Sunday, July 31, 2011

Home sales would be a sea change for Cuba

Posted on Saturday, 07.30.11

Home sales would be a sea change for Cuba

A law allowing Cubans to buy and sell homes could be enacted this week
when the Cuban parliament convenes to discuss pending economic reforms.

Selling an apartment in front of the Habana Libre, excellent condition

The seller, Marita, is advertising this Havana apartment on, an online marketplace that's kind of like a Cuban
Craigslist. She's asking the equivalent of around $57,600 in convertible
Cuban pesos.

Of course, at the moment real estate sales in Cuba are strictly illegal
and have been for the past five decades. But that may change soon. As
part of sweeping economic reforms unveiled at the Communist Party
Congress in April, Cuba plans to allow the buying and selling of homes
and cars.

A July 1 article in Granma, the Communist Party newspaper, painted the
broad brush strokes of the real estate reform: such transactions would
be permitted with little government interference beyond getting notary
approval, making payment through a state bank and paying an as yet
unspecified tax.

The real estate reform has yet to become law, but it's possible it could
when the National Assembly, Cuba's parliament, convenes Monday for a
three-day meeting at Havana's Convention Palace. In any case, the
government has said a new law will take effect by the end of the year.

This potential sea change has set off a flurry of activity on both sides
of the Florida Straits. For years, Cuban-Americans have been funneling
money to relatives to fix up tired properties or for under-the-table
payments to "buy'' a home or sweeten a permuta, or swap, the accepted
form of acquiring Cuban real estate.

Now with the possibility of a true real estate market developing, people
have been dusting off property titles or trying to find them and have
been busy fixing up properties they anticipate putting on the market,
said Antonio R. Zamora, a Miami lawyer who specializes in foreign

"A lot of money is coming from Miami — some of it's speculative,'' said
Zamora, who visited Cuba recently.

Some exiles say they have made under-the-table payments to purchase
beach homes or other properties from family or friends with the
understanding that some day they will own the homes outright. But they
have no official paperwork to acknowledge such transactions.

In these cases, it should be buyer beware, said George Harper, a Miami
attorney who left Cuba when he was 17. "That's all well and good but any
deal is subject to what the local laws are.''

The expected law does not allow foreign ownership. The guidelines
announced in Granma said that foreigners and Cubans living abroad can't
own property unless they are permanent residents of Cuba. Cubans will be
allowed to own only one home and they can inherit a dwelling, even if
the relatives of the deceased don't live in the home, according to Granma.

Because of the influx of exile money, Zamora said it would be more
realistic to "get the name of the foreign relative into the title."

Phil Peters, a vice president at the Lexington Institute and a veteran
Cuba watcher, said that the exile money flowing into Cuba may have an
impact beyond investment.

"Now with the door open for Cuban-Americans to visit, to support their
families, to invest and to perhaps indirectly buy real estate, it
becomes not just an exile community but also an immigrant community with
a foot in both places,'' he said.

One thing that isn't expected to be a topic of debate in Cuba is exile
claims on homes.

Over time, Zamora said, families who occupied the homes of Cubans who
left the island have essentially become the owners of the dwellings.

"There's always been a difference of opinion on residential properties
that were taken but now I think most people, with some notable
exceptions, have given up on the notion of getting those properties
back,'' said Harper.

He's been back to Cuba twice since he left as a teenager and visited the
home where his family once lived. He found several families in the
residence. "From a humanitarian point of view, it would be impractical
to kick those people out,'' he said.

Also expected to change once a property law is enacted is the messy
permuta system. Currently, homes that are exchanged are supposed to be
of "equal value.'' But matching up the homes on offer with what people
want is often a tricky business.

Sometimes two apartments are exchanged for a large home in a prime area
and multiple parties are involved in so-called triangular deals.
Although no money is supposed to change hands, there are sometimes
under-the-table payments to even up deals or bribes paid to officials to
let dubious swaps go through.

Under the new system, someone wanting to downsize from a four-bedroom
home with a garage, for example, to a smaller apartment will probably
just be able to do the swap and pay the difference in value, said
Zamora. "The reform should make the permuta much easier and out in the
open,'' he said.

Besides cleaning up illicit housing transactions, the government has
said the reform is designed to help with Cuba's serious housing shortage.

But Harper said, "The fact that people can buy and sell homes won't
really impact the housing supply. If Cuba had money to build new
housing, I think they would have done it by now.''

Cuba, however, may be counting on real estate owners to expand and
improve properties. In its effort to move more people off the state
payroll into self-employment, the government has said that renting
rooms, gardens and even swimming pools can be considered an alternative
to state employment. Permitting home ownership may also encourage home

"If people are allowed to sell homes, this is a huge step forward in
terms of property rights,'' said Peters. "It makes assets liquid, a home
can be used as collateral.''

Because of the possibility of freeing up capital when a home is sold,
other entrepreneurial activity may be unleashed, Peters said. "This
really would be a sign of the Cuban government being serious about
letting go of controls,'' he said.

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