Rights and Risks of Foreign Investors in Urban Transformation Projects 

1. Introduction

      Urban transformation in Türkiye is a multi-actor, large-scale public policy aimed at renovating structures at risk of disaster and replanning cities, particularly in metropolitan areas. This process, legally established by Law No. 6306 on the Transformation of Areas Under Disaster Risk, presents various opportunities for foreign investors, but also carries certain legal risks.

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2. General Status of Foreign Investors under Turkish Law

    In Türkiye, foreign investors have equal rights with domestic investors under the Law No. 4875 on Direct Foreign Investments. However, this principle of equality may vary in practice in some administrative processes (e.g., acquisition of real estate, building permits, restrictions on private property).

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3. Rights of Foreign Investors in Urban Transformation Projects

3.1 Right to Equal Treatment

  Foreign investors are treated equally with Turkish investors in project development, construction, and property acquisition processes. They can participate in public tenders and form partnerships with the private sector.

3.2 Right to Acquire Immovable Property

Foreign-owned companies can acquire real estate in Türkiye; however:

• The company's articles of association must define real estate acquisition as an activity.

• Acquiring real estate in military restricted areas and special security zones is subject to permission.

• In the transformation of properties covered by Law No. 6306, special conditions may arise.

3.3 Tax Advantages and Incentives

Urban transformation projects can benefit from various tax and fee incentives such as VAT exemption, fee waivers, and building permit facilitations. Foreign investors can benefit from these incentives equally with domestic investors.

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4. Major Legal Risks for Foreign Investors

4.1 Risk of Expropriation and Property Rights

According to Law No. 6306, some properties may be expropriated for reasons of public interest. Insufficient notification, compensation assessment, and eviction processes during the expropriation process can create risks for investors.

4.2 Zoning Plan Amendments

    Sudden changes to zoning plans by local governments can negatively impact the economic feasibility of an investment. Foreign investors should establish institutional communication with municipalities on this matter and secure necessary zoning commitments in writing.

4.3 Breach of Contract and Partnership Issues

Projects undertaken with local partners may face commercial risks such as contract breaches, construction delays, or property disputes. Foreign investors have redress mechanisms under the Turkish Code of Obligations and the Turkish Commercial Code, but in practice, lengthy legal proceedings represent a significant risk factor.

4.4 Administrative Permission and Bureaucratic Obstacles

Another risk that foreigners may face is the slow pace of administrative processes and the delay in obtaining permits (e.g., environmental impact assessment report, building permit, occupancy permit). The unpredictability of these processes can disrupt investment plans.

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5. Risk Management and Legal Safeguards Mechanisms

• Partnership agreements and real estate sales promise agreements should be prepared in detail and under strict supervision.

• Contracts containing international arbitration clauses should be preferred.

• Protocols signed with the administration and investment incentive documents must be formalized through a notary public.

• A detailed legal assessment should be conducted beforehand for properties to be invested in.

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6. Conclusion

   Urban transformation projects offer significant opportunities for foreign investors in Türkiye. However, participation in these projects requires not only economic but also legal foresight and planning. Familiarity with Turkish legislation, the reliability of local partners, and the proper management of permit processes are key to a successful investment. Therefore, it is strongly recommended to seek expert legal advice before investing.