Turkey: Acquisition of Real Property in Turkey: Time Consuming Processes for Foreign Investors

Last Updated: 18 November 2015
Article by Serap Zuvin and Nurgul Cakir

Intentions to protect national interests, together with security concerns, have led the countries to enact strict legislations and compliance considerations on transfer of ownership of immovable property to foreigners. Due to Turkey's unique geopolitical position, i.e. being a bridge between Asia and Europe continents and possessing sea straits from Black Sea to Mediterranean Sea, selling immovable property to foreigners has always been an important issue for Turkey.

The Land Registry Law[1] ("Land Registry Law"), which was enacted in 1934 and which in fact shaped Turkey's approach to the sale of immovable property to foreigners, had certain restrictions such as requirement on reciprocity. The Amendment Law to the Land Registry Law[2] ("Amendment Law"), however, briefly abolished such reciprocity requirement and eased the procedures for foreigners to acquire real estate in Turkey. The general spirit of the Land Registry Law and the Amendment Law, restrictions and requirements introduced by the same were already discussed in our first article titled "Acquisition of Real Property in Turkey: Ambiguities, Challenges and Risks for Foreign Investors" published on October 12, 2015. Therefore, the scope of this article is limited only to the time consuming processes that the foreign investors had to encounter in acquiring real estate in Turkey.

Loss of Time of Foreign Real Persons in Acquiring Property

Despite the convenience provided to foreign real persons as recently introduced by the Land Registry Law and the Amendment Law, foreign real persons continue to suffer certain difficulties when -and after- acquiring a real estate in Turkey.

The Land Registry Law, with the  Amendment Law, provides that the Ministry of National Defense must send within one year following the amendment becoming effective, the map and coordinates of forbidden military zones, military security zones and strategic zones to the Ministry of Environment and Urban Planning to whom the General Directorate of Land Registry and Cadaster reports. It further states that, the Ministry of Internal Affairs will send the map and the coordinates of private security zones to the Ministry of Environment and Urban Planning in order for the title deed transactions to be carried out in accordance with such map and values.

The problem is although the Amendment Law entered into force on May 3, 2012 and three years passed such date instead of one, neither the Ministry of National Defense nor the Ministry of Internal Affairs has sent the map and the coordinates to the Ministry of Environment and Urban Planning to date. As a result, in the event that foreign real persons want to buy a real estate in Turkey, every time the General Directorate of Land Registry and Cadaster communicates with the relevant Army Commandership to receive the required piece of information to confirm whether such piece of property is among the permitted area. This practice causes loss of time both to the foreign buyer and the seller.

Furthermore, foreigners buying real estate in Turkey are not being promoted by providing residence permits unlike many other countries in the globe. In order to reside in Turkey foreign real persons must have a residence permit issued by the Ministry of Internal Affairs. The Foreigners and International Protection Law[3] provides that the short term (only up to 1 year) residence permit can be issued to foreigners owning real estate in Turkey. The same article also states that the short term residence permit may be extended for another 1 year.  Therefore, real persons, owning a real estate in Turkey, must renew their residence permits every year. Obviously this renewal process causes additional expense and inconveniences for foreign real persons and takes up their time.

Foreign Investment Companies Still Struggle in Acquiring Immovable Property in Turkey!

Similar to the former Land Registry Law did, the Amendment Law provides that the real estate acquisitions both by foreign real/legal persons must comply with the restrictions as provided under the Law of Military Forbidden Zones and Security Zones[4] ("Military Law"). Under the Military Law, foreign real/legal persons cannot acquire or even enter into those zones, lease real estate and/or work within certain military forbidden zones unless they hold special permission.

Without prejudice to the provisions of the Military Law; the Land Registry Law gives the companies with foreign shareholders the opportunity to acquire real estate in private security zones, military forbidden zones, military security zones and other zones determined by the Military Law. In this case, if the property to be acquired is in military forbidden zones, military security zones or other zones determined by the Military Law; the company must receive a permit in advance from the relevant Army Commandership, or the respective governorship in case the real estate is in private security zones.

Meanwhile, the Regulation on the Land Registry Law[5] provides that companies with foreign shareholders must apply to the Governorship of the place where the property to be acquired is located by submitting the necessary documents and information determined by the Regulation on the Land Registry Law. The Governorship then communicates with the relevant Army Commandership to receive the required information with respect to the property in order to decide whether it will issue its permission for such property or not.

Obviously the foregoing practice contradicts with the Law on Foreign Direct Investment[6] ("FDIL"), which provides that the foreign investors investing in Turkey shall be treated equally with the locals. Under the FDIL, foreign and local investments are protected under the principle of equal treatment. Despite the equality principle provided under the FDIL, the Regulation of the Land Registry Law imposes a special application process to the Governorship on companies with foreign shareholders when acquiring real property in Turkey. To comply with this obligation takes more than one month in practice and imposes additional restraints to the companies with foreign shareholders in their real estate acquisitions in Turkey.

What Could Be Done to Eliminate those Encumbrances for Foreign Investors?

As a developing country, foreign direct investment has always been an energizer for the Turkish economy, and in fact, Turkey has been a good example in applying and seriously benefiting from foreign direct investment especially since the beginning of 2000's. We believe that if Turkey eliminates the foregoing obstacles in the field of acquisition of real property by foreigners in Turkey, she will be able to attract more foreigners to invest in real estate, that is to say;

  • The map and coordinate values of forbidden military zones, military security zones, strategic zones and private security zones should be sent to the Ministry of Environment and Urban Planning by the relevant Ministries in order the title deed transactions to be carried out swiftly.
  • Longer term (such as up to 5 years) residence permits should be given to foreigners who invest in real immovable property in Turkey with a minimum value.
  • The equality concern of the FDIL between foreign investors and local investors should be preserved and the governorship application process, which is imposed only to companies with foreign shareholders when acquiring real property, should be abolished.

Rest of the downsides of foreigners acquiring a real estate in Turkey will be discussed in our forthcoming article, namely "Acquisition of Real Property in Turkey: Avoiding the Liquidation Risk for Foreign Investors" to be published within next month, i.e. December 2015. We kindly invite you to follow our article series regarding the acquisition of real properties by foreigners in Turkey in order to be aware of all significant points on this issue.


[1] Land Registry Law dated December 22, 1934 and numbered 2644 and published in the Official Gazette dated December 22, 1934 and numbered 2892.

[2] Amendment Law to the Land Registry Law dated May 3, 2012 and numbered 6302 and published in the Official Gazette dated May 12, 2012 and numbered 28296.

[3] Foreigners and International Protection Law March 28, 2013 and numbered 6458 and published in the Official Gazette dated April 11, 2013 and numbered 28615.

[4] Law of Military Forbidden Zones and Security Zones dated December 18, 1981 and numbered 2565 and published in the Official Gazette dated December 22, 1981 and numbered 17552.

[5] Regulation on Real Property Acquisitions and Limited Real Rights Acquisitions by Companies and Their Affiliates in accordance with Article 36 of the Land Registry Law published in the Official Gazette dated August 16, 2012 and numbered 28386.

[6] Law on Foreign Direct Investment dated June 5, 2003 and numbered 4875; published in the Official Gazette dated June 17, 2003 and numbered 25141.

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.

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Authors
Serap Zuvin
Nurgul Cakir
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