The Turkish government recently changed its citizenship regulations to attract more foreign investment in real estate as a way to support its struggling currency, the Turkish lira. Under the new policy, foreigners who purchase at least $250,000 worth of real estate and hold it for three years can apply for Turkish citizenship. This is aimed at bringing foreign currency into Turkey's economy as inflation and the devaluation of the lira have caused economic turmoil. However, some Turks are uncomfortable with the growing number of foreigners gaining citizenship and voting power in Turkey through real estate investments.

1. How Turkey Is Using Foreign Real Estate Investment to Alleviate Economic
Pressure
Recently, the Turkish government made important changes to the regulations for
foreigners achieving citizenship. This new policy is meant to support the lira, the
national currency of Turkey. According to the new policy, people who make a certain
level of investment in the country, including through real estate, can obtain citizenship.
Any foreigner owning real estate in Turkey totaling at least $250,000 can now apply for
citizenship provided that those properties have been held for at least three years.
The new regulation requires that foreign currency obtained through the sale of real
estate to foreigners be sold to the central bank through a local bank for conversion to
the Turkish lira. Furthermore, the currency that foreigners hold in Turkish banks for
investment will be converted to the lira.

2. The Current State of the Lira and Inflation in Turkey
Turkey has faced some significant financial turmoil in the last couple of years. Inflation
has recently hit the highest rate in the past 19 years at 36.1 percent. While President
Recep Tayyip Erdogan has taken steps to end the country’s financial turmoil, inflation is
the highest it has been since he assumed the presidency, and economists believe that
the rate could continue to rise in the setting of cut interest rates. Monetary
policymakers generally raise interest rates to drive down inflation and strengthen
currencies, yet Erdogan has done the opposite to help the local economy.
The Turkish lira is currently quite weak and lost about 45 percent of its value against
the American dollar throughout 2021. This was the worst year for the lira in two
decades. Last month, Erdogan announced a plan to protect local depositors against
market volatility by paying them the difference between declines in the currency and
the bank’s interest rates. However, economists largely believe that this plan is
unsustainable and will ultimately deplete the Turkish government’s reserves. The new
policies for citizenship are another means of bringing more reserve to the country and
could help sustain the plan for longer by driving foreign investment.
Foreigners Attracted to Turkish Real Estate Opportunities

3. In the setting of high inflation and the dropping value of the Turkish lira, many
foreigners are being attracted to Turkey’s real estate market. As the value of the lira
decreases, real estate becomes more affordable for foreign investors. Toward the end of
2021, the number of sales to foreigners increased by more than 50 percent over the
prior year. In November 2021, more than 7,360 homes were sold to foreigners, a record
number. This interest has brought billions of dollars into Turkey’s economy. The largest
number of foreign investors came from Iran, followed by Iraq and Russia, with the
majority of sales occurring in Istanbul. Other popular targets for sales were Ankara, the
capital, and Antalya, a resort town on the Mediterranean.
The promise of citizenship in Turkey is attracting several foreigners to the country,
especially given the low price of real estate. A real estate broker in Istanbul noted that
about 40 percent of his sales are to foreign investors, many of whom are interested in
applying for citizenship. These foreigners are especially drawn to some of the hipper
neighborhoods in Istanbul, such as Beyoglu, which has a rich nightlife and views of
mosques and palaces built in the Bosporus and Ottoman eras. The new government
policy significantly reduced the value of real estate required to obtain citizenship from
$1 million to $250,000, so moving forward, this may be even more of a draw for
investors.
Unrest among Turks about Foreigners Getting Citizenship

4. Turkey is currently in a difficult position. Foreign investors in real estate and other
sectors help bring more money into the country, which could ultimately help restore
the value of the lira. At the same time, many Turks feel uncomfortable with the number
of foreigners who will potentially get Turkish citizenship. Since the 1980s, Arabs have
been encouraged to invest in Turkish real estate, but native Turks have pushed back. In
more recent years, the discomfort about citizenship grew with the influx of Syrians
fleeing the civil war in their country. In particular, many Turks fear the growing voting
power Arabs are attaining as they gain citizenship.
Moving forward, anti-foreigner sentiment may continue to grow as more people come
to the country and gain citizenship through real estate, especially considering the
criticism that Erdogan has received for his policies. If the economy improves, the
sentiment may change, but if the lira continues to drop in value as inflation increases,
tensions could run high in Turkey. This tension could, in turn, affect the willingness of
foreigners to invest in Turkish real estate, especially if they are doing so primarily to get
citizenship.