Good News For Foreign Real Estate Buyers – Mexico’s House Loosens Fideicomiso

The House Chamber of Deputies, following an overwhelming majority vote of 356 in favour and 119 against the real estate scenario is about to change. Though the measure was approved in the House, the bill still needs approval from the Senate and state legislatures before it officially becomes law.

Up till now, foreign buyers were allowed to purchase property in and around Mexico’s coastal and border towns under supervision of a real estate trust known as a fideicomiso. However, following a historic vote in Mexico’s House last week, a new bill that will loosen these restrictions is one step closer to becoming law.

In the case of owning property in Mexico it refers to a bank trust. It is a legal agreement between the “property owner” and his bank that establishes that the bank hold the property in trust for the “owner”. This arises from the fact that foreigners cannot own property within 50 kilometres of the coast or within 100 km. of the northern border. This is sometimes called the foreigner exclusion zone.

If the bill gets passed, it will permit foreign buyers to bypass the “red tape” that is created by the current fideicomiso system, which is outlined in Article 27 of the constitution and prohibits direct ownership of land by foreigners within 50 kilometers (31 miles) of the coast and 100 kilometers (62 miles) of the border. The bill will change all of this, permitting foreign buyers to purchase real estate directly in oceanfront areas for residential use. Changing the current laws could have a positive impact to the Akumal real estate market, and economy along with other coastal towns around Mexico.

The old law is serving as more of a hindrance than a protective measure, since giving added legal certainty to foreign property ownership rights will financially benefit the local governments and people of coastal and border towns. When the new bill becomes law, it will also mean additional tax revenues for the areas in question.

Several expert opinions are pouring in about the bill and Wall Street Journal too has aired their view, Mexican real estate developers and local government officials are backing the new bill to remove the restrictions, citing the success of landlocked towns such as San Miguel de Allende, which is very popular among expats and has developed a strong local economy to prove it.

Fideicomiso is a complicated process than buying direct from developers and real estate professionals will be. By removing these outdated restrictions, the new bill is expected to bring an added burst of new activity to Mexico’s already strong real estate sector.

The development that happened last week, was the first governmental step to changing the real estate law, however the process is still a long journey to completion. Hope this proposal to lift the fideicomiso law which has been circulating for over a year in the capital gets passed.

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