Partner Perspectives: Chloe Americanos & George Andreou

How do the earliest Real Estate and Construction laws in Cyprus shape today’s regulations, and what opportunities do they create for private corporations?

Cyprus legal system, along with its laws in the legislation is based on common law, and so is the real estate and construction sector. The sector is governed by the immovable property law, which was enacted in 1946. The legal framework on real estate includes other laws governing the sector, such as the specific performance law, the town country and planning law, the immovable property, mortgage and transfer law, etc. Cyprus has also the Department of Land surveys as also as known as the land registry, which is responsible amongst others for keeping records of the land oil owners, issuing title dates and evaluating the land parcels.

These laws have been amended from time to time to reflect the innovation and the initiatives of the Cyprus market and adopt new provisions focusing on the development and improvement of the market. Cyprus has also liberalized its rules in 202004 once a country entered the European Union, allowing the investment by Europeans without any migration permissions. Today, these principles from the basis, from the basis of the modern regulations providing a clear legal framework for private corporations to acquire and transfer real estate, the stability in property rights enhances investors’ confidence and facilitate smoother transactions.

Private corporations today can also benefit from a transparent framework governing the land use and zoning by ensuring that the construction projects align with designated land use categories evolved standards on construction, safety and compliance, and also environmental sustainability with eco-friendly designs and technologies.

What impact do recent regulatory changes in Cyprus have on corporations in Real Estate and Construction, and how can companies leverage these changes for acquisition and development?

In recent years, the construction industry in Cyprus has been in full swing with many large scale projects upgrading the country’s building environment. The construction is mainly focused on multipurpose projects, accommodating all types of buyers. We have seen large projects such as new luxury marinas in almost all coastal areas of the island, new shopping malls, hotels, and even casinos.

The construction companies have been positively impacted mainly by the initiatives brought by the recent regulatory changes imposed to the sector, especially with the fast track licensing for planning and a number of privileges offered for environmental upgrading of the projects, focusing on a more sustainable ecosystem with new technologies as two corporate constructions.

We have recently seen projects combining the residential with the office policy since this trend attracts digital nomads who are employed by foreign companies, but reside in Cyprus. All these changes and initiatives leverage the construction companies to develop new projects, accommodating the needs of the market from luxury lifestyle to relocation of headquarters and employees.

From a corporate standpoint, how does the current legal framework affect foreign investment in Cyprus’ Real Estate and Construction, and how can companies navigate these regulations for optimal operations?

The current legal framework in Cyprus provides incentives to real estate and construction companies to attract foreign investors who are interested in acquiring a property in Cyprus, especially investors outside of the EU. One such example is a permanent residency scheme via investment, which provides you opportunity to third country nationals to apply for permanent residency in Cyprus and include in their application their family members as well.

One of the conditions to apply for permanent residency is to acquire a property in Cyprus, either a house or an apartment, which is new, meaning that it is a first state property and the purchase price must be a minimum of 300,000 euros, plus VAT. Another initiative is the reduced VAT on the first property purchase in Cyprus for the first 200 square meters of the property, whereas the normal VAT rate is 19% in Cyprus. Currently. If someone is eligible to apply for the reduced rate, then they will benefit from a reduced VAT rate of 5%, so a 14% discount.

These are just some examples of initiatives that the recent regulatory changes imposed on the real estate in the construction sector and which were adopted in order to assist the development companies to attract foreign investors and increase their sales.

Considering the historical context, how do recent updates in Cyprus’ Real Estate and Construction laws influence corporate governance, and what opportunities exist for companies to enhance compliance and risk management?

Recent updates in Cyprus real estate and construction laws when viewed in historical context can have implications for corporate governance, compliance, and risk management.

Such updates are the transparency and the accountability by establishing robust mechanisms for the construction companies and risk management strategies by identifying and mitigating potential legal, financial, and operational risks associated with the projects.

We have also seen developments in legal due diligence practices on the construction projects, ensuring basically the, the ownership and protecting the buyers from any conferences on the property, but also perform checks to ensure the proper licensing  of the project.

How significant is the impact of the Real Estate & Construction sector on the Cyprus’s economy?

The real estate and construction sector traditionally constitutes one of the key pillars of the Cyprus economy. The sector as shown in recent studies contributes approximately 15% to the country’s gross value added, the GDA. During 2022, the sector reached a record high of 5.2 billion, euros in value showing an increase of 27% from the previous year. We’re expecting that 2023 result soon, but from our experience, that increase has continued.

I pay the multiple negative effects through the year, especially due to the war in Israel. According to the European Commission, the increase in the sector is a reflection of the growing appetite from companies of foreign interest to relocate their operations and starting the country.

Cyprus is offering a number of benefits to investors who are investing in real estate sectors, such as competitive prices, low office rental costs, regulatory framework aligned with the European Union and attractive lifestyle in a safe, clean, and healthy environment. All these, along with tax initiatives, both corporate and personal, consist of factors contributing to the development of the sector. We’re expecting the real estate and construction sector to continue thriving in the upcoming years. Our firm has significant experience in real estate transactions with vast clientele and multiple transactions throughout the years in all types of projects.