Real Estate Sector In Turkey

Turkey's real estate industry has witnessed remarkable growth over the past two decades, becoming a crucial sector in the country's economy. With its strategic location bridging Europe and Asia, a rich history, and a fast-growing population, Turkey offers attractive opportunities for real estate investment. From residential and commercial properties to luxury developments and urban transformation projects, the Turkish real estate market appeals to both local and international investors.

In this article, we delve into the significance of Turkey's booming real estate sector, highlighting its rapid development and the lucrative opportunities it offers for investors. Additionally, we provide a step-by-step guide for entrepreneurs on how to establish a real estate company in Turkey, ensuring a seamless entry into this thriving market.

Whether you're an investor seeking high returns or an entrepreneur looking to tap into Turkey's dynamic real estate industry, this guide has everything you need to get started.

Overview of Turkey's Real Estate Industry in Turkey

he real estate sector in Turkey has been one of the primary drivers of economic growth. Over the past decade, it has consistently contributed around 5-6% of Turkey's GDP and attracted billions of dollars in foreign direct investment (FDI).

Key Highlights

Market Size: Estimated to exceed $150 billion by 2025.
Housing Demand: Fueled by a young, growing population and urbanization.
Commercial Real Estate: Rising demand for office spaces and logistics centers.

Key Factors Driving the Market

Several factors contribute to the growth of the real estate industry in Turkey:

Strategic Location

Turkey's position as a bridge between Europe, Asia, and the Middle East makes it a hotspot for international trade and tourism, boosting demand for residential and commercial properties.

Economic Growth

Despite fluctuations, Turkey's economy has shown resilience, encouraging investment in real estate as a stable asset class.

Government Incentives

Citizenship by Investment: Foreign investors can obtain Turkish citizenship by purchasing properties worth $400,000 or more.
Tax Benefits: Reduced VAT rates on certain real estate transactions for foreign buyers.

Infrastructure Development

Mega projects like Istanbul Airport, Marmaray Tunnel, and the Istanbul Canal have enhanced connectivity and increased property values in surrounding areas.

Key Features of the Istanbul Financial Center

The Istanbul Financial Center is equipped with world-class facilities and cutting-edge technology to meet the needs of modern financial institutions. Key features include:

Integrated Smart Infrastructure: High-tech office spaces, energy-efficient buildings, and advanced telecommunications systems.
Centralized Regulatory Hub: The IFC brings together key regulatory bodies, streamlining compliance and fostering transparency.
Advanced Transportation Links: Proximity to Istanbul's international airports, metro lines, and highways ensures seamless connectivity.
Residential and Commercial Amenities: The center includes luxury apartments, shopping malls, hotels, and conference facilities, offering a holistic environment for professionals and their families.
Innovation and Fintech Focus: Dedicated zones for fintech companies and startups foster innovation in the financial services sector.

Popular Cities for Real Estate Investment in Turkey

Istanbul

The economic and cultural heart of Turkey, Istanbul leads the real estate market.
Prime locations: Bosphorus waterfront, Kadıköy, Levent, and Başakşehir.
Average property price: $1,500–$5,000 per square meter, depending on location.

Ankara

The capital city offers affordable housing and growing commercial opportunities.
Popular areas: Çankaya and Batıkent.

Antalya

A hotspot for tourism and expats, known for its Mediterranean coastline and luxury developments.

Izmir

A blend of modern living and traditional charm, with rising demand for coastal properties.

Bursa

Known for its historical sites and proximity to Istanbul, attracting both local and international investors.

Foreign Investment in Turkish Real Estate

Foreign investment has surged in Turkey's real estate market, particularly since legislative changes in 2012 that allowed foreign ownership of properties.

Top Foreign Buyers

Citizens from the Middle East, Europe, and Asia are the most active buyers.
Countries like Iraq, Iran, Russia, and Germany lead in real estate purchases.

Reasons for Popularity

Affordability compared to Western markets.
Favorable exchange rates for foreign buyers.
Citizenship and residency benefits.

Statistics

Over 68,000 properties were sold to foreign buyers in 2022, a record-high figure.

Urban Transformation and Infrastructure Projects

Turkey's ambitious urban transformation projects aim to modernize aging infrastructure and mitigate earthquake risks.

Urban Renewal

Over 7 million housing units are being renovated under government-backed initiatives.
Focus areas: Istanbul, Izmir, and Bursa.

Mega Projects

Istanbul Canal: Expected to boost real estate prices in nearby districts like Arnavutköy.
North Marmara Highway: Enhances connectivity to suburban developments.
New Financial Districts: Projects like Istanbul Financial Center are creating demand for commercial spaces.

Challenges Facing for Real Estate Sector in Turkey

Economic Instability

Fluctuating currency exchange rates and inflation impact construction costs and property prices.

Oversupply

High levels of housing inventory in some regions have led to price stagnation.

Regulatory Complexity

Lengthy approval processes and bureaucratic hurdles can deter some investors.

Natural Disasters

Turkey's vulnerability to earthquakes necessitates strict compliance with building codes, increasing costs.

