In today's world, the increasing living costs in cities have led to heightened activity in the real estate sector, necessitating the implementation of various regulations, incentives, and projects within this sector. Furthermore, when specifically assessing Turkey, the fact that Turkey is located in an earthquake zone makes the planning of livable cities and the acceleration of the urban transformation process essential. To achieve these goals, new projects and regulations are being introduced daily to overcome challenges related to resources, financing, and legal frameworks. Real estate investment funds, which make real estate more accessible, provide financial functionality in minimizing these challenges. The legal framework introduced on project real estate investment funds aim to ensure accessibility, flexibility, and inclusivity for the real estate sector in Türkiye.

On July 17, 2024, the Communiqué on Amendments to the Principles of Real Estate Investment Funds ("Amendment Communiqué") was published in the Official Gazette numbered 32604, introducing several changes to the Communiqué on the Principles of Real Estate Investment Funds ("Communiqué").

The Amendment Communiqué allows real estate investment funds to invest in real estate projects where more than half of the total gross area of the independent sections is designated for residential use, thereby contributing to housing production. It mandates that the titles of these funds must include the term "project real estate investment fund" ("Project REIF"), and aims to simplify and enhance the efficiency of the application processes for real estate investment funds ("REIF").

With Article 15 of the Amendment Communiqué, principles regarding Project REIFs were established following Article 18 of the Communiqué. According to this, it is possible to establish funds exclusively for investing in real estate projects, where more than half of the total gross area of independent sections is designated for residential use, as determined by reports prepared by independent real estate appraisal firms. Certain principles have been established for these funds:

• It is mandatory for the titles to include the phrase "project real estate investment fund."
• The REIF portfolio may only consist of land for project development, real estate projects, participation shares of investment funds with short-term or money market terms in their titles, reverse repos, lease certificates issued by the Republic of Turkey's Ministry of Treasury and Finance Asset Leasing Company, government debt securities, term deposits, and participation accounts.
• Portfolio limitations outlined in Article 19 of the Communiqué (requiring at least 80% of the fund's value to consist of real estate investments) will not apply to Project REIFs.
• Project REIFs can include real estate projects conducted on their own land, as well as on lands belonging to other individuals or the public through revenue-sharing or land-for-land agreements, and they can invest in real estate projects by acquiring independent sections with residential characteristics from ongoing projects or establishing surface rights.
• For lands registered under the name of Project REIFs in the land registry, all legal requirements must be fulfilled to start the construction of a real estate project meeting the conditions set by the Communiqué within three years at the latest.
• Rights arising from revenue-sharing agreements that the fund is a party to must be secured by mortgage, guarantee, surety, or other types of collateral deemed appropriate by the Capital Markets Board. No collateral is required if the other party of the agreement is the Republic of Turkey Ziraat Bank, Türkiye Halk Bankası Anonim Şirketi, Türkiye Emlak Bankası Anonim Şirketi, Türkiye Vakıflar Bankası Türk Anonim Ortaklığı, Savings Deposit Insurance Fund, Housing Development Administration of Turkey, İller Bankası A.Ş., municipalities, their subsidiaries, affiliates, and/or companies in which they have the privilege of nominating members of the board of directors.
• It is mandatory that all necessary permits for real estate projects to be included in the portfolio have been obtained, the projects are ready and approved, and all legally required documents for commencing construction are complete and correct, as verified by independent real estate appraisal firms. Additionally, the project must be secured by at least one of the following methods: building completion insurance, bank guarantee letter, progress payment system, or other methods deemed suitable by the Capital Markets Board.
• It is required that all construction works of real estate projects be carried out by contractors under an agreement that includes the mutual rights and obligations of the parties arising from the construction works.

With Article 9 of the Amendment Communiqué, Article 12/A, titled "Principles for Umbrella Funds and Funds Attached to Umbrella Funds," was added following Article 12 of the Communiqué. This amendment allows the participation shares of REIFs to be issued under an umbrella fund. Thus, instead of creating separate charters for each REIF, new REIF shares can be issued under a single charter by preparing an issuance document with the umbrella fund.

Additionally, the Amendment Communiqué changes the regulation regarding the start date for the sale of participation shares, previously limited to no more than six months following the receipt of the issuance document by the founder, extending this period to one year.

Furthermore, Article 20 of the Amendment Communiqué introduces Provisional Article 2 into the Communiqué. According to this provision, existing REIFs that have issued participation shares as of the effective date of the changes, July 17, 2024, and whose portfolios comply with the principles and procedures for real estate projects, must apply to the Capital Markets Board within one month, i.e., by August 17, 2024, to change their titles and/or issuance documents to include the term "project" upon declaring that an issuance agreement has been signed with all participation share owners.

Another change introduced with Article 20 of the Amendment Communiqué, under Provisional Article 2, grants existing REIFs until December 31, 2024, to sign issuance agreements with their investors and ensure compliance with the issuance agreements.

@Eren Yeniculha @Cagla Barut