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Buying property in Turkey in instalments

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Istanbul
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The key feature of instalment plans from Turkish developers is that they can be issued even for completed projects. An instalment period of up to three years and a down payment of 25–50% are typical conditions for the Turkish market. You can get a discount of up to 20% for a purchase without instalments. In this article, we explain why a foreigner cannot get a mortgage in Turkey, why it is profitable to take an instalment plan and how to protect an investment by buying an apartment in a new building on an instalment plan.

Underlying reasons for instalments

The issuance of mortgages in Turkey to foreigners has been suspended. Formally, this is due to the new rules that came into force in January 2022 due to amendments to Article 13 of the Turkish Capital Circular. Now, in real estate deals, foreign buyers must exchange foreign currency for Turkish liras and receive a special exchange certificate — Döviz Alım Belgesi. A foreigner can register ownership of the property only with such a certificate (a complete guide from the Cadastral Administration). The amount of the convertible currency must correspond to the sale price indicated in the title deed (TAPU). When receiving a housing loan, part of the real estate cost is paid by the bank, and the new owner pays only the down payment.

Interest-free instalments from developers and a discount for a lump sum payment

Most Turkish developers provide instalment plans for up to three years. In some projects, instalments can be issued even if the facility has already been built and put into operation. The down payment can range from 25% to 50%. The residual amount is allocated to mandatory payments. Payments’ frequency depends on the agreement with the developer. Of course, there is an option to pay off early without any fees. Instalment is interest-free; however developers provide a tangible discount of 10–20%, if they receive the entire amount at once. 

The ownership of real estate is registered only after full payment by instalments. In some projects, you can use your property immediately after paying the down payment and after the construction’s completion.

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Investment benefits of instalments in Turkey

Typically, the prices for new buildings in Turkey are denominated in euro or US dollars. The total cost and payment plan in instalment agreements are indicated in foreign currency: this is how developers protect themselves from inflation and the depreciation of the Turkish lira. From April 2021 to April 2022, the Turkish lira depreciated by 96% against the US dollar.

The real estate market in Turkey is now experiencing a real boom: according to the Reidin analytical agency, in March 2022, the average property prices in the country increased by 102% in Turkish liras. The March report of the Central Bank of Turkey shows an annual growth of 110% in the housing price index. In popular municipalities of Istanbul and Antalya, property prices increased by more than 170% in Turkish liras (Endeksa) or about 40% in US dollar terms.

The annual growth of average house prices in Turkey as of April 2022:

City

Price increase in ₤

Price increase in $

Rent growth in ₤

Rent growth in $

Istanbul

173%

39%

147%

26%

Antalya

183%

44%

279%

93%

Ankara

129%

17%

132%

18%

Mersin

160%

32%

72%

-13%

Source: Endeksa analytical agency

Keep in mind that these are average figures; a closer look at new buildings in the central regions shows an even more significant increase in prices. According to Turkish industry experts, developers and real estate agents, the prerequisites for further appreciation of real estate are still there. Read a detailed analysis of property prices in Turkey.

Therefore, from an investment point of view, during this rapid market rise in large municipalities such as Istanbul and Antalya, it is quite profitable to take an instalment plan: the loss of developer’s discount of 10–20% is covered by an increase in property value in the coming years. Especially when you consider that in Turkey the buyer does not incur significant additional costs when buying a property, except for the transfer tax of 2–4% and VAT, which can be returned after the transaction.

To obtain citizenship by investment, you will have to pay off instalments

In Turkey, you can obtain citizenship under the Turkish Golden Passport programme for investments in real estate from 400,000 US dollars. However, you can apply for citizenship only after registering property’s ownership. In most projects, this means paying off the instalment plan. Therefore, those investors who are interested in Turkish citizenship often do not apply for instalments or apply for a short period, if necessary.

The rules of investment citizenship in Turkey are changing: until 2018, investment citizenship cost more than 1,000,000 US dollars, then the threshold was lowered to 250,000 US dollars, and in May 2022 it was increased again to the current 400,000 US dollars for deals concluded after 13 June 2022. How long these new rules will last is unknown, so it’s safer to pay for the purchase right away.

There are rare exceptions: some large developers agree to issue a certificate of ownership to the buyer before the instalment is paid off in full. In this case, the property will be encumbered, but with an instalment agreement and a certificate of ownership, you can apply for citizenship.

Risks associated with instalment plans and the purchase of objects under construction

The Turkish government is interested in selling property to foreign investors. Foreign buyers of Turkish real estate are given a residence permit and citizenship. Also, in order to attract foreign investors, a subsidy programme was launched in April 2022 for companies that sell Turkish real estate to foreigners and develop in foreign markets. These subsidies cover up to 50% of the expenses of such companies.

