Property Funds in Turkey: A Strategy for Citizenship by Investment

Turkish real estate investment funds (REIFs) are becoming a preferred path to Turkish citizenship for foreign investors who want both capital protection and hard-currency returns. In today’s economic environment, traditional deposit-based strategies no longer provide the stability required for citizenship by investment.

Bank Deposits in Turkey After KKM: Why the Strategy Has Stopped Working

For several years, Turkish bank deposits offered foreign investors an almost risk-free way to earn high nominal returns. Elevated interest rates in Turkish lira (TRY), combined with the FX-protected KKM scheme, allowed deposit holders to earn double-digit yields while the state absorbed the impact of lira depreciation. For many applicants evaluating Turkish citizenship by investment, a USD 500,000 deposit looked like the simplest route.

By 2025, this framework no longer exists. According to the Central Bank of Turkey, the KKM programme became too costly for the budget and is now being phased out, with banks no longer accepting new FX-protected deposits. At the same time, the Central Bank is normalising monetary policy: inflation is easing, and interest rates are gradually being adjusted.

As a result, investors who previously relied on lira deposits must now consider instruments that deliver predictable, hard-currency returns—especially those pursuing Turkish citizenship by investment.

Why Returns in TRY Do Not Translate Into Returns in USD/EUR

The fundamental issue is the purchasing power of the lira. A high nominal rate in TRY does not guarantee a real return in USD or EUR.

Consider a typical example: a three-year deposit at 25% per annum in TRY appears attractive on paper. But if the exchange rate nearly halves over the same period, the investor experiences a loss in USD. The account balance is higher in lira, yet its dollar value is lower than at the start.

Without FX protection, interest rates of 30–40% in lira no longer act as a safety cushion. Effective returns in USD often approach zero or turn negative. For foreign investors—whose objective is to preserve capital in hard currency—this makes lira deposits an unsuitable vehicle for citizenship-related investment.

Turkish Citizenship by Investment: Why the Deposit Route is Losing Ground

Turkey’s citizenship by investment program offers several qualifying routes: direct real estate purchase, bank deposits, government bonds, and real estate investment funds. For years, a USD 500,000 lira deposit seemed the most straightforward option. Once FX protection ended, its risk-return profile shifted sharply.

The Risk of a USD 500,000 Deposit in Lira

A lira deposit is now fully exposed to depreciation. Over a mandatory three-year holding period, even a high-yield TRY deposit can lose substantial value. In practice, an investor may end up with the equivalent of USD 420,000–450,000 from an initial USD 500,000—purely due to currency erosion.

Buying Real Estate for USD 400,000: Attractive but Not Always Practical

Real estate remains a strong route to citizenship. A well-located apartment or villa can generate rental income and appreciate. But property ownership is operationally demanding: selecting a district, navigating the developer landscape, managing the asset, and coordinating rental operations.

For investors who do not live in Turkey, these responsibilities can outweigh the benefits of direct ownership.

Real Estate Investment Funds (REIF) in Turkey: How the Instrument Works for Citizenship

Since 2018, Turkish law has allowed investors to meet citizenship requirements through units in real estate investment funds (REIFs). For many foreign applicants, REIFs now represent one of the most effective ways to achieve Turkish citizenship by investment.

Key advantages include:

• investment in USD or EUR rather than TRY

• professional management of income-producing real estate

• no operational involvement

• a natural three-year investment horizon aligned with citizenship timelines

As deposits lose relevance, interest in REIFs continues to rise among foreign investors.

Fund Structure and Investor Protection

A Real Estate Investment Fund (REIF) is a regulated investment vehicle operating under Turkish capital markets law. The management company pools investor capital and builds a diversified portfolio of real estate assets: residential blocks, commercial buildings, aparthotels, income-generating properties and land. The Capital Markets Board of Turkey (SPK) oversees fund formation, reporting and governance.

Key structural features:

• Ring-fenced assets: A REIF is not a joint-stock company but a separate pool of assets legally segregated from the manager’s balance sheet. Even if the management company faces financial difficulties, fund assets remain protected.

• Qualified investor framework: Units are available only to qualified investors. For most foreign applicants, a USD 500,000 investment meets the threshold automatically.

• Institutional oversight: Each REIF works with
  – a custodian bank safeguarding assets,
  – an independent auditor overseeing financial statements,
  – an accredited valuation firm independently confirming portfolio value.

This structure offers clarity, protection and transparency for foreign investors evaluating REIFs for Turkish citizenship.

