Mexico Beachfront Property Reforms To Spur Foreign Real Estate Investment?

Foreigners have long been barred from purchasing beachfront property in Mexico, but now, a bill working its way through Mexico’s congress may just change the entire scene.

Mexico Beachfront Property Reforms To Spur Foreign Real Estate Investment?

Mexico Beachfront Property Reforms To Spur Foreign Real Estate Investment?

After the U.S. – Mexican War ended in 1848, Mexico lost almost half of its territory to the U.S.  Article 27 of the Mexican Constitution was then written to prohibit further loss of the country’s borders. Article 27 clearly states that “Within a distance of 100 kilometers from national borders and 50 kilometers from national coastline, under no circumstances may foreigners acquire direct title over land or water.”

However, foreigners have been able to purchase coastal property in Mexico ever since the 1970s via a mechanism called a ‘fideicomiso’, created exactly for this purpose.

The fideicomiso is a bank trust through which the bank holds nominal title to the property but the beneficiary of the trust is the foreign buyer of the property.  The property is not regarded an asset of the bank and may not be used by the bank for any purpose other than being held legally for the benefit of the trust beneficiary. Over the years, the fideicomiso has proven to be a popular but fairly complex process that requires a whole lot of paperwork and also payment of annual bank fees. Plus there is also a big risk – the government can revoke ownership of the property.

While some real estate buyers are ready to go through these hassles and bear the risk in order to own a home in breathtaking destinations like Playa del Carmen, Cancun in the Riviera Maya, other potential buyers have been discouraged by the thought of too many official procedures, causing them to invest their money in other countries.

In April this year, the lower house of Mexico’s Congress had passed a constitutional amendment that would allow foreigners to purchase residential property directly, though buying commercial property would still be restricted. The proposed constitutional change would allow foreigners to acquire direct title to land within the designated “prohibited zones” as long it is used solely for residential purpose and not for any commercial venture, along with some additional conditions.

Supporters say that easing property ownership laws is much needed to promote coastal development in Mexico and will bring about a boom in foreign investment in the country which in turn will improve the economy. Foreigners will now find the process of investing in Mexico beach homes a lot less scary and costly, which is in fact the purpose of the initiative.

However, opponents of the bill say it is a letdown and would likely be damaging to the coastal environment of the country.

Lets just wait, watch and hope for the best.

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