Cyprus has increasingly become an attractive destination for investment, offering diverse opportunities across various sectors. Among the most promising options are mixed-use developments, which have gained increasing traction in the Cypriot market due to their potential for high returns and diversification of revenue.
Mixed-Use Developments explained
Mixed-use developments are integrated projects that combine multiple functions, such as residential, commercial, hospitality, and cultural elements, within a single property or development area. These projects are designed to maximize land utilization, promote economic activity, and enhance the quality of urban life. By offering a blend of uses within a cohesive environment, mixed-use developments are recognized for their ability to foster vibrant, sustainable communities and provide long-term value for investors.
In Cyprus, the predominant type of mixed-use developments involves the integration of hotel and residential units within a single parcel of land. This model which we refer to as Hotel-Enhanced Mixed-Use Developments («ΗΕΜU»), enables the coexistence of hotel rooms and residential units, creating a seamless blend of touristic and residential living.
Legislative Framework
The legal framework governing HEMU projects in Cyprus is comprehensive. Key legislation includes:
- Council of Ministers Decision No. 93649 (14.09.22): Officially published on 21.10.22, this decision outlines the regulatory framework for HEMU developments (the «Decision»).
- Hotels and Tourist Establishment Law (N. 40/1969): This law, as amended, provides the foundation for the establishment and operation of hotels and tourist accommodations.
- Regulation of the Establishment and Operation of Hotels and Tourist Accommodation Law of 2019: This law further refines the regulatory environment for hotel and tourist accommodations.
Types of HEMU Developments
HEMU projects are classified into two primary categories:
- Non-Touristic Development («NTD»): Independent residential, commercial, or mixed-use buildings located on the same parcel of land yet separate from the hotel building.
- Condo Development: Touristic developments within the hotel building, where residential condo units coexist with hotel accommodations under centralized management.
HEMU framework is applicable to existing and new touristic developments.
Legal considerations
Prospective investors must be aware of certain restrictions and requirements under the relevant laws and regulations. Key considerations include, inter alia, the following:
- Hotel Classification: Only 4-star and 5-star hotels are eligible for HEMU projects. Lower-rated hotels may qualify under specific conditions.
- Leasehold vs. Freehold Agreements: Condo units may only be sold under leasehold agreements with a minimum duration of 15 years. NTDs, however, can be sold either by virtue of leasehold or freehold agreement, offering greater flexibility to investors.
- Management & Operational Guidelines: Condo units must be centrally managed by the hotel operator, ensuring service quality and brand consistency. The condos' leaseholds agreements with the respective purchaser, should regulate, inter alia, the latter's rights and obligations as well as the usage of the commonly used areas, the management service, the common expenses.
- Space Allocation: The Decision provides limitations as to the allowable building ecoefficiency for each use in a parcel of land. In both cases of NTD and Condo Development, at least 60% of the total development must remain designated for touristic use (hotel operations), while the residential area, whether allocated for condo units or residential/commercial units not forming part of the hotel must not exceed 40% of the total allowable building coefficient.
The Benefits
HEMU real estate developments in Cyprus offer significant advantages, particularly in light of the island's thriving tourism and real estate markets. With the potential for high returns and the need of more sustainable living opportunities, HEMU projects are poised to become a cornerstone of Cyprus's real estate sector.
Μixed-use developments contribute to the expansion of specialized tourism sectors, such as medical tourism, education, and research and technology industries. This, in turn, creates year-round employment opportunities and fosters the development of high-quality jobs.
Additionally, these investments help address the housing shortage in various urban regions by ensuring the necessary infrastructure such as business facilities and employee accommodations is in place. This can attract foreign companies seeking to relocate to Cyprus.
Furthermore, Cyprus's government has established regulations and incentives to support such investments.
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.