How REIFs Differ From Listed GYO (Turkish REITs)

Turkey has two categories of institutional real estate vehicles:

• GYO (REITs): listed companies whose shares trade on the stock exchange

• GYF / REIF: non-listed real estate investment funds structured as unit trusts

For citizenship by investment, only REIF units qualify. Their value is tied directly to real assets rather than public-market volatility.

Investment Horizon and Liquidity

REIFs designed for citizenship are typically closed-end funds with a term of three to five years. This aligns naturally with the mandatory holding period.

At the end of the term, the fund liquidates assets and distributes proceeds. Depending on the structure, secondary sales of units between qualified investors may also be possible.

What Drives REIF Returns in Turkey

A REIF generates returns from two main sources: rental income and capital appreciation. The combination of these components typically produces more stable and predictable performance than individual property ownership.

Rental Income and Indexation

REIFs lease out their residential, commercial and logistics assets. Depending on the fund’s policy, rental income is either distributed to investors or reinvested.

A major advantage is hard-currency or inflation indexation of leases. Many commercial tenants pay in USD, providing predictable income for investors who calculate returns in hard currency.

Capital Appreciation and Active Management

The second return component is capital growth. Professional REIF managers:

• acquire projects with strong upside potential

• enter redevelopment or development projects early

• renovate or reposition assets

• exit properties strategically to capture capital gains

This institutional approach provides access to investment opportunities unavailable to private buyers.

Return Profile Compared With Direct Ownership

Market data indicate that Turkish real estate funds target around 15% annual returns in USD, depending on strategy and asset mix.

By comparison, individual investors leasing out a single apartment typically receive 5–8% net yield in TRY, with capital growth that may diminish significantly once converted into USD. REIFs, by contrast, are designed to generate performance directly in USD or EUR, making them substantially more suitable for citizenship-linked investments.

How REIFs Hedge Against Lira Depreciation

Currency protection is one of the strongest arguments for using REIFs for Turkish citizenship by investment.

USD/EUR-Denominated Asset Base

Most REIFs in Turkey are structured around USD- or EUR-denominated assets. When the lira weakens, the TRY value of the portfolio rises, preserving its value in hard currency. This acts as a natural hedge for foreign investors.

Real Estate as an Inflation Hedge

Historically, Turkish real estate has protected investors against inflation and lira volatility. During periods when lira deposit holders experienced losses in USD terms, real estate owners often maintained or grew their capital.

By aggregating a diversified asset base, a REIF systematises this inflation-hedging effect.

Real Estate Fund or Bank Deposit: Which is Better for Turkish Citizenship?

To compare investment routes, consider a three-year scenario with a USD 500,000 investment.

Illustrative Outcome Over Three Years

*At higher depreciation (>27% annually), returns may fall to zero or negative in USD.

Illustrative scenario based on historical macroeconomic ranges; not a guarantee of future performance.

Return, Risk, Tax, and Liquidity

Investment Currency

• REIF: Hard-currency base (USD/EUR), limited FX risk.

• Deposit: Fully exposed to TRY volatility.

Expected Returns

• REIF: Target 15%/year in USD.

• Deposit: High nominal TRY rates often convert into low or negative USD returns.

Currency Risk

• REIF: Minimal due to USD-based structure.

• Deposit: High; KKM protection no longer applies.

Taxation

• REIF: No corporate tax; capital gains tax exempt after two years.

• Deposit: Interest taxed at source (≈15–17.5% for non-residents).

Liquidity

• REIF: Moderate; units redeemed at fund maturity or sold to another qualified investor.

• Deposit: High in theory, but USD conversion at maturity may occur at an unfavourable exchange rate.

Conclusion:

REIFs provide stable, hard-currency performance and meet citizenship requirements. Lira deposits, without FX protection, rarely deliver acceptable USD returns for foreign investors.

How to Use REIFs for Turkish Citizenship by Investment

Since 2018, REIFs have been an officially recognised investment route for citizenship. To qualify, several requirements apply.

1) Minimum USD 500,000 Investment

Investors may allocate USD 500,000 to one or multiple REIFs or venture capital funds. The total is calculated at the official exchange rate on the subscription date.

2) Only SPK-Authorised Funds

The fund must be licensed by the Capital Markets Board of Turkey. This ensures regulatory oversight and protection through a custodian bank and an independent audit.

