Amendment Made to the Communiqué on Real Estate Investment Funds in Turkey
Summary
The Capital Markets Board (SPK) has made certain amendments to the Communiqué on Real Estate Investment Funds (III-52.3) with the aim of facilitating the contribution of REIFs to housing production and simplifying application processes. The amendments entered into force on July 17, 2024.
Key Amendments
- Project Real Estate Investment Funds: REIFs can now be established to invest in real estate projects where more than half of the total gross area of independent units is exclusively allocated for residential use. The names of such funds must include the phrase “Project Real Estate Investment Fund,” and construction of projects that meet the conditions specified in the Communiqué must begin within 3 years on the land registered in the name of the fund in the land registry.
- Umbrella Funds: REIFs may be issued as umbrella funds, similar to securities investment funds.
- Simplified Internal Regulation and Issuance Document: Certain matters may be regulated in the fund’s internal regulation, issuance document, or the fund issuance agreement to be signed between the fund and participation unit holders.
- Fund Issuance Agreement: Prior to selling participation units to qualified investors, a fund issuance agreement containing the minimum elements specified in the Communiqué must be signed with investors, and a copy of the agreement must be published on the fund’s Public Disclosure Platform (KAP) page.
Project-Specific Requirements
- Independent Real Estate Valuation Report: An independent real estate valuation report must confirm that the project meets all legal requirements, has obtained and been approved for the necessary permits, and that all documents required to commence construction are complete and accurate.
- Project Guarantee: Projects must be secured with at least one of the following: building completion insurance, bank guarantee letter, progress payment system, or any other method deemed appropriate by the SPK.
- Authorized Contractor: All construction work must be carried out under a contract including mutual rights and obligations, by contractors holding Class A or B contractor certificates as defined under the Regulation on the Classification and Registration of Contractors published in the Official Gazette dated 2/3/2019 and numbered 30702. When selecting the contractor, the founder must evaluate factors such as experience, financial status, and project scale. The scope of the contract may be freely determined by the parties but must at least include the contractor’s obligations, payment terms, warranty against defects, termination conditions, the employer’s right to claim compensation, and termination provisions. The founder’s board of directors must approve the contractor selection and contract terms.
Transition Provisions
- Existing REIFs that issued participation units before the amendment date are granted until December 31, 2024 to sign fund issuance agreements with investors and comply with the minimum requirements to be included in the issuance document.
- REIFs that issued participation units before the amendment date and whose portfolios comply with the provisions of project real estate investment funds may apply to the SPK within one month from the amendment date to convert the fund into a project real estate investment fund, provided that fund issuance agreements are signed with all participation unit holders.
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