If you want to buy real estate in Georgia, you’ll want to make sure you are familiar with the details that could affect that purchase. From scams to avoid, through to mortgages, due diligence and more.
In this article, we cover many of the most basic questions that real estate buyers ask, as well as some lesser known questions that can make a real difference.
|Table of Contents (Purchasing Real Estate In Georgia)|
|Georgian Real Estate Basics|
|Money & Mortgages|
|Legal Process & Considerations|
|Property & Capital Gains Taxes|
|Get Legal Assistance With Your Property Purchase|
Georgian Real Estate Basics
What Is Immovable Property? Can I Buy Immovable Property In Georgia As A Non-resident?
Immovable property includes a “plot of land with its subsoil minerals, the plants growing on the land, and buildings and other structures firmly attached to the land.” (Article 149)
Foreign citizens are allowed to acquire immovable property with the exception of agricultural land as outlined below. Furthermore, foreign citizens can acquire state property as well – with the exception of state-owned agricultural land plots (Article 3.1).
What Is Agricultural Land? Can I Buy Agricultural Land In Georgia As A Non Citizen?
Agricultural land – “land area of either a pasture, a hayfield, an arable land (including the land under perennial crops) or a homestead land category, which is used or may be used for agricultural purposes with or without buildings and structures on it.” (Article 3.a)
In most cases, non-citizens cannot purchase agricultural land. Though there are some limited workarounds, which are quite complex. Also there are exceptional cases, such as when a foreign citizen inherits the land (Article 4.2.a).
The most important practical consideration is that agricultural zoning may be applied to land in places you would not expect. Many areas in towns and villages, and even parts of Tbilisi (the capital of Georgia), are zoned agricultural. Getting the zoning changed can be a long and difficult process. Because of this, most foreigners choose to purchase non-agricultural land rather than pursue rezoning.
Money & Mortgages
Can I Get A Mortgage In Georgia As A Foreigner? What Mortgage Rates Are Available?
Commercial banks are able to set their own policies regarding mortgage loans for foreign citizens..
Both Bank of Georgia and TBC, amongst others, offer mortgage options to foreigners. Upon approval of your financial status, typical mortgages for foreigners require a high initial down payment (normally at least 40%) as well as a relatively short term (up to 10 years) at an interest rate of ~6% and up. Note that most loans are taken in USD. For loans in the national currency (GEL), you can expect interest rates upwards of 12% per annum.
These numbers can vary but the key take away is, yes, you might qualify for a mortgage, but the conditions foreigners receive are different from citizens of Georgia. Speak to your bank to find out what they can offer you.
If I Don’t Get A Mortgage, Am I Expected To Pay 100% Of The Cost Of The Purchase In One Lump Sum?
This is up to negotiations with the seller.
If the property is being bought from a developer, they might be offering payment by installments. Usually, down-payment of 30-50% of the purchase price is required. Interest rates may or may not apply. The duration of the “loan” varies, but sometimes developers require the property to be fully paid for before construction is finalized. Usually, the buyer will be registered as a future owner of the property and they will be registered as the owner only after (and if) the price is fully paid.
If the property is being bought from a private individual, it can be difficult to find a seller that would agree to payment by installments. But the law does not prohibit such transactions.
Can I Buy The Property In A Foreign Currency?
Georgian Lari is the only legal tender on the territory of Georgia. (Article 34.2) This means that the payment should take place in GEL. Nevertheless, parties are entitled to determine that the price will be an equivalent of “X” USD/EUR/GBP (or other foreign currency), paid in GEL.
In such cases, an agreement on how the exchange rate will be calculated, should be made. Usually, parties agree that the official exchange rate determined by the National Bank of Georgia on the date of payment will apply.
Please also note that real estate prices are usually advertised in USD.
How Do I Get The Funds To Georgia To Make The Purchase? What Problems Might I Incur Getting Funds To Georgia?
You can open a personal bank account in Georgia using a foreign passport or Georgian ID card.
After opening a Georgian bank account, you can transfer the funds from a foreign bank account to it. Due to measures directed towards the prevention of money laundering and the financing of terrorism, a sizeable transfer might be frozen and you will need to provide relevant documentation to the bank to show the legitimacy of the funds, in order for the transfer to be released.
Since it is difficult to predict when the transferred funds will reflect on your Georgian bank account, it is not always practical to transfer the funds from a foreign bank account directly to the seller’s Georgian bank account.
Do I Need An Estate Agent? What Percentage Fees Will Real Estate Agents Take?
Most real estate agents charge 3% of the transaction value. The percentage is subject to negotiations. The fee is usually paid by the seller.
Many sellers and developers will sell directly to you and no agent is needed. Having your own legal representation, direct with the seller, is sufficient in most cases.
Agents who are handling a sale will want their cut, so if a seller has already engaged them and you have found the property via that agent, you are most likely going to have to use them for at least part of the process, even if you don’t find the agent to be helpful or competent.
Legal Process & Considerations
What Documentation/Permits Must I Provide In Order To Close A Sale?
