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Amendments to the Communiqué on Principles Regarding Real Estate Investment Funds

Amendments to the Communiqué on Principles Regarding Real Estate Investment Funds

Amendments to the Communiqué on Principles Regarding Real Estate Investment Funds

Summary

The Capital Markets Board (CMB) of Turkey has amended the Communiqué on Principles Regarding Real Estate Investment Funds (III-52.3) to facilitate REIFs' contribution to housing production and streamline application processes. The amendments became effective on July 17, 2024.

Key Changes

  • Project Real Estate Investment Funds: REIFs can now be established specifically for investing in residential real estate projects. These funds must have "Proje Gayrimenkul Yatırım Fonu" (Project Real Estate Investment Fund) in their names and initiate construction within three years on plots registered under the fund's name.
  • Umbrella Funds: REIFs can be issued as umbrella funds, similar to securities investment funds.
  • Simplified Bylaws and Issuance Documents: Certain matters can be addressed in either the bylaws or issuance document, or in the fund issuance agreement with unit holders.
  • Fund Issuance Agreements: Before selling units to qualified investors, a fund issuance agreement outlining specific elements must be signed with investors and published on the fund's Public Disclosure Platform page.

Project-Specific Requirements

  • Independent Real Estate Appraisal: An independent appraisal report must confirm that projects meet all legal requirements, are ready and approved, and have complete construction documents.
  • Project Security: Projects must be secured with at least one of the following: building completion insurance, bank guarantee letter, earned value system, or a CMB-approved method.
  • Qualified Contractors: All construction works must be carried out by contractors with a Class A or B license (as defined in Regulation 30702) within a contract outlining mutual rights and obligations. The founder selects the contractor based on experience, financial status, and project size. The contract scope is determined by the parties but must cover contractor obligations, payment terms, defect guarantees, withdrawal conditions, contract giver's right to damages, and termination conditions. The founder's board of directors must approve the contractor and contract terms.

Transitional Provisions

Existing REIFs with issued units have until December 31, 2024, to sign fund issuance agreements and comply with minimum issuance document requirements. Founders of existing REIFs with compliant portfolios can apply to the CMB within one month to convert the fund into a project real estate investment fund, provided a fund issuance agreement is signed with all unit holders.

Navigate the New Landscape with Nexpo

These amendments present new opportunities for REIFs. Nexpo, a leading expert in Turkish real estate investment, can help you navigate the evolving landscape. We offer comprehensive guidance on establishing and managing project real estate investment funds, ensuring compliance with the latest regulations.

Contact Nexpo today to discuss your REIF needs.