable for buyers, as they are binding upon third parties, if annotated with the Land Registry ("tapu kütüğüne şerh"). Likewise, the stamp duty arising from execution of residential property sales agreements with a down payment, within the context of the Law on Consumer Protection numbered 6502, has been decreased from 0.948 % to 0. Moreover, as per the Council of Ministers decree numbered 2017/9973 and dated 13 March 2017, the stamp duty arising from construction agreements in return for revenue sharing or in return for condominium unit (which are typically executed by and between the land owners and the contractors) is determined as 0, as well as the stamp duty arising from subcontracts and consultancy contracts based on such agreements.
- Land Registry fee adjustment: The land registry fees arising from an official real estate sale and purchase transaction to be paid separately by both the seller and the buyer have been decreased from 2 % to 1.5 % of the acquisition price by Council of Ministers decree numbered 2017/9973 and dated 13 March 2017.
- VAT exemption: As per the modifications made to the Law on Value Added Tax Code no. 492, which are promulgated with effect as of 1 March 2017, real estate purchases by (i) non-resident foreign natural persons, (ii) foreign companies which do not generate income in Turkey via a workplace and permanent representatives, and (iii) Turkish citizens living abroad with a work or residence permit for a term of more than 6 months shall be exempted from value added tax of 18 %. However, this exemption is only applicable to direct residential or workplace sales in which the buyer is expected to provide the purchase price from abroad in foreign currency and keep the real estate in their ownership for at least one year.
As an additional note, Turkey offers citizenship to foreign property buyers. According to a new amendment to the existing legislation on requirements to become a Turkish citizen, foreign property buyers investing at least 1 million dollars in real estate are entitled to obtain Turkish citizenship directly, provided that they hold the purchased asset for at least three years.