In this article, we provide information on foreign nationals' acquisition of real estate in the Republic of Turkey ("Turkey") and whether the payment obligations arising from these sales contracts can be paid in foreign currency.
1. Real Estate Acquisition by Foreigners in Turkey:
A. By Real Persons
Pursuant to the Land Registry Law ("Law"), in terms of international bilateral relations and when required by the interests of the country, foreign natural persons who are citizens of countries designated by the President of Turkey may acquire real estate in Turkey.
The total area of immovable and limited real rights in kind of independent and permanent nature acquired by real persons of foreign nationality may not exceed ten percent of the area of the district subject to private property and thirty hectares per person throughout the country. The President of Turkey is authorized to increase the amount that can be acquired per person throughout the country by up to two times.
B. By Legal Persons
Commercial companies with legal personality established in foreign countries in accordance with the laws of their own countries may acquire real estate only in accordance with the provisions of special laws (Turkish Petroleum Law, Tourism Promotion Law and Industrial Zones Law). Except for these foreign companies, other foreign legal personalities (association, foundation etc.) may not acquire immovable property in Turkey.
An exceptional situation is foreseen in the establishment of mortgages, and no restrictions are foreseen for mortgages to be established on immovable properties between these foreign companies and foreign natural persons.
C. Common Provisions
Real persons of foreign nationality and companies with legal personality established in foreign countries in accordance with the laws of their own countries are obliged to submit the project to be developed on the unstructured immovable they purchase to the approval of the relevant Ministry within two years.
The President of Turkey may determine, limit, partially or completely suspend or prohibit the acquisition of immovable property by real persons of foreign nationality and companies with legal personality established in foreign countries in accordance with the laws of their own countries, in terms of country, person, geographical region, duration, number, ratio, type, quality, area and quantity, where the interests of the country so require.
2. Prohibition of Foreign Currency in Real Estate Sales Contracts
Pursuant to the Communique on the Decree No. 32 on the Protection of the Value of the Turkish Currency ("Communique"), in real estate sale contracts executed by and between the persons settled in Turkey, of which the subject is real estates located in Turkey, including those regarding residences and workplaces with roof, the contract price and other payment obligations arising from these contracts cannot be in foreign currency or indexed to foreign currency.
As an exception to the above-stated rule, the contract price and other payment obligations arising from real estate sale contracts to which the below listed persons settled in Turkey are parties as purchaser, can be foreign currency or indexed to foreign currency:
- Persons who do not have any citizenship relation with the Turkey,
- Branches, representative offices, offices, liaison offices, companies in which foreign residents directly or indirectly have fifty percent or more shareholding or joint control and/or ownership in Turkey
- Companies located in free zones within the scope of their activities in the free zones
3. Conclusion
Within the scope of the above information, real persons of foreign nationality who are citizens of countries determined by the President can acquire real estate in Turkey, provided that legal restrictions are complied with. Whereas for foreign legal entities, only foreign companies can acquire real estate and establish limited real rights in Turkey. No other foreign legal entity has the right to acquire real estate in Turkey. Meanwhile, the right of foreign companies established in foreign countries in accordance with the laws of their own countries to acquire real estate and limited real rights is exceptional. This right is only possible if it is determined by special legal regulations. These special regulations are listed as the Turkish Petroleum Law, the Tourism Incentive Law and the Industrial Law.
By rule (other than those exceptions mentioned above), legal or real persons residing in Turkey cannot decide on their payment obligations in foreign currency or indexed to foreign currency in the real estate sales contracts where the subject of the contract is a real estate located in Turkey.
However, in the real estate sales contracts where legal entities established in Turkey are buyer side but have a foreign element (where 50% of the shares belong to a foreign company), foreign exchange ban does not apply. In these contracts, the contract price and other payment obligations arising from the contract price can be determined in foreign currency or indexed to foreign currency by taking advantage of the exception under Communique.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.