Scrutiny tightened over citizenship-related estate sales

Emre Eser - ISTANBUL

An association of the Capital Markets Board (SPK) has intensified its investigations on both the real estate sector and entities producing valuation reports after extensive profiteering and manipulations were detected, particularly in property sales to foreigners seeking Turkish citizenship, a senior official has said.

If a foreign individual intends to buy or sell real estate in Türkiye, they are obligated to obtain a valuation report from entities licensed by the SPK. This becomes especially crucial when seeking Turkish citizenship in exchange for a specified investment.

The report assesses the value based on the property's specifications.

The Turkish Appraisers Association (TDUB), operating as a regulatory and supervisory professional association under the oversight of the SPK, has the authority to set rules, manage the discipline and oversee the valuation process.

Speaking to daily Hürriyet, TDUB head Yaşar Bahçeci stated that a multibillion-lira profit pie has emerged in the real estate market over the last two years, particularly in sales involving foreign parties.

Several valuation reports were manipulated for profit, leading to investigations into numerous companies and experts.

In sales related to citizenship, reports often overstate the real value of houses, allowing certain individuals to gain unfairly, deceiving the state-run institutions, according to Bahçeci.

"We have imposed fines totaling 15 million Turkish Liras [$519,000] on 16 legal entities and 28 individuals just this year. Each case undergoes a seven to eight-month review process. Substantial penalties are imminent. Those engaged in irregularities and manipulation will not escape without repercussions, even if they are within our administration," he added.

Discussing the volume of real estate sales for Turkish passports, Bahçeci mentioned that 800,000 valuation reports were generated in 2023, with approximately 40,000 involving transactions with foreigners and around 10,000 related to properties for citizenship.

"In other words, citizenship-related real estate transactions exceeded $5.5 billion in 2022 and approximately $3.5 billion in 2023. The stakes are substantial,” he explained.

Bahçeci highlighted that within TDUB, 155 valuation companies with nearly 9,000 valuation experts operate, and investigations are ongoing for 43 of these companies.

"We are determined to cleanse ourselves of any bad actors. For instance, we identified an excessive valuation in a file for just 112 residences in a housing project. Unfortunately, like in any profession, there are those among us who are engaging in irregularities and manipulations, but we will no longer tolerate such behavior."

Reminding that an "automatic expert assignment" system was introduced in 2019 to prevent manipulation, where customers and experts were matched, which prevented excessive valuations in reports, Bahçeci noted that this system was abandoned after just two years.

"In this system, no one could choose an expert during the sale; the valuation expert was assigned by artificial intelligence. However, due to intense objections, the automatic assignment was removed. This system was preventing manipulation. Urgently, we need to revert to this system."