1. Introduction
Urban transformation in Turkey is a large-scale, multi-stakeholder public policy especially aimed at renewing buildings at risk of natural disasters and re-planning cities—predominantly in major metropolitan areas. Established under Law No. 6306 on Transformation of Areas Under Disaster Risk, this process offers various opportunities as well as legal risks for foreign investors.
2. General Legal Status of Foreign Investors under Turkish Law
Under Law No. 4875 on Foreign Direct Investments, foreign investors in Turkey enjoy the same rights as domestic investors. However, this formal equality can encounter practical limitations in certain administrative processes (e.g., real estate acquisition, zoning permits, restrictions on private ownership).
3. Rights of Foreign Investors in Urban Transformation Projects
3.1 Right to Equal Treatment
Foreign investors are entitled to equal treatment with Turkish investors in project development, construction, and property acquisition. They may bid in public tenders and form partnerships with private-sector entities.
3.2 Right to Acquire Real Estate
Foreign-capital companies may acquire real estate in Turkey, provided that:
- The company’s articles of association explicitly include real estate acquisition activity.
- Properties in military zones or special security areas require prior government approval.
- Special conditions may apply to properties undergoing transformation under Law No. 6306.
3.3 Fiscal Incentives and Grants
Urban transformation projects can benefit from various incentives such as VAT exemptions, waiver of fees, and simplified building permit procedures. Foreign investors are entitled to these benefits on the same terms as domestic investors.
4. Key Legal Risks for Foreign Investors
4.1 Eminent Domain and Property Rights Risk
Under Law No. 6306, certain properties may be expropriated for public interest. Inadequate service of legal notices (tebligat), valuation disputes, and eviction procedures can pose significant risks for investors.
4.2 Zoning Plan Changes
Abrupt amendments by local authorities to zoning regulations can adversely impact the economic feasibility of a project. Foreign investors should maintain institutional communication with municipalities and secure written zoning guarantees.
4.3 Contractual Breaches and Partnership Disputes
Projects involving local partners may face risks such as breach of contract, construction delays, or ownership conflicts. Legal recourse is available under the Turkish Code of Obligations and Turkish Commercial Code, but protracted litigation remains a major concern.
4.4 Administrative Delays and Bureaucratic Barriers
Foreign investors may be affected by delays in administrative processes and late issuance of permits (such as EIA reports, building permits, occupancy certificates). Unpredictable timelines can disrupt investment planning.
5. Risk Management and Legal Safeguards
- Draft partnership agreements and real estate promise-of-sale contracts in detail and under expert supervision.
- Prefer agreements with international arbitration clauses.
- Formalize agreements with authorities and investment incentive documents through notarization.
- Conduct comprehensive legal due diligence on target properties before investing.
6. Conclusion
Urban transformation projects in Turkey offer meaningful opportunities for foreign investors. However, participation in these projects requires not only economic analysis but also legal foresight and careful planning. Mastery of the Turkish legal framework, the reliability of local partners, and effective management of permitting processes are essential for successful investment. Therefore, obtaining expert
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