3) Three-Year Lock-Up of Units

The investor signs an undertaking not to transfer units for 36 months. Income—rent distributions or capital gains—may still be received during this period.

4) Certificate of Compliance

After subscription, the custodian submits documentation to SPK, which issues a certificate confirming that the investment meets citizenship criteria.

5) Processing Timeline

REIF-based citizenship applications typically complete within 3–6 months, faster than applications involving multiple property transactions.

Additional Notes

• A spouse and children under 18 can be included without additional investment.

• Mixed portfolios (real estate + REIF) can qualify if the total equals USD 500,000.

Combining Direct Real Estate and REIF Units

Many investors purchasing a home for USD 250,000–300,000 do not want to buy a second apartment solely to meet the citizenship threshold.

A balanced structure:

• ≈ USD 300,000: residential property for personal use

• ≈ USD 200,000: REIF units

This satisfies the USD 500,000 requirement. After three years, the investor may sell the units and keep the home permanently.

When a Real Estate Fund is More Efficient Than Buying Multiple Apartments

Buying several apartments to meet citizenship requirements sometimes leads to higher costs and operational complexity.

1) Operational Burden

Each apartment requires tenant management, maintenance and monitoring. With multiple properties, the workload grows significantly, and outsourcing reduces yield.

A REIF eliminates all operational involvement.

2) Vacancy and Tenant Risk

Individual landlords are exposed to tenant behaviour. REIFs diversify risk across multiple assets and maintain stable rental flows.

3) Exit Strategy

Selling several properties after three years can take months. REIF units typically offer a single, cleaner exit event.

4) Cost Efficiency

Owning multiple properties involves:

• 4% title transfer tax

• legal fees

• furnishing and maintenance

• repair costs and insurance

• monthly building fees

REIFs benefit from institutional pricing and economies of scale. Units are not subject to VAT.

5) Professional Portfolio Management

Private buyers may misjudge location quality, liquidity, or construction risk. REIF managers evaluate assets professionally and operate within a strict investment strategy.

Who Should Choose REIFs and Who Should Focus on Direct Property

1) End-Users Buying for Personal Use

Budget: USD 250,000–400,000

Priority: living quality, district, comfort

If the target home is below USD 400,000, adding REIF units to reach USD 500,000 is often more efficient than buying a second property.

2) Investors With USD 150,000–300,000

Goal: passive income and capital preservation

A single apartment generates 5–6% net in TRY. REIFs generate 10–15% in USD with no operational burden. Over several years, this difference may allow investors to eventually reach the citizenship threshold.

3) Investors From USD 500,000 Who Live Abroad

Goal: capital protection + second passport

REIF advantages:

• immediate qualification for citizenship

• 15–20% annual target returns

• no property management

• the process can be fully managed remotely

• clear exit after three years

Real estate becomes relevant mainly for emotional or lifestyle reasons.

Outlook for Real Estate Investment Funds in Turkey After 2025

Urban Renewal and Demand for Modern Housing

The Turkish property market has moved beyond the inflation-driven surge of 2020–2022 and entered a more structurally driven cycle. Urban renewal is the key catalyst.

Government incentives—accelerated permitting, redevelopment support, land allocation—drive construction of modern, earthquake-resistant housing. Domestic demand remains strong as families move out of ageing stock.

REIFs benefit through:

• early-stage participation in redevelopment

• exposure to value-accretive projects

• balanced residential-commercial portfolios

• professional management and scale advantages

Growth of Commercial Real Estate and USD-Linked Leases

Turkey’s economy continues to grow at 5–7% annually, increasing demand for:

• office and business centres

• logistics and e-commerce warehouses

• retail space in expanding urban districts

A significant portion of premium commercial leases is denominated in USD, supporting stable hard-currency cash flows for REIF investors.

A Comprehensive Citizenship Strategy With Luxury Estate Turkey

Choosing between direct real estate in Turkey, a lira deposit, or a real estate investment fund is a strategic decision. As a licensed agency, Luxury Estate Turkey represents the investor’s interests exclusively. We do not sell our own funds and are not affiliated with fund managers, allowing us to recommend solutions tailored to your objectives.

We assess your goals, preferred involvement level, and long-term plans in Turkey to build a clear and efficient strategy, combining citizenship eligibility with sustainable real estate-backed returns. Luxury Estate Turkey represents your interests throughout the entire process, from fund subscription and property selection to exit preparation.

The information provided is for general guidance and does not constitute financial, legal, or tax advice. Investors should make decisions after consulting licensed professionals.