Nevertheless, in order to avoid courts in a foreign state, one should minimise possible risks in advance and do everything by the book.

Risk no. 1. Fraudsters, bankruptcies and project freezes

There is an outdated opinion that in Turkey any unemployed person can engage in the sale of real estate, therefore, the risk of encountering fraudsters is quite high. True, a few years ago, there were such agents in Turkey. However, since 2018 the government has been taking active measures to combat illegal real estate trade. And from 1 September 2020, all real estate transactions must be carried out in the presence of a licensed real estate agent, whose activities and rates are regulated by the Cadastral Office (Tapu Kadastro Genel Müdürlüğü).

It is now mandatory for construction companies to work with authorised offices or organise their own sales offices in accordance with the law. Therefore, the problem of fly-by-night companies and unscrupulous realtors in Turkey has eventually been solved. Make sure that your agent or developer has a real estate trade permit (Taşınmaz Ticareti Yetki Belgesi).

Sometimes new construction companies attract buyers with low prices and then fail to cope with the project and go bankrupt due to a lack of sufficient experience. When choosing property in a project under construction, it is important to pay attention to the developer's experience and look at his portfolio, containing examples of completed projects. Experienced developers, who have been on the market for a long time, value their reputation and their business.

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The very fact of payment in instalments is a protection against the risk of developer’s bankruptcy and freezing of projects at the construction stage, since the investor invests an amount proportional to the current project cost. If the developer goes bankrupt, the land with the unfinished project will be sold at the market price, and the proceeds will be returned to investors. Instalment payments in the contract should depend on the stages of construction.

Risk no. 2. The construction may be delayed

Most projects in Turkey are built quickly — within 1–2 years. According to the Turkish Statistical Institute data for March 2022, construction prices have risen by 103% in a year and by 9.6% in a month. Therefore, there is a high risk that contractors will exceed the estimate and the construction itself will be delayed due to the lack of funding.

The construction industry plays a key role in the Turkish economy, so the government supports developers: subsidises loans and reduces the tax burden during periods of crisis.

It is important to make sure that the contract specifies the completion date of the project as well as clauses on compensation in case of delays.

We recommend choosing completed or close to delivery projects.

Risk no. 3. Changes in the project or cost after the contract has been concluded

Generally, sales in the project begin after obtaining a building permit and plan approval. Make sure the developer has the following documents:

  1. Certificate of ownership of the land (TAPU) or rental agreement for municipal land for residential development.
  2. Building permit with approved zoning plan (İmar Durumu Belgesi).
  3. Design compliance declaration and floor plans of the building.

Depending on the project’s stage, there may be different documents: at the construction stage, it is important to check the land rights and building permit, and for finished housing — the TAPU status. The Kat İrtifakı mark in TAPU means pre-registration according to the approved project plan and that the developer has yet to complete the second stage of registration. The Kat Mülkiyeti mark means that the apartment is finally registered in the housing stock. Depending on the construction’s type, other documents may be required, so it is very important that the deal is accompanied by a lawyer specialising in Turkish real estate.

Land title certificate from the developer.
Building permit

The contract must exclude project changes without the buyer’s consent, indicate the final price and specify the procedure for notifications and confirmations of receiving instalment payments (dekont, makbuz).

In order to protect your interests, a lawyer should be involved in the deal, who will analyse the contract with the developer and warn of possible risks. All major real estate agencies have such lawyers. We cooperate with trusted Turkish lawyers specialising in real estate transactions.

Elena Milishenkova Elena Milishenkova Chief Commercial Officer at Tranio

Risk no. 4. Low-quality construction

In 2021, the Turkish Ministry of Environment and Urbanism started the implementation of the Building Identification System (Bina Kimlik Sistemi). Each building will have a certificate, by which anyone can get information about it: from the materials used in its construction, the technical plan and the results of regular inspections to the list of residents.

By the end of 2022, it is planned to include 100,000 buildings in this system and release a mobile app for wide use. Developers in large cities, especially in Istanbul, are already building projects in compliance with all building regulations, pending the certification of buildings in the new system and the transparency that will follow.

Nowadays, many new buildings in Turkey appear on the market already finished or close to completion. This is not Germany, where everything is sold at the early stages of construction or even immediately after obtaining a building permit.

You can visit Turkey to see and touch everything with your own eyes and hands. Or at least look at the property during a video call with the manage

Elena Milishenkova Elena Milishenkova Chief Commercial Officer
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