Turkey's International Real Estate Stock Exchange Market
Turkey is set to establish the international real estate stock exchange, which will enable the properties in the country to be sold abroad. In May 2017, Nurettin Canikli, the deputy prime minister of Turkey said at a news conference that banks were struggling to finance construction in the Turkish real estate market. Searching for alternatives, ministers along with the president Recep Tayyip Erdogan had come up with a workable solution that would ensure the growing success of the industry that had reinvented itself over the last 15 years.
They settled upon the idea of the International Turkey Real Estate Stock Exchange. Certificates would instead finance the sector and buyers in many countries would be eligible to invest in Turkish real estate.
Aided by the Standing Committee for Economic and Commercial Cooperation of the Organization of the Islamic Cooperation (COMCEC), by July 2017, it was in full operation, and stockbrokers can now trade shares in any real estate project that has received trading approval including land acquisition, shopping malls or community residences.
The system is the first of its kind, but it acts just like a stock exchange, and the body governing it assures buyers and sellers that is risk-free and extends to the 57 COMCEC countries.
Real Estate Certificates (Gayrimenkul Sertifikası)
The Capital Markets Board (CMB), draws up the real estate certificates called Gayrimenkul Sertifikası in Turkish. The whole concept is to divide real estate projects into smaller shares and give alternative financing for construction companies and builders.
Since it is a form of financing, applicants need to apply to the Capital Markets Board, and Borsa Istanbul, (BIST) is the sole and central establishment for trading in Turkey. The board, along with the BIST only approves projects that are in the design or construction stage, because the whole point of the system is financing rather than acquisition.
Both residential and commercial projects can trade the certificates via the Borsa Istanbul and investors with low savings will find many benefits including the ability to later sell certificates for title deeds or to earn from potential appreciation because real estate becomes more expensive once construction has finished.
Units sold at auction will see the proceeds distributed evenly towards all certificate holders. Alternatively, if the investor wishes to sell their certificates to other investors, they can do so on the stock exchange.
Depending on the project size, and financing needs, each certificate will either represent areas such as square meters or monetary values. Issued certificates for residential projects focus on monetary values from 1 to 200 Turkish liras, hence giving potential buyers an affordable way to invest should they wish to buy more certificates in the future.
The Standing Committee for Economic and Commercial Cooperation of the Organization of the Islamic Cooperation has helped the setup of the Turkish real estate stock market because certificate holders do not receive interest revenue. Hence it falls within the guidelines of Islamic finance principles. As usual with any other investment, because the certificate is traded on the Borsa stock market, there is no fixed income.