Fueled by a sustainable economic expansion over the past decade, Turkey has seen its real estate markets boom as hundreds of new housing projects have mushroomed across the country. Favorable conditions in Turkish housing markets have not escaped the radar of foreign investors, who would like to benefit from a high demand and increasing property value. Meanwhile, European real estate markets have plunged due to a lingering sovereign debt crisis.

Yet Turkey still fails to attract foreign capital for its real estate at a desired level. One critical reason for this is that the country has reciprocity agreements with several countries, including EU countries and the US, but it lacks such a deal with the majority of Arab nations, Iran and Turkic countries, where investor sentiment is relatively high. Anticipated regulations in property ownership law are aimed at attracting investors in Gulf and Turkic republics, markets from which Turkey loses a significant capital inflow in real estate investments. Market observers expect the anticipated foreign investor influx to Turkish real estate markets could create as much as $5 billion in sales per annum following the expected regulations.

Real Estate Investing Association (GYUDER) President Işık Gökyaka tells Today's Zaman that a large Iranian real estate group is currently considering acquiring a large number of houses from separate housing projects in Turkey. “Currently busy doing comprehensive market research, this group is particularly interested in the provinces of İstanbul and Bursa. …They do not have an upper limit but as far as we know this group considers buying between 500 and 1,000 houses from each project they study,” says Gökkaya.

Real Estate's General Manager Tansel Turgut Yazıcı said on Monday Arabs have already moved to make large real estate buys in Turkey. "I guess there are representatives of nearly 100 groups looking for investment opportunities," she said.

Under existing regulations it isn't clear whether a company should be classified as local or foreign and therefore which legal procedures they are subject to while acquiring a land in Turkey. With the expected planned changes to the law, restrictions on companies that are funded by foreign capital will be eased.

According to Gökkaya, adding to the size of foreign-led real estate investments in Turkey could double and even triple the current figures in the following few years. Turkey attracted $3 billion in foreign real estate investments between 2003 and 2008. This number was $2 billion last year. “Take the example of Spain: They attracted $7 to $8 billion in real estate investments from abroad per year until 2008 when the global financial crisis hit Spanish markets hard. There is no reason we can't repeat Spain's earlier success provided that necessary measures to ease procedures are taken,” he argues. The GYUDER head warns that the Turkish government should provide long-term, sustainable city planning in order to avoid the currently rising interest in real estate being curtailed due to a future financial crisis.

Gökkaya says there are also “serious investors” from Asia doing research in Turkish real estate markets. “We have also been contacted by investors from Singapore and Malaysia who are considering acquiring property in Turkey. The use of ‘sukuk' [the Islamic equivalent of bonds] in Turkish banks also facilitates the increasing interest from Muslim investors in Turkey.”

İnlar Holding CEO Serdar İnan acknowledges the increasing foreign investor interest in Turkish real estate markets, particularly from the Gulf countries. “I receive around four to five Arab investors from Qatar, Saudi Arabia and the UAE every month. …there are also Iranian investors that have contacted us. They are currently doing comprehensive market research. I know Turkish investors who are building new hotels in and outside of İstanbul to attract Gulf buyers. One of them is constructing new houses in Bolu and Arab investors will most likely acquire estates there. Some Arab investors are considering partnerships with Turkish counterparts.” İnan, however, says the anticipated regulations may not be enough to attract much foreign investment unless some bureaucratic obstacles are removed. He says the anticipated legal changes should be finalized as soon as possible to avoid potential speculative investments in the market. “Some foreign investors are acquiring land for relatively cheaper prices via locally registered companies and they are awaiting the new laws. Later they will sell this land for higher prices in anticipation of making huge profits