With lowered investment amounts, Turkey’s program is increasingly attracting investors from China. The program offers a great opportunity to foreign investors who wish to obtain citizenship for themselves and their families. The purchase of a property valued at $250,000 makes it possible to obtain a passport, while also profiting from the investment.
“There is an important increase in the number of Chinese investors who have investment interests in Turkey, both individuals and institutional investors,” said Fevzi Doğan, a Turkish immigration attorney.
Many migration agents have added this to their options and are focusing on promoting Turkey’s program, especially with Turkey having an E-2 treaty with the United States.
“The Turkish program is a nice new addition to the options already available to Chinese people seeking immigration solutions,” said Shirley Liu, president of KBL Group.
Winner Xing from Worldway Immigration Group agreed.
“The launch of the citizenship by investment program in Turkey provides global immigrant investors with an unprecedented opportunity to not only invest in real estate but also create a home overseas,” he said.
China is also working more closely with Turkey and there has been an upward trend in bilateral economic ties in recent years, including China looking to double its investments in Turkey to $6 billion by 2021. [1]
Turkey made changes to its citizenship by investment program in September of 2018, mainly by lowering the limits required for the respective investment amounts. The previous requirement was $2 million for capital asset investments and $1 million for real estate investments. These amounts are now fixed at $500,000 and $250,000 respectively.[2] Within a year of this change, 2,611 investors and 7,351 family members successfully obtained Turkish citizenship, bringing the total number to 9,962.[3]
Let’s focus on the real estate purchase route of this program and the overall process for real estate purchases and the subsequent citizenship applications in Turkey.
REAL ESTATE PURCHASES IN TURKEY
Turkish real estate law mainly depends on an official title deed registry system, where all records for real estate are kept and preserved by the State and all agreements related to the sale of these properties must be concluded before the Title Deed Registry Offices.[4] Any real estate purchase agreements not concluded before the Title Deed Registry Offices will be null and void by rule, even if they are in writing.[5]
This can be a problem for foreigners that are not familiar with such a regulation. It is therefore crucial to get legal assistance from an attorney when purchasing a property, in order to avoid long and costly legal battles in the future, whether this purchase is related to the citizenship program or not.
Since the only binding contract is the official one before the Title Deed Registry, it is also not recommended to make any sort of significant payment to the seller before concluding the contract. The usual practice is to exchange the purchase amount at the Title Deed Registry Office, as the contract is signed by both parties.
Foreigners have some limitations when it comes to purchasing real estate in Turkey. First, designated special security areas, properties close to military zones will be ineligible for foreigners. Second, the total area of the purchase by a foreigner cannot exceed 10% of the total land area of the county/district where the real estate is situated in, and it cannot exceed 300,000 square meters (about 3,2 million square feet) per person.[6] These limitations would not realistically affect the situation for an investor looking to obtain citizenship.
CITIZENSHIP APPLICATION
The first step is to find a property that could be valued at a minimum of $250,000. The investor, either by themselves or through an attorney, should get in contact with a real estate agent to evaluate possible properties. The buyer and the seller are free to decide on a sales price for the property since there is freedom of contract. However, it should be noted that the parties’ agreement of the sale price is not enough for the citizenship application. Once the property is selected, an independent evaluation company (licensed by the Capital Markets Board of Turkey) must value the property above the amount of $250,000. An attorney or a real estate agent may assist the investor during this process and get in contact with such an evaluation company as well.
The property that will be purchased cannot be owned by another foreign individual (including the immediate relatives of the investor) or a company in which a foreign individual is a shareholder or a manager.[7]
Once the building is valued over $250,000 and if there are no further problems with the purchase of the property, the investor and the seller will then conclude the official sales contract before the Title Deed Registry Office. This process will require a translator since the official contract will be in Turkish, and it will be beneficial for the investor to have an attorney present. The investor must guarantee at this point that they will not sell this property for three years after purchase. This guarantee will be added as a comment to the title deed and will remain in effect for this three-year duration.
The $250,000 amount can be reached by purchasing a single property as well as multiple properties.[8] For example, purchasing one property for $200,000 and another for $100,000 will make the investor eligible for citizenship, although it will drive up the costs and complicate the process of the application.
