General Introduction to Real Estate Investment Companies in Turkey


A rapid increase in the Turkish construction sector had caused companies to experience difficulties in covering their liquidity demands, paving the way for the commencement of Real Estate Investment Company (“REIC”) practices in 1995. Since the construction sector in Turkey has grown significantly in recent years due to increased economic stability, new regulations, extensive urban renewal projects, and rapid population growth which attracts and inspires foreign investors to invest in the Turkish real estate market, we would like touch briefly on the REIC.

Definition of the REICs

REICs are regulated in Capital Markets Law under the Communique numbered III-48.1 (“Communique”). According to the brief definition in the Communique, REICs are “a type of capital market institution which is founded in order to issue its shares for the purpose of operating and managing a portfolio composed of real estates, real estate projects, real estate based rights…”.  In addition to this definition, there are also some other activities stated in the Communique, such as Infrastructure investment. Pursuant to the Communique, if a REIC’s activity covers only infrastructural investment, then its portfolio shall consist only of infrastructural investments and services.

Scope of the Activities

The main aim of REICs is investing in profitable real estate projects, including projects owned by companies that are idle because of the lack of liquidity. REICs are only able to engage in activities permitted by the Communique which are defined as real estate projects, and if the REIC’s Articles of Association contains a specific clause permitting it, infrastructure projects. 

Pursuant to the Communique, REICs are under an obligation to invest at least 51% of their total assets in real estates, real estate projects, and real estate based rights. Moreover, at least 75% of the total assets of REICs shall be composed of activities and operations in a specific field of business or investment in a particular real estate or infrastructure project. REICs are not directly allowed by the Communique to be involved in construction, have equipment or machines, operate any hotel, shopping mall, supermarkets, or residential sites for commercial purposes other than rental income and purchase and sale of the real estate.

Main Conditions of the Establishment

REICs may be established directly as a joint stock company by having their Articles of Association compatible with the Communique or by amending their articles of association in accordance with the Communique. The establishment applications of REICs are first subject to the approval of the Board of Capital Markets (“Board”), then the Ministry of Customs and Trade. In order to get approval of the Board, it is necessary to satisfy the requirements stated under the Communique. Basically these requirements are: (1) Initial capital – or in the case of conversion, each of its paid capital, issued capital, and equity capital – shall not be less than the amount determined every year by the Board; (2) Founders of the REICs shall not have any criminal records, overdue tax debt, suspension of bankruptcy or order of bankruptcy, and shall have financial capacity and a good reputation; (3) The members of the Board of Directors and the general manager shall meet the requirements specified in the Communique; (4) The registered title of the new company shall include the phrase “Real Estate Investment Company”; and (5) At least 25% of its initial capital or issued capital shall be offered to the public within three months.

Pursuant to the Communique, REICs may only issue shares providing the privilege of nominating members of the Board of Directors as privileged shares before a public offer. After the public offer, REICs cannot issue privileged shares even though the shares are related to the nomination.  

Main Incentives

Although REICs are restricted in their activities, they receive special tax advantages which enable them to avoid some tax obligations. For instance, pursuant to Corporate Tax Law, incomes of REICs are excluded from the 20% corporate tax. Additionally, if the Board makes profit distribution obligatory to a REIC, the 15% tax on distributed shares will be excluded from withholding tax as well. These incentives – which represent major advantages of REICs – attracts both small and large, domestic and international investors who are looking to diversify their stock portfolios and would likely benefit from REICs’ long-term returns. 


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