Future Trends & Opportunities for Real Estate Sector in Turkey

Sustainable and Smart Housing

Green building practices and smart home technologies are gaining traction, appealing to environmentally conscious buyers.

Coastal and Resort Properties

Demand for properties in Antalya, Bodrum, and Fethiye is expected to rise as tourism recovers.

Commercial Real Estate

Logistics centers and co-working spaces are becoming popular due to the growth of e-commerce and hybrid work models.

Digitalization of Real Estate Transactions

Online platforms and virtual tours are making property transactions more accessible for international buyers.

How to Set Up a Real Estate Company in Turkey

Setting up a real estate company in Turkey has become increasingly popular among entrepreneurs and investors. With a booming property market and strategic location at the crossroads of Europe, Asia, and the Middle East, Turkey offers a lucrative landscape for real estate ventures. Whether you're a foreign investor or a local entrepreneur, establishing a real estate company in Turkey involves clear procedures and significant opportunities.

1- Legal Framework for Foreign Entrepreneurs

Foreign investors are allowed to establish companies in Turkey, including real estate firms, under the same conditions as Turkish citizens.

Key Regulations
- Foreign Ownership: Foreigners can own 100% of a company.
- Property Restrictions: Certain areas, such as military zones, are restricted for foreign-owned entities.
- Licensing: A real estate company must comply with Turkey's real estate brokerage laws and obtain the necessary operating licenses.

2- Required Documents for Company Registration

Articles of Association (by mersis system).
Passport Copies (for foreign investors, translated into Turkish and notarized).
Tax Identification Number (for foreign investors).
Proof of Address (for the company's registered office, Virtual office is available).
Signature Declarations (of authorized company representatives).
Trade Registry Application Form (by mersis system).

3- Choose a Company Type

The most common company types for real estate businesses are:

Joint Stock Company (JSC)(Anonim Şirket)
- Structure: Ideal for larger, corporate businesses, a JSC operates through shareholding. Shareholders' liability (except for public debts) is limited to their capital investment.
- Capital Requirement: Minimum of 250,000 TL, with 25% to be paid upfront into the company's bank account before establishment. The remaining amount must be paid within 24 months.
- Benefits: No upper limit on the number of shareholders.It has simplified share transfers. 100% foreign ownership permitted. Shares can be listed on the stock exchange. Most common type of equity company at IFC.
- Responsibilities: Shareholders are not required to act as directors, it is optional, therefore the liabilities of non-director shareholders are limited to their capital amount (excluding public debts).
  Learn more about JSCs in Turkey

Limited Liability Company (LLC)(Limited Şirket)
- Structure: Accommodates 1 to 50 shareholders.
- Capital Requirement: Minimum of 50,000 TL, payable within 24 months.
- Benefits: 100% foreign ownership permitted. Establishment can proceed with zero capital (to be deposited later).Most common type of equity company in Turkey.
- Responsibilities: At least one shareholder must act as a manager. Other directors can be shareholders or external appointees.
  Learn more about LLCs in Turkey

Sole Proprietorship Company(Şahıs Şirketi)
- Structure: Owned and operated by a single individual responsible for all debts and liabilities.
- Benefits: No cash capital required, quick registration and liquidation, low operating costs.
- Drawbacks: Owner is personally responsible for all actions and debts, subject to progressive tax regime.
Branch Office(Şube)
- Structure: Allows foreign companies to engage in commercial activities in Turkey without establishing a new entity.
- Benefits: No minimum capital requirement, can commence business immediately, can issue invoices and transfer profits outside of Turkey.
- Drawbacks: Limited to the parent company's scope of activities.
  Click the link for more info about Branch Office in Turkey

Liaison Office(İrtibat Ofisi)
- Structure: Set up by foreign investors for research activities without commercial engagement.
- Benefits: Exempt from corporate income tax and VAT, relatively easy registration and liquidation.
- Drawbacks: Prohibited from commercial activities, cannot issue invoices or transfer profits, time-restricted operations (initially three years, extendable).
  Click the link for more info about Liaison Office in Turkey

4. Obtain a Tax Number

5. Open a Bank Account

Open a corporate bank account in Turkey and deposit the required minimum capital.

7. Obtain Necessary Licenses

Apply for a real estate brokerage license from the relevant authorities.
Ensure compliance with local zoning and property management regulations.

8. Register for Social Security

9- Taxation and Financial Obligations

Real estate companies in Turkey are subject to the following taxes:

Corporate Tax: Standard rate: 25% (as of 2023).
Value Added Tax (VAT): Applies to property sales, usually at 1%, 8%, or 18%, depending on the property type.
Stamp Duty: Charged on documents such as contracts, typically at 0.189%.
Withholding Tax (WHT):Withholding tax applies to specific income and payment types, such as self-employment & rental payments, wages, dividends and interest, and royalties, with rates varying by income source. Generally, the tax rate is 20%, with the payer responsible for deducting and remitting it to the government.

Accounting Requirements

Companies must maintain accurate financial records and submit annual financial statements.
Hiring a certified accountant is mandatory.

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.