London, 17 December 2008 TBCCI Briefing BUYING PROPERTY IN TURKEY: A LENDER’S PERSPECTIVE

INT’L DIRECT INVESTMENTS in TURKEY (in million USD) Q/073Q/08 Total1,7512,78510,03120,18522,21417,09612,311 Net equity75311,4428,19017,26319,28815,04410,085 Real Estate9981,3431,8412,9222,9262,0522,226

INT’L DIRECT INVESTMENTS in TURKEY (in million USD)

FOREIGN PROPERTY BUYERS (September 2008) Investors’ country of originNumber of propertiesTotal square metersNumber of buyers Germany18,99622,824,76316,889 UK15,3425,161,15522,124 Denmark3,6311,177,2454,667 Netherlands3,3651,712,3864,273 Ireland3,897745,9845,271 All countries68,09445,949,25478,054

FOREIGNERS BUYING PROPERTY De jure & de facto “reciprocity” Different categories exist Eligible countries: UK, Ireland,Germany, Greece, Syria etc Countries not qualified Romania, Czech Republic, Bulgaria etc Other set of countries’ citizens need to reside in Turkey for a certain period before owning a property Australia (5 yrs), Egypt (6 months) etc. Equal treatment in payment of duties 1.5% from both the buyer and the seller, total 3%

INVOLVEMENT OF A LENDER Eases finance requirements Provides safeguards to both the seller and the (foreign) buyer Streamlines the process Might seem costlier but a big investment need to be handled with care

SAFEGUARDS FOR THE BUYER Prudent lending practice (reasonable LTV) Independent valuation Proper conveyance Legalities need to be adhered to before release of funds Application for the military permission (both the location and the prospective buyers are checked)

SAFEGUARDS FOR THE SELLER/DEVELOPER Enhances selling activities Favourable credit assessment signals to a dependable/credible buyer Expedites completion or starting of a new development

FUNDING AVAILABILITIES Lending continues Prudent lending criteria Variable rates Widened base rate–LIBOR gap prevents tracker mortgages Ideally, no currency mismatch Affordability (household budget surplus)

STAGES Pre-assessment tool ( ) Application Payslips, bank statements, address verification etc. Credit reference agency checks Lender’s own credit scoring platforms Decision making Conditional offer A key component: independent valuation Upon conveyance and the lender becoming the first mortgagee, release of funds to the seller

OTHER IMPORTANT ITEMS Requirement of both earthquake & property insurance Isbank London lending: in line with MCOB Contracts governed by the English law Originators in Turkey lend according to Turkish practices with contracts governed by the Turkish law Joint applications possible

ADVICE TO THE BUYERS Don’t refrain from borrowing banks Your own interests will be protected You can always ask for a smaller percentage of the transaction Whenever possible, bring in independent valuers of the bank before agreeing on the price Consider operational issues for making the monthly repayments

ADVICE TO THE BUYERS Avoid currency mismatch don’t make ill judgements on the promised lower interest rate of a currency in which you have no regular income Remember: £/€ was 1.37 at end-2007 and only 1.10 now £/$ was 2.0 at end-2007 and only 1.55 now

RECENT MORTGAGE LAW Covered bonds, Mortgage Backed Securities Lack of such products prevented Turkey from facing bigger difficulties in the present economic downturn Adjustable rate mortgages Was at the stage of implementation Consumer Information Pre-contractual information sheet to be mandatory BIG DOMESTIC POTENTIAL House loans to GDP still below 5% Population growth of around1.1%