Acquisition of a real estate in Georgia – how can a foreigner buy property
The procedure for buying real estate in Georgia: what to look for
Real estate investment is a secure way of investing money with promising long-term benefits, and Georgia is a country with the most attractive real estate investment conditions among all post-Soviet countries. Why is it profitable to buy real estate in Georgia and how to conclude a deal - will discuss in this article.
Perks of buying a property in Georgia
Ukrainians who wish to profitably invest in real estate choose Georgia because of numerous benefits that it offers to its investors.
The property price in large cities, such as Tbilisi or Batumi, starts at 800 USD per square meter. The closer to the city centre, the more expensive it gets. Additionally, you will need to pay extra to have a nice view from the window, but it's definitely worth it. In smaller cities and even in resort areas such as Bakuriani, Gudauri or Tsikhisdziri, the cost per square meter of a property starts from 350-400 USD.
Good investment climate
Georgian government strives to create the most comfortable conditions for international investors by simplifying the procedures for starting a business and buying real estate, decreasing taxes, duties and reducing the number of formalities for concluding deals.
It usually takes around 4-8 years for apartments in a hotel complex or commercial real estate in the centre of a large city, on the seashore or in a ski resort to start producing a profit. Rental income averages at 20% per annum, especially when there is a high demand for property among tourists.
Low tax rates
An individual foreign investor does not pay tax on property acquisition. Only if his income from renting out the property exceeds 40 000 lari per annum, a surcharge of 0,02 to 1% is payable.
Obtaining a residence permit
An acquisition of property valued at 100 000 USD and more gives a foreigner the right to apply for residency in Georgia. Until recently, the amount of real estate investment, allowing the obtaining a residence permit was 35,000 US dollars; however, it has been revised and could possibly be further increased in the future.
Features of buying real estate in Georgia
Most of the Georgian territory is practically a resort, so you can invest in property by the sea, ski resorts or in unique climate zones, where people travel for relaxation and medical purposes. Another option is to invest in a property located in the business and shopping areas of large cities. For example, commercial property in the city centre of Tbilisi can produce up to 20% of annual profit from rent, as the city remains active throughout the whole year and not just holiday seasons.
Registration of a transaction for non-residents
The government made the purchase of a real estate for foreigners in Georgia as convenient and straightforward as possible. To conclude a deal, an individual only requires a passport and a minimum of information is entered into the Register:
• Full name;
• Passport information.
The information about changes in the ownership of purchased property gets entered in the Public Register within four days. However, even this term can be shortened by paying an increased state fee. The investor even does not need to be present during the conclusion of the deal. He can delegate this to an authorized person by drawing up a formal power of attorney in his name. What will be required:
• send to the authorized person a notarised power of attorney alongside with a copy of your passport;
• top up an account in a Georgian bank to pay for the transaction.
The transaction is concluded according to the standard procedure and does not require payment of additional fees or taxes.
Timeframes and costs of formalization
After the conclusion of the property purchase deal in Georgia, the information on the transfer of ownership rights gets entered into the Public Register of Real Estate within four days. The price for this service is 105 lari. You can speed up the process of data entry into the Register for an additional fee:
• 255 lari - 1 day;
• 305 lari - 1 hour.
The payment of state fee is carried out through the bank. Other than that, the property purchaser is not obliged to any additional registration fees.
Features of the contract conclusion, which are essential for the buyer to know
When investing in the Georgian property, a foreigner might face some difficulties when trying to understand all the intricacies of local legislation. Some nuances when concluding a deal for the purchase of real estate:
• the purchase and sale agreement must be drawn up in Georgian and the buyer's native language in three copies: for the buyer, the seller and the Register;
• a handwritten text is sufficient for the translation of some documents;
• all extracts from the Register are published on the official website - reestri.gov.ge and are available for viewing by all users.
Primary or secondary market: which is more profitable to buy real estate in?
As the name of it states, primary market refers to the brand-new property, which is being sold for the first time. The volume of investments in Georgian development market is huge, which allows the investor not only to find real estate that meets his requirements but also to take advantage of additional opportunities that development companies offer for their clients. One of these opportunities is "turn-key finishing" when you can immediately move into a new home right after receiving the keys.
