New rules for buying and selling real estate in Turkey: what do foreigners need to know?

How will the new regulations affect the real estate market in Turkey?
How does an expert property appraisal protect the interests of the seller and the buyer?

Introduction of new regulations in the real estate market in Turkey

Sergey Volchenkov, who heads the Turkish company Tolerance Homes, which is involved in real estate and construction, reports on the introduction of new regulations that came into effect on March 4, 2019. These changes are detailed in circular No. 1795, which requires a mandatory professional appraisal of real estate for foreign citizens intending to buy or sell an apartment or house in Turkey.

Goals of the new standards

The adoption of these new regulations is driven by the need to implement a tax policy aimed at aligning Turkey's real estate market with international standards and norms. They are also intended to collect statistics on actual housing prices in different regions, which will allow for more accurate determination of tax strategies and increase budget revenues.

Problems of the previous system

Before the introduction of Circular No. 1795, documents confirming property ownership (tapu) often indicated a lower value for the acquired properties. As a result, the purchase tax was calculated based on this minimum amount. With the new rules, foreigners wishing to engage in real estate transactions must obtain an appraisal that reflects the actual value of the property. Based on this information, the property registration tax will be determined.

Important terms for buyers

Now important terms for buyers in the real estate market in Turkey, such as:

tap- document confirming ownership;
search- cadastral information;
aidat- monthly service fees;
residence- residence permit.

Tax rates

The temporary tax on home purchases has now been reduced to 3% of the actual value, and this rate will remain in effect until the end of March 2019. After that, it will increase to 4%.

Profit tax for developers

In addition, the new rules establish a profit tax for builders and owners of secondary housing if the ownership period is less than five years. It will amount to 20% of the difference between the sale price and the price at which the property was acquired. Homeowners will be able to avoid paying this tax only after five years of owning the property.

Example of applying the new rules

For example, if a citizen bought an apartment in Turkey for 100,000 lira and then decides to sell it two years later, receiving an appraisal from an accredited company confirming that the true market value is 300,000 lira, then the seller is required to sell the property at that specified price, which will be recorded in the title deed. The price difference of 200,000 lira will be documented. Based on this information, the seller must pay a 20% profit tax on that difference, which will amount to 40,000 lira.

Consequences of the new legislative initiative

Thus, the new legislative initiative significantly impacts both the process of buying and selling real estate in Turkey and the taxation mechanism, creating more transparent conditions for all key market participants. Now, buyers and sellers will be better informed about their rights and obligations, which is bound to have a positive effect on the development of Turkey's economy and the real estate market as a whole.

Expert assessment of real estate

If the expert assessment shows that the value of the apartment exceeds the amount the owner is willing to sell it for, he has the right to indicate a price lower than this assessed value in the ownership document (tapu). However, it is important to understand that tax will need to be paid on the difference between the actual sale price and the expert assessment.

Sellers should also be prepared for possible tax audits.

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Government authorities are aware of the previously existing rules in the market, and experts suggest that the audits will not be too strict. At the same time, it is difficult to predict the exact developments in each specific transaction.

Support for foreign citizens

Now, foreigners wishing to buy or sell real estate in Turkey no longer have to worry about facing the novice aspects of the system, unscrupulous agents, or dishonest developers alone. They will have a special expert report in hand, which contains all the necessary information about the property they are interested in.

These reports are issued only by licensed companies that are regulated by the Banking Regulation and Supervision Agency (BDDK) and the Capital Markets Board (SPK). The cost of the appraisal services varies depending on the region where the property is located, as well as local fees for document processing.

Currently, the average price of an expert evaluation is aboutthousands of lira, including value-added tax (VAT).

Payment for the expertise

It should be noted that the payment for the expertise must be made before submitting the documents for the issuance of the title deed. The law does not specify who is responsible for paying for this expertise, leaving this decision to the discretion of the parties involved in the agreement.

Typically, the additional costs associated with purchasing real estate are traditionally covered by the buyer, so it is possible that the cost of the appraisal will also fall on their shoulders. The validity period of the appraisal report isthree monthsfrom the moment of its receipt.

Content of the expert report

The expert report includes the following information:

cadastral data of the land plot on which the property is located;
the dimensions of the land plot that will be transferred to the new owner (proportional to the area of the purchased housing);
object type;
information about the presence or absence of the act of commissioning (scan) and the permit for the use of the property or its part;
estimated value of the property in lira;
If the object is still under construction, the report will indicate the estimated price upon completion of the work.
plan with dimensions of the object;
information about the existence of encumbrances on the property;
Description of the area where the property is located, which plays an important role in assessing the future liquidity and other characteristics of this real estate.

Thus, the process of buying and selling real estate becomes more transparent and reliable for foreigners, allowing them to feel confident in the new market.

Conclusion

In conclusion, the new rules that came into effect on March 4, 2019, open up new horizons for foreign citizens in the Turkish real estate market. As the director of a real estate and construction company, I see this as a significant step towards transparency and fairness. Now, buyers and sellers have the opportunity to obtain an independent expert assessment, which not only protects their interests but also contributes to improving the tax climate in the country.

I am convinced that this change will help smooth out many issues that investors have faced in the past. Documenting the real value of real estate through expert reports will significantly increase trust in the market. We will no longer witness undervalued transactions, which is beneficial for both investors and the state, which will be able to optimize its tax policy. Thus, the new tax system should lead to more stable and predictable conditions for all participants in real estate transactions.

Support for foreign citizens

It is also important to remember that foreign citizens will now receive the necessary support in the form of expert reports, which will help them protect themselves from unscrupulous practices. This decision will make the process of buying and selling real estate safer and more transparent, which will undoubtedly increase interest in the Turkish market among foreign citizens.

Advantages of the new rules

Transparency.The ability to obtain an independent expert assessment protects the interests of the parties involved in transactions.
Optimization of the tax climate.The real value of real estate will allow for an improvement in tax policy.
Increasing trust in the market.Eliminating undervalued transactions will protect investors' rights.
Support for foreigners.Expert reports will help avoid unethical practices.

I understand that there may be some difficulties at the beginning related to adapting to the new rules; however, the upcoming changes are necessary for the growth and development of the market. Mutual responsibility between buyers and sellers, as well as transparency in all transactions, is what we strive for with our company.

The future of Turkish real estate

Ultimately, the adoption of such measures will strengthen Turkey's position as one of the attractive destinations for real estate investment. I am confident that each year we will see more positive changes in this market, and I will be happy to continue sharing useful information with our clients. Believe in the future of Turkish real estate just as I do!