Turk gov't promises swift end to chaos in foreign property sale

Under the directive, sales to foreign nationals and foreign companies will be frozen unless a second directive stating otherwise is issued.

Turk gov't promises swift end to chaos in foreign property sale

A Constitutional Court ruling that annuls a law regulating property sales to foreigners went into effect yesterday, temporarily freezing all sales to foreigners and thereby sending a wave of shock and panic through the markets, Today's Zaman reported.

Those in the real estate sector have stated that the suspension of property sales must be ended as soon as possible. The government, however, said the Cabinet had already received a new regulation on property sales for their signature and promised a swift end to the chaos.

All sales to foreigners across the country have been frozen under the directive issued by the Land Registry General Directorate of the Public Works Ministry since the Constitutional Court ruling went into effect yesterday.

Foreign companies established in Turkey and foreigners who hold Turkish passports will be kept outside the scope of the directive, the ministry announced. The Constitutional Court canceled a single article of the law that gave authority to the Cabinet to remove limits on property sales to foreigners -- set at 2.5 hectares -- as long as the total area sold to foreigners does not exceed 30 hectares and is not more than 0.5 percent of the area of a province. Under the directive, sales to foreign nationals and foreign companies will be frozen unless a second directive stating otherwise is issued.

Although the sale of property to foreign companies operating in Turkey under Turkish law are outside the scope of the suspension of sales, the Constitutional Court also canceled a ruling regulating sales to these companies. However, it said it would allow six months before the cancellation went into effect. Officials at the Land Registry say the court has not yet released its explanation of the decision, but they emphasize that within the next six months, a new law that regulates this type of sale should be passed.

"If not, the sales of property to these companies would also have to be frozen," said an official.

However, businesses and professionals say the mistake must be corrected without delay. Foreign investors have already been greatly unnerved by the top court's decision, according to Mustafa Alper, secretary-general of the International Investors Association (YASED), who underlined that the cancellation of the law would cause great problems for foreign investors. "The economy's wheels won't roll as long as this problem is not solved," Alper said.

Alper's tone was alarming. "There is a serious question mark in the minds of foreigners who were planning to invest in Turkey. This has to be solved, or else we'll have to face dire consequences."

As an example, he said Canada's Magna International, the world's fourth largest automobile parts supplier, had plans to invest in Turkey. "According to this decision, they can't even buy a single apartment in Turkey, let alone buying land for building a plant," he said.

Alper noted that some companies had phoned YASED and expressed their apprehension over the law.

"The government should move quickly and pass a new law, as fast as possible, that would fall outside the scope of the decision made by the court."

The cancellation is not only a problem for foreign investors, but also for individuals buying property, according to Nevzat Tilkici, head of the Fethiye Realtors' Federation. "This will absolutely cause problems," said Tilkici, in a phone interview with Today's Zaman. He said the ruling would also have an impact on homes sold to foreign nationals in the regions of Fethiye, Didim and other Mediterranean resort towns popular with European home buyers. "In just the three months between Jan. 16 and today [April 16], the day of the court's decision and the day it went into effect, hundreds of homes have been sold," Tilkici stated. He said he expects most of the homes bought through real estate agencies in this period will not be paid for, estimating the losses for Turkey just from these homes at 3 million pounds. Given the gravity of the figures, he said, he believes the relevant authorities and officials of the Republic of Turkey will solve the problem as quickly as possible.

You can't explain this to an American!

But isn't there a way to get around the regulation? "No," replied Tilkici. He underlined that foreign home buyers do not want to deal with confusing and rigid rules, let alone putting effort into circumventing them. "Even with the rule that home sales to foreigners should be inspected by the local military command to decide whether the location of the house is strategically important, officials at the land registry say the inspections slow things down by months in some cases. If these buyers were Turkish, you could explain [this delay]. But you can't explain this to an American or a British person."

Since 2002, when the Justice and Development Party (AK Party) came to power, the number of property sales to foreign nationals have exceeded the figures from sales between 1923, when the republic was established, and 2002, according to data presented to Parliament by Nafiz Özak, the minister of public works and settlement, earlier this month in response to a query by a legislator.

In the past five years, 40,026 pieces of real property -- both buildings and land -- were sold to foreign nationals compared to 20,843 in all of the republican era until 2002. Some have criticized the skyrocketing sales, accusing the AK Party of "selling the motherland" to foreigners. Does this mean that Turkey, then, is not a good place for investing as it is filled with individuals hostile to a foreign presence in their economy and with a Constitutional Court possessing the same mentality as these people? This is absolutely not the case, says Erdoğan Bayraktar, president of the Housing Development Administration of Turkey (TOKİ), a state agency that undertakes affordable housing projects in most cities across the country.

"There is no mentality that prevents the sale of property to foreigners or that has a twisted view of property sales to foreigners in Turkey," said Bayraktar yesterday in a meeting held at TOKİ to introduce a new report titled "Emerging Trends in Real Estate Europe 2008."

He said the top court's decision regarding the law on property sale to foreign nationals and companies had created a misunderstanding, adding that the ruling in fact does not run against the ideal of economic integration with the rest of the world.

Bayraktar said the decision was issued only to stress the impropriety of allowing the Cabinet to decide whether to remove land sale limits on foreigners, underlining that the court had allowed six months to make changes to the sale of property to foreign companies. "A period has been given to the political power, the government, for it to correct this mistake."

He said the Public Works Ministry's directive was only temporary and that it was issued due to a technical necessity.

"This mistake will be corrected in the shortest time. There is no such thing as property sales to foreigners being prevented in Turkey."

Bayraktar said it would be impossible to even assume that in a Turkey trying to embrace Europe and the contemporary world such a thing could ever happen.

Government promises urgent action

A statement from Finance Minister Kemal Unakıtan eased the air of panic slightly in the sector. He said a new regulation that would remedy the situation had already been submitted to the Cabinet. "The regulation on property sales to foreigners has been opened for signature in the Cabinet. I signed it today. Only a few ministers haven't signed it yet, and we will refer it to Parliament in the shortest possible time," he told reporters.

Foreign investment plummets

Meanwhile, the Treasury yesterday announced more disheartening data on foreign direct investment in Turkey. According to these figures, the amount of direct foreign investment made in Turkey for January and February combined dropped to $1.592 billion, a sharp fall of 80.4 percent in comparison to the same period last year.

The amount of net direct foreign investment made in Turkey was $976 million in January, dropping to $616 million in February, according to the Treasury's international direct investment figures. The net total for January and February combined last year for foreign direct investment was $8.102 billion.

Last Mod: 17 Nisan 2008, 08:19
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