A secondary market is a complete opposite. There you can find properties that have been used before. The first type is relatively easy to describe, as developers tend to stick to specific standards. Whereas the secondary market, you can find both exclusive apartments finished with the most expensive materials, and dilapidated premises requiring significant repairs. It is easy to see the disadvantages of the secondary market when comparing it to the primary:
• Expensive renovation – the cost of a good renovation can easily reach up to 20% of the property value. Other than that, the investor has to deal with solutions of a previous owner. Even if the property looks excellent, you might discover that additional investments are required.
• Complex layout – when purchasing a property from the primary market, you usually get a lot of available space that allows it to adapt to any designer solutions. However, with the secondary market changing the layout is a lot more complicated.
Brand-new property from a trusted developer is a guarantee of modern interior and aesthetics, which will not require significant financial investments for an extended period of time.
5 steps to property acquisition in Georgia
Step 1. The choice of real estate
Modern developers offer flats and apartments that give opportunities for area size, room layout, communications and location. Location is one of the most critical aspects that need to be considered when purchasing a property. A thorough analysis of the district's profitability in terms of conducting business or renting out to tourists is essential. Another aspect that one needs to decide on is the surrounding area - what is more important: silence and closeness to nature or easy access to entertainment, cultural or business facilities. Luckily, Georgia provides a good combination of those two.
Step 2. Signing a preliminary contract
A preliminary contract is not mandatory; however, it can give additional security for the investor. It is usually signed prior to the completion of all formalities related to the purchase of an apartment and even before the building is put into operation. A preliminary agreement guarantees that the chosen property will not be sold to someone else. The buyer declares his intention to buy a home in the booking agreement, and the developer promises to exclude it from the sale offers. This agreement does not have to be concluded in the form of a title deed. When signing a preliminary agreement, a pre-payment is typically required to be made. The pre-payment can vary from 10% to 100% of the property value. If the investor decides to go ahead with the purchase, this amount will be added to the cost of the apartment.
A preliminary agreement can include additional conditions, such as the date of conclusion of the final contract. The period when the promised contract must be concluded has to be determined either by clearly indicating the calendar date or by marking the end of the period easily identifiable by both parties in advance. If you conclude the preliminary agreement in the form of a notarial deed, a notary fee will be charged.
Step 3. Property's legal purity revision
The revision of the property's legal purity when investing in Georgian real estate is not always required. When purchasing a property from the primary market, which is in a new building, looking in the Register whether the object has been put into operation is enough. In order to do so, you need to know the cadastral building number. When purchasing a property from the secondary market, a verification from lend and mortgage registries may be required. These are available for everyone to view. You can just ask the landlord for the land register number and review its contents on the website of the Ministry of Justice of Georgia. The Land and Mortgage Register consists of four sections:
• Section I of the land and mortgage register allows you to confirm the compliance of the data disclosed in the real estate cadaster;
• Section II of the Land Register contains information about who owns of the real estate and whether there are co-owners;
• Section III of the Land and Mortgage Register contains information on rights, requirements and restrictions of the real estate;
• Section IV includes records about the mortgage on real estate and the owner's bank or state debts.
Nowadays, most of the property objects are entered into the digital registries, making it easy to look up the information online without actually visiting the government departments. Simply log on to the government website, enter the number of the land and mortgage book established for this site, and extract all the necessary information.
Step 4. Drawing up the final agreement and conclusion of the sale and purchase transaction
The final contract for the purchase of real estate must be drawn up in Georgian and in the buyer's native language. The agreement must contain detailed information about the property - its legal status, quality of finishing, area, number of premises and their functions, and other information.
There are a few ways of signing the sale and purchase agreement:
1. At the House of Justice (directly or through a proxy).
2. At a notary with the subsequent transfer of the contract to the House of Justice.
Georgian real estate market is considered to be one of the most welcoming for foreign investment in the world, where property deals can be concluded even without the personal presence of the buyer.
There is no tax on the property acquisition in Georgia, whereas in some European countries it can get up to 10% of the property value. Additionally to paying a fee for Register data entry, an investor might incur extra costs for registering property rights:
• translation services - up to 10 lari per page of the translated text, as well as up to 50 lari for the translator to be present at the conclusion of the transaction at the House of Justice;
• notary services - up to 150 lari, however, the price would depend on the volume of the purchase and sale agreement.
The total amount of additional expenses normally does not exceed 500 lari. A developer usually takes upon himself a significant part of the expenses and formalities, making the process as convenient for the investor as possible.