Supplementary memorandum submitted by
British Business Group
SUBJECT: PROPERTY
OWNERSHIP IN
TURKEY
Another issue has arisen very recently which
could also have a potentially negative impact on some aspects
of business in Turkey, affecting foreign owned businesses here.
This relates to the ownership of property.
Basically it is possible for foreign individuals
to own property in Turkey, subject to reciprocity. There are certain
limits with regard to the amount of property which can be owned
and military approval is required of individual purchases.
Following changes set out in the law relating
to foreign investment, foreign investors (both corporate and individual)
could establish companies in Turkey and own property in Turkey
via these companies. Many investment and property development
projects were established using this legal framework.
The main opposition party raised an action in
the Constitutional Court to cancel the provisions of the foreign
investment law allowing foreign capital companies to own property
in Turkey (Art 3.d)), and the Court recently ruled in favour of
cancellation of this provision. This is a potential source of
difficulty for some foreign companies which are engaging in the
property business—we have one such UK client at present.
While the court decision is not yet published, and from statements
by the court its effect will be postponed for six months to allow
the government time to rectify the anomaly which it causes, there
is understandable concern on the part of businesses who have now
committed time and resources to projects which have potentially
been put at risk. Property already owned is unlikely to be taken
away from its owners, but future registrations will be very difficult
to achieve and sale of property to other Turkish foreign capital
companies will be a problem. Many major Turkish businesses will
also be highly concerned about the effect this ruling could have
on their ability to bring foreign equity partners into their important
real estate projects.
It would be critical to learn from the Government
directly what steps they intend to take in order to solve this
problem and provide security to investors in the property market.
If they do nothing projects worth millions may fail and the foreign
investment climate in property will be irreparably damaged. Assurances
should be sought that the Government will act to secure this important
source of investment for the foreseeable future.
March 2008
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