Citizenship Investment in Turkey: No Risks but the Investment...

Today’s real estate market in Turkey is being led by the most active source of new buyers. These new buyers are the citizenship investors buying property to obtain a Turkish passport and world-wide tax free income with non-residency status. A very attractive prospect, and a very well designed inward investment program, competitive at the leading edge, globally.

The program is so well designed that the citizenship qualifying criteria are basic and simple, the application submission and disclosure is basic and simple, the application processing is basic and simple, and the delivery of the passport is basic and simple. A non-Turkish speaking applicant obviously will need a Turkish speaking person to follow the application in a periodic manner, as it crosses the different approval stages within the different ministries, but very little can or does go wrong. There are no hidden pitfalls, contingencies, criteria, additionalities. Investors that are overly concerned about this need to rest assured, citizenship application procedures are indeed as simple as described.

The biggest risk is not the application risk. The biggest risk is the investment risk. There are no specific regulations governing business practices applied to foreign investors buying property in Turkey, and consumer protection laws are week compared to most developed  many countries. As a result, estate agents and everyone else, from lawyers to mortgage bankers, are facilitating sharp practices, all driven by ‘gold rush mentality’ in pursuit of exorbitant hidden price mark-ups and commissions.

An example of one of many investors’ grievances illustrates these risks below. What is he complaining about?

• Paying the seller’s transfer taxes and other transaction costs.
• Paying too much for the property.
• Misleading information about urban location.
• Misleading information about local transportation and travel times.
• Misleading information about building surroundings.
• Misleading information about rental income and yields.
• Misleading information about permits
• Misleading information about payments, deposits, procedures etc

Investors would be wise to spend less time and effort on citizenship qualification criteria and application procedures, and instead, allocate more time and effort to finding properties that qualify with complete due diligence. Using professional non-commission charging advisers is the best way to do this, but there are practically none available because of the ‘commission gold fever’. Investors would do well to avoid English speaking websites of estate agents. Ninety percent have inaccurate or misleading information on their web pages, including their ‘advice’ guides on how to buy property in Turkey.  Of the remaining ten percent, a few of these have the longest and most dire track record of misleading foreign investors. One recently told an investor that they do not charge buyers a commission, and at the same time, on the firm’s website, there was a statement assuring investors they do not receive commission from sellers. Knowing this firm does not charge fees, the implication is that they are a charity, working for free.  Exactly what type of investors do they expect to be so gullible as to believe any of what they say…?

Investors be prepared, this type of practice is not uncommon or unusual. Instead it is standard practice by everyone in the ‘gold fever commission’ chain- estate agents, citizenship consultants, lawyers, mortgage bankers, appraisers etc. In private, it is laughed off amongst them as a necessary tactic for remaining competitive in business, and so acceptable. For many, receiving one or two commissions of $20,000 to $40,000 justifies risking their professional licenses, but the chances of recourse through sanction are so low as to be a nonexistent risk.

Caveat emptor is a key tenant of free market economies… ‘buyer beware’ comes with a high risk and cost for the buyer.

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