Turkey: A New Means For Funding Real Estate Projects Beyond Conventional Methods – Real Estate Investment Funds

The Capital Markets Board (the "Board") has introduced a new financing model for real estate projects with its Decree on the Principles Regarding Real Estate Investment Funds1 (the "Decree"). Given the flexibility of the real estate investment fund model (no public offering procedure, easier liquidation process, etc.) in comparison with other funding methods (real estate investment companies, etc.), it is expected that real estate investment funds will gain popularity as a new financing tool for real estate projects within a short time following the Decree's coming into force on 1 July 2014.

The real estate investment fund is defined under the Decree as an estate, established for a definite or indefinite period of time for the purpose of managing the assets acquired with the funds provided by qualified investors in return for contribution shares. The portfolio of the fund should be operated based on fiduciary ownership principles in the name of the investors. Real estate investment funds may be founded for the purposes of both investing in a specific project and/or sector as well as for an unspecified purpose.


A real estate investment fund may only be established by portfolio management companies and real estate portfolio management companies (the "Founder") that are registered with the Board. The establishment of a real estate investment fund is subject to the approval of the Board. To obtain such approval, the internal regulation of the fund, the standard form and other relevant documentation, as may be requested, must be submitted to the Board. Upon the Board's approval, the fund is established upon the registration of the internal regulation of the fund before the relevant trade registry.

Founders may either manage the fund directly or hire another portfolio management company or real estate portfolio management company as the manager of the fund.

Real estate investment funds do not have legal personality, the assets are held by the fund on the basis of the fiduciary ownership principles on behalf of its investors.2 As an exception, the fund is deemed to have legal personality with respect to the registration of real estate related rights. In other words, the real property held by the fund will be registered before the relevant land registries in the name of the fund.

With the purpose of protecting investors' rights, the estate of the fund is deemed separate and different from the estate of the Founder, portfolio trustee and/ or the portfolio manager. Accordingly, the assets of the fund cannot be levied; even for the collection of public receivables, put in pledge and provided as a guarantee for the obligations of the Founder and/or portfolio manager. The obligations of the Founder and/or portfolio manager to third parties cannot be set off with the receivables of the fund from such third parties.

Qualified Investors - Contribution Shares

Contribution shares are issued to investors, in return for the cash provided by such investors to the fund. The contribution shares of the real estate investment funds do not have any nominal value. The value of the contribution shares is determined on the basis of the total value of the assets of the fund (i.e., total value of the assets / total number of the contribution shares). Accordingly, if the fund is managed profitably by the Founder or portfolio manager and the value of the assets increases following the establishment of the fund, the value of the contribution shares owned by the investors will increase proportionately, which will constitute the return of the contributors' investment in the fund.

As per the Decree, contribution shares may only be issued to qualified investors,3 which are generally defined as the legal or real persons holding cash deposits and financial assets exceeding TL 1,000,000.4 Accordingly, the issuance procedure in real estate investment funds is simpler than that in the public offering procedure: the Founder should apply to the Board with the issuance certificate (ihraç belgesi), the standard form and other relevant documentation as may be requested by the Board. Following the approval of the issuance certificate by the Board, the contribution shares of the fund may be issued and submitted to the investors through appropriate distribution channels.

Investors may always exit the fund by selling their contribution shares to other qualified investors. However, unlike in other types of investment funds, the investors may not exit from the fund by freely returning their contribution shares to the real estate investment fund. The return of the contribution shares may be restricted under the fund documents (internal regulation, issuance certificate, etc.) with certain time periods (e.g., once a year, etc.).

Moreover, the return of the contribution shares of the funds having a definite duration may be restricted to the complete term of the fund, which means that the contribution shares may only be returned to the investors upon the dissolution of the fund.

The foregoing restriction regarding the return of the contribution shares arises from the immovable nature of the assets held by the fund. The liquidation of the assets are more time consuming than other types of financial instruments, such as equity, forex transactions, etc., which restricts the ability of the fund for immediate return of the contribution shares (liquidity issue).

The Decree adopts a flexible approach with respect to the liquidity issue. It does not impose any minimum cash requirement to ensure the liquidity of the fund. Instead, the Decree encumbers all responsibility for ensuring the liquidity regarding the return of the contribution shares to the Founder. Such liquidity may be ensured by the Founder by any means deemed appropriate. The Founder may also opt for purchasing the contribution shares in its name, to ensure the liquidity for the return of the contribution shares. However, contribution shares to be acquired by the Founder may not exceed %50 of the total number of contribution shares and the respective contribution shares should be returned to the fund within 2 years following the acquisition of the contribution shares by the Founder.

It is possible to apply a commission for sales and/ or return of contribution shares, provided that terms and conditions regarding such commission are expressly set forth in the internal regulation and the issuance certificate. Such commissions would be included in the fund's assets as revenue.

