Amendment to the Communiqué on Principles Regarding Real Estate Investment Funds

The Communiqué (III-52.3.f) Amending the Communiqué (III-52.3) on Principles Regarding Real Estate Investment Funds (Communiqué) entered into force through its publication in the Official Gazette dated 17.07.2024 and numbered 32604. With the Communiqué, real estate investment funds (REIFs) are given the opportunity to invest in projects reserved for residential use in order to contribute to housing sector and various provisions are amended to simplify and expedite the application processes. The significant amendments introduced by the Communiqué are summarized below:

• The definitions of the most appropriate means of communication, fund issuance agreement and contractor are added to the scope of the Communiqué, and the investor information form was removed from the definition of information documents and the definition is updated to cover only the fund bylaws and issuance document.
• The required qualifications of real estate appraisers to be included in the organizational structure of the founder and the manager are detailed. The Communiqué states that this position can also be filled by a board member who has a real estate appraisal license and at least 3 years of experience in this field.
• Prior to the amendment, it was not possible for REIFs to invest in real estate projects other than publicly funded housing. With the amendment, it is now regulated that REIFs can invest in real estate projects where more than half of the total gross area of independent sections is allocated for residential use. Funds established within this scope must include the phrase “project real estate investment fund” in their titles.
• A requirement has been introduced for construction to begin within 3 years on lands registered in the name of REIFs.
• The Communiqué also establishes principles regarding project real estate investment funds. Accordingly, independent real estate appraisal institutions must verify that the real estate projects to be included in the portfolio have obtained all necessary permits, that the projects have been approved and that the documents required for the commencement of construction are complete. In addition, the projects must be secured by building completion insurance, a bank letter of guarantee, a progress payment system or other methods deemed appropriate. In addition, it is regulated that all kinds of construction work of real estate projects must be carried out within the scope of contracts executed with certain contractors. 
• Prior to the amendment, it was not permitted to establish real estate investment funds as umbrella funds. With the amendment it is regulated that real estate investment funds may be issued under an umbrella fund like securities investment funds.
• It was regulated that the sales start date to be determined for the issuance of participation shares of the fund shall not exceed 6 months following the receipt of the approved issuance document by the founder. This period has been extended to 1 year.
• In order to simplify the texts of the bylaws and the issuance document, it is stipulated that certain issues will be regulated only in one of these texts or in the fund issuance agreement to be signed between the fund and the holders of participation shares.
• Prior to the sale of participation shares to qualified investors, a fund issuance agreement containing the minimum elements specified in the Communiqué will be signed with the investors and this agreement will be published on the Public Disclosure Platform

With the provisional articles added to the Communiqué, funds whose participation shares were issued as of the effective date of the amendments were given until December 31, 2024 to sign a fund issuance agreement with investors and to comply with the minimum elements required to be included in the issuance document. In addition, the founders of funds whose portfolio complies with the provisions of project real estate investment funds may apply to the Capital Market Board within one month at the latest in order to convert their funds into project real estate investment funds by signing a fund issuance agreement with all participation shareholders.