Real-Estate Regulations Still Lacking
Even with new luxury developments planned in the future, housing for retirees has yet to materialize. The Cuban government’s regulations are not set up yet for foreigners to buy real estate. The law that bans foreigners from buying property in Cuba is not changing even after the announcement that U.S. and Cuba would reestablish diplomatic relations.
A few foreigners who have bought homes in the names of their Cuban spouses or found third parties to buy the property for them. This is risky because the third party could really steal the property and the person who put up the money would have no recourse.
At this juncture in time, investing in Cuba is not for the faint at heart and only for the brave. Not only is there the question of potential claims on properties from exiled Cubans, the Cuban government has a long history of first encouraging and then cutting off economic liberalization.
Observers say Raúl Castro, who is more pragmatic and less ideological than his older brother, is unlikely to do a U-turn. One western business leader, who has set up a financial services consultancy in Havana, says: “Cuba is bankrupt. Ministers may not like it but they know the only way to balance the books is to encourage the local market and to allow overseas investors to build homes and golf courses and maybe eventually buy”.
Cuban American living in the States are seemingly shut out of the real estate market under the U.S. “Trading With the Enemy Act.” However, there are more loopholes around for them than there are for other American and foreign investors.
Eager to own a piece of their native homeland, Cuban Americans are placing their bets on the island’s underground foreign real estate market. Good news for tens of thousands of exiled Cubans, who left the country after the revolution, still claim rights over properties. Cuba has retained the original Spanish, pre-revolutionary land registry of properties.
As mentioned it is still illegal — according to both U.S. and Cuban law -— for Americans to purchase property in Cuba, but that hasn’t stopped some from trying. Their window of opportunity first opened in 2011, when Cuba relaxed a decades-long ban on the sale of property in the country, which prevented home and landowners from selling and purchasing property. As mentioned, until that point in time, Cubans were only allowed to swap or barter their homes using the “permutas”system.
Once, Castro lifted the bad on legally selling property, Cuban-Americans with family and friends still on the island — and cash to burn — saw a way to reclaim a piece of their homeland. In the few years since, an underground foreign real estate market has flourished without much interference from either country’s government.
So, it appears there is a nascent real estate boom in Cuba, but for Cubans only who cam skirt the rules. Despite a move to restore diplomatic relations between the United States and Cuba, a real estate market in Cuba is emerging, but unfortunately U.S. citizens still are prohibited from buying property.
The Cuban government just doesn’t allow it. The U.S. government doesn’t allow it. However, it is not difficult to imagine a day when U.S. citizens will be allowed to purchase property in Cuba. So, it is currently impossible for foreign nationals to own freehold residential property in Cuba outside of international owned complexes.
“Even if you as a Cuban national buy a residence lawfully through the right mechanisms, the government could at any time repossess the property without any cause,” one Cuba expert states. “There is no certainty in any type of transaction in Cuba.”
Investors bide their time
Here is one expert’s analysis, “People have paid a substantial amount of money for apartments in Havana. “It’s a gold rush to try to own something. But today you’re really investing blindly. It’s a risky business. In a market subject to such speculation, prices are all over the map. Homes and apartments for sale in May 2015 sold for anywhere from $8,000 (U.S.) at the low end to $180,000 at the high end. A search on the popular Cuban real estate listing website www.Cubisima.com turned up listings for three-bedroom homes in Havana that ranged from $1,500 to $770,000“.
Many Cubans have realized the tremendous potential of the Cuban real estate market and are taking advantage of it. The people of Havana it turns out are very interested in real estate. People are aware of the potential value of properties when the country finally does open its real estate market completely. This is mainly because Raúl Castro allowed homeowners to buy and sell their properties for the first time since the 1960s so the island’s real estate market is quickly becoming a driving force for economic and social change. There is a potential windfall in redevelopment in Havana or where housing has become substandard. Dilapidated buildings abound, needing new plumbing, water, electrical work and structural redesign. A home renovation business would be an excellent venture in the Havana area once the real estate market opens up for foreigners. Building supplies and fixtures will also be essential for the construction and renovation market.
As one Cuban American investor put it, “On seemingly every Havana street, contractors are mixing cement, fixing cracks and giving makeovers to moldy facades that haven’t seen paint for decades. New bathroom fixtures arrive in couriers’ suitcases from the Home Depot aisles of South Florida. Havana’s skilled electricians and plumbers earn more in a day than a doctor makes in a month.” “Many of the old homes are being turned into mini-hotels in the face of the imminent tourism boom. New investors are transforming tattered properties into boutique hotels before a the real U.S. tourist surge hits.”
One area that promises to be a potential gold mine is the run-down decaying buildings which border Havana's sea-side Malecón. This area has the potential to become another tourist mecca like Miami's South Beach. This type of transformation is already taking place. The biggest spike is from Cubans in the United States who have relatives on the island able to occupy the properties or manage them as rental units.
Speculators have focused on the burgeoning real estate market. Investors are salivating over oceanfront properties that haven’t been renovated in years in popular cities like Havana. The idea is that if they can get in early, plunk down a few hundred thousand dollars on a property and bide their time until Cuba officially opens its market to foreigners, they
“Wealthy and middle-class Cuban families who fled for the United States saw their homes expropriated by the government. Many went to poorer Cubans or the caretakers that the wealthier families had left behind. Today, many of those families are selling, finding themselves suddenly in possession of a valuable property leading to a gentrification in many areas.”
Right now Cuban Americans can send $8,000 annually to relatives and others in Cuba. On top of that amount, they can also bring with them up to $10,000 in cash each time they visit the island.
Using that formula, Cuban Americans quickly could be accumulating thousands in funds for their relatives to buy properties -- in the relatives' names, of course. The hope is that Raul Castro might change the regulations in his lifetime to allow Cuban Americans to buy in their own name.
