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Foreign investment in real estate property

After the opening of the Colombian economy to foreign investment, a process which started with the Economic Opening (Apertura Económica) initiated in the administration of President Barco (1986 -1990) and which was almost fully developed and implemented in President Gaviria's term (1990 - 1994), a ban on foreign investment in real estate and related businesses was established and maintained.

This situation was recently changed by means of Decree 241, February 8 1999, enacted by the Colombian Ministry of Treasury and Public Finance. The government put forward two main reasons, in order to enact Decree 241 and abolish the restriction on foreign investment in real estate : (i) the five year long construction crisis in the country, that has led to low prices and activity in real estate property in Colombia; and (ii) the existence of several strict laws and regulations aimed at preventing money laundering through the acquisition of real estate. In this last sense it is important to bear in mind that one of the main reason behind the restriction, was to prevent money laundering schemes involving illicit funds obtained abroad that would be invested in land and other real estate properties.

Decree 241 expressly eliminated from the Foreign Investments Statute sections c) and d) of Article 8 and it also expressly created a new means of foreign investment in real estate. Therefore, under current regulations foreign investment in real estate is authorized with no limitation for companies whose business is the purchase and sale of real estate, or of securities issued by means of securitization of real estate or construction projects.

Paula Samper and Ricardo Fandiño De la Calle

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