To complete a purchase, the following is necessary:
- Identification document (passport or Georgian ID card; if using a foreign passport, a translated and notarized copy may be required).
- The real estate purchase agreement which is to be signed in the presence of the relevant authority or a notary.
- Payment of relevant administrative and notary fees.
- The relevant authorities are entitled to request additional information and/or documents.
No special permit is required to make the purchase, as a non-citizen.
ExpatHub specializes in purchase agreements as well as pre-purchase agreements and relevant legal due diligence, bi-lingual agreements and other processes related to purchasing real estate.
If you intend to buy property and want all the legal elements handled, book a consultation with one of our advisers.
What Language Should The Contract Be In?
A purchase agreement should be drafted in Georgian. In case a party to the agreement does not understand Georgian, the agreement must be bilingual..
In many cases, a bilingual agreement may already have been created by the seller. If so, you have no guarantee that the seller has engaged a translator who is accurate. It is always possible that key terms in the English language version do not match the legally binding Georgian version. Which can lead to significant problems once the agreement is signed.
As part of our legal processes, ExpatHub can check the accuracy of the translation so you have no surprises. We also identify clauses that should be of concern, so you can request revisions by the seller. Additionally, we can send our lawyers to negotiate revisions and any other part of the purchase process. Get more information about our real estate legal services here.
What If I Buy Property And There Is Something Seriously Wrong With It? Or Debts Owed? What Legal Recourse Do I Have Against The Seller?
First and foremost, try to prevent a dispute in the first place. For this, it is best practice to be diligent and inspect the property as well as specify the description and condition of the property in the purchase agreement as much as possible. This includes physical characteristics as well as legal condition (mortgage, liens, third party claims and other restrictions) of the property.
In case the transferred property does not correspond to the description and condition agreed under the agreement, the property will be non-conforming (there will be material and/or legal defect). When the property is non-conforming, you are entitled to relief. Depending on the agreement, you can be entitled to:
- Request that the seller fixes the non-conformity within a reasonable time.
- Request payment of compensation of damages incurred by you as a result of such non-conformity (the amount that would be required to make the property conforming).
- Request the reduction of price (by the amount that would be required to make the property conforming).
- Request the termination of the agreement and restitution (i.e. return to the situation that was before the conclusion of the agreement).
- The seller is prohibited from hiding material information about the condition of the property.
- The buyer cannot request relief for a defect that they were aware of.
- The dispute can be negotiated, mediated, arbitrated or litigated.
If you purchased without due diligence being performed, you may not be aware of debts attached to the property. Upon transfer of title, these would be transferred to you. Do not expect the seller to necessarily disclose debts. Our lawyers will check this, amongst many other things, during our due diligence process.
How Do I Get The Property Inspected To Make Sure It Is Safe?
Inspection as a step before purchasing real estate is not common in Georgia and there is no code of practice or accredited body governing real estate inspection. You can contract an independent expert who will accompany you and inspect the property. Depending on what you want to inspect, you will need an expert in architectural, construction or electrical engineering.
What Legal Differences Are There From Buying Finished Property And Off-plan Property?
When you buy a finished property, you conclude a real estate purchase agreement, hence you are registered as the owner of the property. When you buy an off-plan property, you conclude a pre-purchase agreement, since it is not possible to conclude a real estate purchase agreement on a property that does not yet exist.
Buying an off-plan property is associated with a higher risk of the developer not fulfilling their obligations. This breach by the developer may be intentional (they never intended to start and/or finish the construction works) or unintentional (due to poor planning and/or other reasons the developer went bankrupt or is unable to complete the construction).
In case a developer breaches its obligations, there is not much you as a buyer can do. Therefore, it is important that you find a trustworthy developer, which has a good track record and reputation.
Can I Purchase Real Estate Remotely?
Yes, if you as a principal grant someone the necessary powers under a Power of Attorney to someone else.
- If you are a foreign citizen who does not have a Georgian residence card, a Power of Attorney should be executed by a notary in Georgia. Alternatively, you as the principal are entitled to issue a Power of Attorney in a foreign country, then legalize/apostille it in that country, and then send it to your trustee in Georgia, who will translate and notarize it in Georgia.
- If you are a foreign citizen who has a Georgian residence card, or a Georgian citizen, a Power of Attorney can be executed by a notary in Georgia, while you are physically present, or remotely from abroad. This is done by a video call with the Georgian notary. Also, two witnesses (who will identify you) and a third person (who will sign on your behalf) will need to be present during the call. None of the three persons should have an interest in the execution of the Power of Attorney. The trustee, as well as the three persons present during the call do not need to be Georgian citizens or have a Georgian residency card.
ExpatHub’s legal team can provide you with power of attorney documents to be used for any situation, we can also be your legal representative during a property purchase. Contact us for more details.
Property & Capital Gains Taxes
What Taxes Are Levied On Residential Property At Time Of Purchase?
At the moment of purchase of residential property, you, as a buyer, will not be subject to any taxes.
What Taxes Are Levied If I Choose To Sell The Residential Property?
