Introduction
Urban transformation projects in Turkey, particularly in major cities such as Istanbul, Ankara, and Izmir, aim to renew disaster-prone areas and promote modern urban development.
These projects are carried out under Law No. 6306 on the Transformation of Areas Under Disaster Risk and offer significant opportunities for both domestic and foreign investors.
Foreign investors can participate through real estate acquisition, project partnerships, construction contracts, and revenue-sharing models, provided they comply with applicable legal restrictions and procedures.
1. Legal Status of Foreign Investors in Turkey
1.1 Main Legal Framework
- Law No. 4875 on Foreign Direct Investment: Grants foreign investors the same rights as Turkish investors (regardless of reciprocity).
- Article 35 of the Land Registry Law No. 2644: Regulates property acquisition by foreigners with security and restriction considerations.
- Law No. 6306: Outlines procedures and principles for urban transformation projects.
1.2 Real Estate Acquisition Conditions
Foreign natural persons:
- May acquire up to 30 hectares of real estate in Turkey.
- Cannot acquire property in military or security zones; project areas require security clearance.
Foreign-capital companies:
- Their articles of association must include provisions on real estate acquisition.
- In some cases, approval from the Council of Ministers or the relevant Ministry may be required.
2. Methods of Participation in Urban Transformation Projects
2.1 Direct Real Estate Acquisition
Purchasing property located in risk-prone areas or buildings classified as unsafe.
2.2 Joint Ventures / Project Partnerships
Partnering with Turkish construction companies under joint venture agreements to develop projects.
2.3 Revenue-Sharing or Build-and-Sell Agreements
Financing the project in partnership with landowners in return for a share of sales revenue.
3. Rights of Foreign Investors
3.1 Equal Treatment Principle
Under Law No. 4875, foreign investors enjoy the same rights and obligations as domestic investors.
3.2 Ownership and Profit Repatriation
- Earnings, profits, sales proceeds, and compensation from investments can be freely transferred abroad.
- Transfers must comply with the Decree on the Protection of the Value of the Turkish Currency and MASAK (Financial Crimes Investigation Board) regulations.
3.3 Arbitration and Dispute Resolution
Foreign investors may include international arbitration clauses in their contracts, choosing institutions such as ICC, LCIA, or ISTAC.
4. Potential Legal Challenges
- Zoning Plan Changes: Project approval processes may be delayed.
- Expropriation and Easement Rights: Land may be expropriated for public benefit.
- Contractual Disputes: May arise between landowners, contractors, and investors.
- Foreign Capital Approval: Some projects require additional permits or government approval.
5. Strategic Recommendations for Investors
- Have all contracts reviewed under both Turkish law and international investment law.
- Verify title deeds, zoning status, and risk assessment reports before investing.
- Explore Free Zones or Investment Incentive Certificates for tax advantages.
- Include clear arbitration clauses specifying seat, language, and applicable law.
Conclusion
Urban transformation projects in Turkey offer foreign investors high-return potential, particularly in metropolitan regions.
However, strict compliance with legal procedures, professional legal advice, and thorough risk assessment are crucial to investment success.
Foreign investors should ensure that their investments comply with both Turkish legislation and the legal requirements of their home countries.
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