Fund Estate

The estate of the fund is comprised of real estate investments, as well as other types of financial instruments. However, at least 80% of the total value of the fund's assets should be real estate related investments, as real property, real estate related rights, shares of real estate investment companies and joint stock companies 75% of the total assets of which consist of real estate investments, real estate certificates and other real estate investment funds. The remaining part of the estate may consist of other types of rights and investments such as deposits, investment funds other than real estate investment funds, derivative transactions and other similar financial instruments.

The total net asset value of the fund should reach at least TL 10,000,000 within a year at the latest, following the commencement of the sales of the contribution shares. The assets of the fund should be subject to asset valuation by institutions recognized by the Board, at least once every year and the results of the asset valuation should be notified to the investors. The asset valuation should also be conducted prior to each real estate transaction of the fund.

Scope of Investments

The fund is entitled to purchase all types of real estate (land, residence, office buildings, shopping centers, hotels, etc.) and real estate related rights (construction right, usufruct right, etc.). The fund may also use credits for the investments to be made and grant mortgages over the fund's assets for such credits, on the condition that the total amount of the credits does not exceed 50% of the total value of the fund's assets, and that the Board and the investors are sufficiently informed of such credit related transactions.

The Decree sets forth certain restrictions regarding the abovementioned investments. Real estate investment funds are not allowed to make short-term real estate investments on an ongoing basis. They may not directly manage or operate real estate projects or undertake the construction works with respect to the real estate projects. If a property owned by the fund needs to be operated or any construction work should be conducted, such works must be outsourced to third parties.

All buildings and other similar constructions to be acquired by the fund must have occupancy permits and condominium ownership should be established over the respective properties. However, acquisition of buildings such as hotels, shopping centers, offices, hospitals, commercial warehouses for the purpose of gaining lease income, is exempted from the condominium ownership requirement.

Real estate investment funds may acquire real estates and real estate related rights that are subject to transfer restrictions or encumbrances (mortgages, etc.). However, the value of such real estates and real estate related rights may not exceed 30% of the total value of the fund's assets.

Agreements granting rights in favor of the funds such as promise to sell agreements, promise to sell agreements in return of land share, revenue share agreements etc. must be registered with the land registry. However, the agreements executed with the Housing Development Organization (TOKİ) and its subsidiaries are exempted from the above-mentioned registration requirement.

The Founder or portfolio manager may collect performance fee from the investors over the revenue and sale profit generated from the real estate investments and/or increase in the value of the fund's real estates, provided that such fee is expressly set forth in the internal regulation and the issuance certificate.


During the last 20 years, real estate investment funds have gained popularity in Europe. They were first regulated in Europe by Switzerland and Germany; followed by the other European states. By the beginning of 2010, the number of these funds was around 780 and their value was Euro 210 billion, approximately.5 These figures indicate the significance of the funds in the real estate investment market.

The Turkish real estate market (as an emerging and alternative investment tools to become a mature investment jurisdiction. Given the relative flexibility of the legislation, it seems that real estate investment funds may attract the attention of local and global market players and contribute to the achievement of the above goal


1 Published in the Official Gazette dated 3 January 2014 and numbered 28871.

2 Under fiduciary ownership, a person (trustee) holds a property on behalf of the other party (beneficiary) on the basis of a written or verbal agreement between the parties. Legal owner of the property is the trustee. However, the property is not held by the trustee for its own benefit, however, kept by the trustee for the benefit of the beneficiary.

3 Defined in Articles 31 and 32 of the Decree on the Rules regarding Establishment and Operations of the Investment Institutions published in the Official Gazette dated 17 December 2013 and numbered 28854 - Article 2 of the Decree on the Sale of Capital Market Instruments published in the Official Gazette dated 28 June 2013 and numbered 28691.

4 Professional investors such as (i) intermediary firms, banks, portfolio management companies, collective investment institutions, pension mutual funds, insurance companies, mortgage financing institutions, asset management companies and institutions established abroad, which are equivalent to the above-mentioned institutions, (ii) retirement and support funds, (iii) public entities and institutions, international institutions such as the Central Bank of Turkish Republic, the World Bank, International Monetary Fund, and (iv) other institutions deemed to be similar to the abovementioned institutions by the Board, are also considered as qualified investors.

5 Gayrimenkul Yatırım Fonları, Yalçın Özge OKAT, http:// www.sermayepiyasasi.org/yatrm-fonlar/makaleler/703- gayrimenkul-yatrm-fonlar-yalcn-oezge-okat.html , p.1.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
ELIG Gürkaynak Attorneys-at-Law
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
ELIG Gürkaynak Attorneys-at-Law
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions