BRICKS & MORTAR: Turkey puts 2B land up for sale, at last

By bne IntelliNews April 24, 2012

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On April 18, the Turkish parliament approved the sale of 2B land, or deforested land owned by the treasury, according to Erste Bank. The ability to sell such land should help push up land valuations and advance "urban transformation" projects that the government has made a key priority.

The law allows the government to sell 2B land at "70% of its fair market value," according to Erste. There is about 4.1m acres of 2B land in Turkey, with about 80% of it located in major cities in the west of the country. Such a description might make the eager investor jump to the conclusion that such land is mostly in Istanbul. However, only 4% of the total 2B lies in Istanbul, according to Erste. Antalya, Mersin, Mugla, Adapazari, and Balikesir are the provinces where about 90% of the land is located, according to local daily Today's Zaman.

The government aims to complete sale of the 2B land by the end of the year. "We expect [the government's Housing Development and Public Participation Administration] TOKI to be the main beneficiary of this process," writes Erste. "Thus, where the acquisition of 2B land is concerned, the greatest [real estate investment trust] beneficiary among listed real estate companies would be Emlak Konut REIT, given that TOKI is its main shareholder. Emlak Konut REIT is able to acquire land from TOKI without a tender."

Since it came to power in 2002, the Justice and Development Party (AKP) has always favoured the sale of the 2B land to increase government revenues. The sale of the land could generate approximately $25bn-30bn, according to some estimates. However, until April 18, opposition parties had blocked the sale of the land. The land was close to being sold in 2004, but the opposition Republican People's Party (CHP) petitioned the country's Constitutional Court to cancel the sale.

Having won power in three consecutive elections, the sale of the land can be considered the latest victory of the AKP, which is intent on using the political capital it has earned in the past decade to enact its vision for Turkey's future.

No easy solution

The sale of the 2B land can be expected to be complicated in a way observers have come to expect from Turkey. That is to say Byzantine, disorderly and complicated to the extent that the sale of the land will take far too long.

The land is technically owned by the state and if there are buildings on the land, they are state owned. However, over the past few decades Turkey has undergone a process of mass urbanisation, with hundreds of thousands moving westward in search of jobs and to escape conflict in the interior of the country. Seeking a place to live, many individuals moved on to the 2B land without asking permission from the state or paying rent. The government turned a blind-eye as they built houses and entire neighborhoods sprang up, expanding cities such as Istanbul from all directions.

Recognising these practices, Turkey's parliament decided that individuals using the land would be given the option to purchase it for 70% of the current value. Last year, some Turks who lived on such land on the Anatolian side of Istanbul told bne that they were waiting expectedly for this outcome. Afterwards, they plan to sell to private developers at a higher price and are already negotiations.

The sale and development of the land move forward the AKP's aim to grow Turkey's cities, and increase the country's prestige. But a growing debate about the quality of buildings being built on Turkish soil, known for its frequent earthquakes, and the wisdom of too rapidly expanding already overburdened cities can be expected to follow.

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