On 3 September 2009, the Regulation on the Principles and Procedures for Allocation of Public Immovables for Investment1 ("Regulation") entered into force, establishing the rules for allocating public real property – "immovables" – to real and legal persons holding an investment incentive certificate for the cities designated and sectors promoted by the Ministry of Finance's Decree No. 15199 on Government Subsidy for Investment,2 issued on 14 July 2009.
Assessment of Land Parcels
Parcels of land belonging to the Treasury, specially budgeted administrations, and special provincial administrations or municipalities, as well as those directly operated by the state, will have to be assessed within the context of the Regulation. Whereas the Ministry of Finance will conduct the required transactions for the plots of land exclusively owned by the Treasury and those under state control, for land owned by specially budgeted administrations, special provincial administrations and municipalities, the relevant administration that owns the land will carry out the necessary transactions under the Regulation.
According to the Regulation, investors should have an investment incentive certificate to benefit from the incentives. The immovables (which are subject to an easement right or license to occupy) must have an investment value no less than the market value designated by the administration that owns them. Under the Regulation, the total investment value for crops and livestock cannot be less than one multiplied by the above mentioned market value; for tourism investments, twice the market value; and for all other types of investments, three times the market value. In any case, the total fixed investment value will not be less than TL 1,000,000 for the first and second regions, and TL 500,000 for the third and fourth regions. The investor should have net assets amounting to at least 20% of the investment undertaken. A feasibility report and a financing chart will be submitted for investments over TL 10,000,000.
Under the Regulation, investors who are to benefit from the incentive will be granted independent and continuous easement rights over the immovables for up to 49 years in return for a sum at the rate of 3% of the real estate tax-based value of the immovables for the first year. In the event the easement right cannot be granted to the investors because the immovables are under state control and not registered with the relevant land registry, the investors will benefit from a license to occupy for up to 49 years in return for a sum at the rate of 3% of the real estate tax-based value of the immovables for the first year. Both the easement right and the license to occupy the immovable are transferrable to third parties.
The investors will be charged for neither the revenues gained from operating the building and facilities on the immovables nor the rentals obtained from third parties residing in these buildings and facilities. The value of immovables including all buildings and their annexes neither required nor owned by the public, and the value of those with unrealized investments, will be assessed at 3% of the real estate tax-based value of the immovables.
The fee for the second and following years regarding the license to occupy and the easement right will be increased in proportion to the increase of the Producer Price Index (PPI – rate for the period ending on the corresponding month of the previous year) announced by the Turkish Institute of Statistics.
The Regulation will not apply to land:
- with restrictive records or annotations with the relevant land registry, e.g., lien, mortgage, certificate of title granted by the state, annotations of trusts and foundations, etc.;
- which is subject to joint ownership or tenancy in common;
- designated for public services;
- to be transferred by the General Directorate of Highways because it remains within the borders of the city's highways;
- within the scope of the Forest Law;
- not approved by the General Staff in line with the Law on Military Forbidden Zones and Security Zones; and
- which should be transferred to the Ministry of Public Works and Settlement in accordance with the Housing Law.
The administrative organs that own the immovables will consult with the Organized Industrial Zone, Industrial Zone Administrations or other relevant organizations and institutions, depending on the type of investment, on the following issues:
- places to be invested in, and the type of investments that may affect them; and
- the minimum surface area of the immovables to be allocated under the Regulation.
In light of the above information, the relevant administrative organs will determine which immovables are appropriate for the investment.
Determination of Market Price
The authorized committees of the administrative bodies that own the immovables will determine the market price and rental fee for the license to occupy or the easement right regarding the immovables, or will have them determined. For the immovables privately owned by the Treasury and those under state control, officials of the Ministry of Finance and real estate appraisal companies subject to the Capital Market Law will determine the market price and the rental fee for the easement right or license to occupy,.
The relevant chambers of industry, commerce and agriculture will be notified of the immovables determined for allocation. The immovables which the administrative bodies deem appropriate will be announced periodically, and a period of at least two months will be granted for the applications.
A committee will be formed of the governor or deputy governor, as chairman, and representatives of the relevant administrations to handle the issue of the license to occupy or the easement right to be established on the immovable. This committee will evaluate the applications.
Termination and Revocation of Easement Right
If the investor fails to comply with the terms and conditions of the Regulation, the easement right (or the license to occupy) will be revoked without the need for any judicial proceeding. In such an event, the buildings constructed over the property will be left to the administration that owns the immovable.
One of the investor's most important obligations is to employ the number of employees declared in the investor's incentive certificate for a period of 5 years.
Cancellation of State Aid
Under the Regulation, the state aid, which is maintained by discounted easement right fees and omission of revenue sharing, will be cancelled if the investor (i) completes more than 50% of the construction but cannot complete the project within the stipulated time limit (except in case of force majeure events); or (ii) fails to employ more than 10% of the employees it has undertaken to employ. Upon cancellation of the state aid, the easement right fee will be collected based on the market price, which should be no less than 3% of the real estate tax value of the immovable.
1. Published in the Official Gazette dated 3 September 2009, numbered 27338.
2. Published in the Official Gazette dated 16 July 2009, numbered 27290.
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.