The purchase amount must be wired from the buyer’s bank account to the seller’s bank account and this wire transfer must be proven to the authorities with a bank receipt.[9] If the investor’s bank account is abroad, they must provide a receipt from their bank as well. Since it is not recommended for the buyer to make a wire transfer before concluding the official contract in the Title Deed Registry Office, it would be better for the investor to use a Turkish bank account and provide the authorities with a bank cheque that blocks the sales amount in their bank account, instead of making a wire transfer.
Once the purchase is done, the investor will begin preparing their paperwork for their residency and citizenship application either themselves or through the assistance of an attorney. The investor’s spouse and children, who are under the age of 18, will also be eligible for Turkish citizenship.[10] If the children are over the age of 18, they have to be dependent on their parents due to physical and/or mental conditions, which should be evaluated on a case-by-case basis. The residency permit will be issued first, then the review for the citizenship application will begin. The final authority that will approve the application is the President of the Turkish Republic. This whole process can take as short as three to four months, but since it is dependent on multiple government agencies’ workload, it can differ greatly.
The costs that will be paid by the investor will depend mainly on the value of the property. To give a general impression, the costs that could come up in the process include: Real estate agent’s fees, attorney’s fees, title deed registry office fees and immigration office fees.
Once the program is completed, the investor becomes a Turkish citizen and will obtain a Turkish passport. Passport issuing process takes 1-2 weeks. The passport will allow the investor to travel more than 100 countries either visa-free or with a visa on arrival.[11] Turkish nationals are also eligible for the E-1 and E-2 visa programs of the United States, since Turkey is a party to the relevant bilateral treaties.[12]
SOME POINTS TO CONSIDER WHEN INVESTING IN REAL ESTATE IN TURKEY
While the real estate is being purchased, a rental-guarantee purchase could be negotiated with the real estate agent. That is, of course, if the investor does not wish to reside in the property. They could collect benefits as they hold on to the property for at least three years.
Turkey is an emerging market where real estate prices in certain cities see an increase over the years and most properties have high resale values.[13] Deciding in which city to purchase the real estate is crucial, as real estate price increases throughout the years differ greatly between cities. For example, while Istanbul has seen a 4% annual decrease in real estate prices according to the residential property price index for August 2019, Ankara has seen a 3% increase, İzmir has seen a 2% increase and Antalya-Isparta-Burdur region has seen a 9% increase in real estate prices for the same period.[14]
If the investor makes a well-informed decision, they will more than likely be able to sell the property at a profit. If the property is sold for a profit after five years of the purchase, the investor will be exempt from an income tax for that profit[15], which makes this investment opportunity even more lucrative.
Sources:
[1] https://www.dailysabah.com/business/2019/03/28/china-aims-to-double-investments-in-turkey-to-6-billion-by-2021
[2] Official Gazette no. 30540, Sep. 18, 2018.
[3] Anadolu Agency, “Bir yılda 2 bin 611 yabancı yatırımcı Türk vatandaşı oldu”, Sep. 26, 2019, https://www.aa.com.tr/tr/turkiye/bir-yilda-2-bin-611-yabanci-yatirimci-turk-vatandasi-oldu/1594629, Access date: 12/11/2019.
[4] Turkish Civil Code Art. 997/I, Turkish Code of Obligations, Art. 237/I.
[5] Turkish Code of Obligations, Art. 12/II.
[6] Turkish Code of Deeds, Art. 35.
[7] Guidelines published by the General Directorate of Land Registry, Annex to Circular no. 2019/5 (“Guidelines”), May 30, 2019, p. 9.
[8] Guidelines, p. 3.
[9] Guidelines, p.8.
[10] Turkish Citizenship Code, Art. 12/I-b.
[11] For a comprehensive list published by the Ministry of Foreign Affairs: http://www.mfa.gov.tr/turk-vatandaslarinin-tabi-oldugu-vize-uygulamalari.tr.mfa
[12] E-1 treaty has been effective since February 15, 1933 and E-2 treaty has been effective since May 18, 1990.
[13] Residential Property Price Index (RPPI), Central Bank of the Republic of Turkey, August 2019.
[14] Residential Property Price Index (RPPI) and Residential Property Price Indices for NUTS Level 2, Central Bank of the Republic of Turkey, August 2019.
[15] Turkish Income Tax Code, Repeated Art. 80/I-6, although it should be mentioned that an amendment to the tax law is being discussed.
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