Generally, capital gains from sale of residential property are subject to 20% personal income tax. However, if you have owned the property in question for more than 2 years prior to the sale, your income will be tax exempt.
What Taxes Are Due On Residential Property I Own? How/When Are Those Taxes Paid?
You will have to pay annual property tax on the residential property you own, provided your annual worldwide household income exceeds 40,000 GEL. The tax rates are set as follows:
- From 0.05% to 0.2% – If your annual income in the preceding year is between 40,000-100,000 GEL;
- From 0.8% to 1% – If your annual income in the preceding year exceeds 100,000 GEL.
The deadline for filing and payment of property tax is 15 November of the year following the year concerned (e.g. if you have owned property throughout 2021, you will have to pay 2021 property tax by 15 November 2022, prorated based on the number of months owned in the reporting year). Filing is done electronically, via Revenue Service web-portal.
If the property is owned by more than one party, property taxation is a little more complicated and it’s worth checking the situation with a tax adviser.
What Taxes Will I Pay If I Rent Out The Property?
Normally, rental income is subject to a 20% personal income tax. However, if you rent out your property strictly for residential purposes, you can register at the landlord registry and start paying 5% personal income tax on your rental income. Deductions, in this case, won’t be allowed.
ExpatHub can assist on any and all tax matters in Georgia, including helping you file property and rental taxes. Contact us for more information.
What About Real Estate Insurance?
There are a few insurers on the Georgian market. Their terms and prices vary. You can insure the frame (carcass), interior (renovations), rooms or parts of the property, integral design elements (including interior trim and engineering equipment) of the property, building and residential engineering equipment (including sanitary-technical and heating equipment, gas/electric heaters, electronic meters, electrical wiring, television and telephone cables), household items (including furniture, technology and appliances), and your neighbor’s property (from a damage originating from your property).
The insurance may cover the following damages: water leak coming from a neighbor, unexpected malfunction of water and/or sewage piping systems, unexpected malfunction of electrical and/or heating systems, fire and explosion, natural disasters (including earthquake, lightning strike, storm, hurricane/tornado, hail, rockfall, weight of snow, flood), transport/vehicle accidents, falling of aircraft or its parts, theft, burglary, robbery, vandalism. It is also possible to insure damage to rented property when you are renting.
Annual prices of insurance usually start from 1.50 GEL per m2.
What Is The Difference Between Black/White/Green Frames?
There is no uniform definition of black, white or green frames in Georgia. Each seller has its own definition. Therefore, it is imperative that the description is agreed in as much detail as possible.
The definitions vary but, in general:
- Black frame typically refers to a property that has a metal entrance door, windows, concrete walls and communications (electricity, gas, water) brought up until the main entrance door.
- White frame typically refers to property that has a metal entrance door and windows, plastered walls, plastered internal partitions according to the project, straightened flooring, plasterboard ceiling, main vertical water and sewerage systems installed in the apartment, central heating pipes and other utility connections – wiring, gas pipes etc. – fitted within the apartment.
- Green frame is typically the next stage along from a white frame, where internal fittings have been completed to a livable standard, painted walls and certain permanent furnishings like kitchen and bathroom installations. Potentially a finished apartment only lacking moveable furniture. However, the term green frame is much disputed and full confirmation should be requested from the seller.
Because the definition of the above can vary, if you are buying off-plan, ensure the exact inclusions and exclusions are defined within your pre-purchase agreement.
How Do I Get Legal Residency Through Purchase Of Property?
Ownership of property with a market value more than the equivalent of $100,000 USD in GEL is grounds for granting a “short-term residence permit”. The short-term residence permit is granted to the owner of the property and his/her family members (i.e. spouse, children. As of May 12th, parents of the owner no longer qualify as family members. Adult children may qualify in some circumstances, contact us for the latest information on this topic). The duration of the short-term residence permit can be no more than 1 year, but can be renewed annually so long as the value of property owned in Georgia continues to meet the threshold amount. At such time as those requirements are no longer met, the SDA can revoke your residency..
Ownership of property that’s valued at more than equivalent of 300,000 USD in GEL is grounds for granting an “investment residence permit” (Article 15.h). The investment residence permit is granted to the owner of the property and his/her family members (i.e. spouse, underaged child). The duration of the investment residence permit can be up to 5 years.
Holding an investment residence permit for 5 years can become grounds for granting a permanent investment residence permit (article 15.k).
When ownership of property becomes grounds for granting a residence permit, it is imperative that the foreign citizen retains ownership of the property or of a portfolio of properties with a total value exceeding 300,000 USD.
ExpatHub can assist with your residency application. Book a free consultation.
Get Legal Assistance With Your Property Purchase
If you plan to purchase property in Georgia, our legal team can assist with both the legal side of the purchase (purchase agreements, due diligence etc.) as well as being able to offer full buy-side assistance (property concierge service) and remote purchase assistance.
Importantly for most foreigners, checking the English translation of the original Georgian purchase agreement (when provided by the seller) as well as identifying clauses which may be a concern, and assisting with negotiations with the seller when needed.