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BUYING A PROPERTY IN PERU

Buying my first property in Peru was exciting but I had to use all my contacts to be well informed. I hardly found facts on the web about taxes, loans or the process of acquiring a property, and every question I asked got three different responses. This reality challenged me and I promised myself I would become an expert on the matter. 

Today is the best time to be a property owner in Lima, Peru. The economy is growing steadily, property prices are rising and the political overview is stable. The demand for residential properties is increasing by the minute and conservative investors have qualified real estate investing in the country as safe and highly profitable. But it would have been nice to have access to a handbook to save time and money.

Properties are priced in US Dollars and residential property prices will continue to rise for the next ten years at least. My first property, a 110 m2 apartment was worth 110,000 US Dollars when I bought it in 2006, now that same property has a price of 200,000 US Dollars in 2012.

Before buying your first property it is vital to determine why you are buying the property. Will you live in it? Do you want it to have a place in Lima when you come visit your relatives? Or is it an investment? Once that is decided you can take a look at the different regions, or districts, of residential development in Lima with a real estate agent.

Finding the right real estate agent for you is not easy, especially if you are used to the realtors in USA or Europe who are well prepared professionals who can answer all your questions and express clearly the benefits of buying the property. In Peru, most real estate agents have little experience and you can answer yourself your questions better than they can. Most of the time they haven’t even visited the property before you and you have as much information about the residence as they do.

In Peru, real estate agents are given a percentage of the purchase price so they are interested in getting you to pay the highest price possible on the property. When you go through the property listings, unless the realtor is the same for the buyer and the seller, you have to visit the property with your realtor, the seller’s realtor and sometimes the owner. The realtors are very secretive with their information and there is not much trust between the different realtors. It is very primitive and non-regulated. Realtors are not working for you, they are working for a commission so they won’t get you the best deal.

The price of a property in Lima fluctuates from district to district of the city. It is priced by square meter (1 sq. meter = 10.76 sq. feet). Other key factors which determine price are if the apartment has ocean view or park view or now view, which floor the apartment is in and how old the building is, new properties are priced higher than old ones.

Realtors’ property listings give you the address of the building, the number of square meters, the monthly expenses (maintenance), the number of bedrooms and any special details (if the apartment has a terrace or Jacuzzi for example). During the visits never look too excited with the property, in Peru there’s always room for negotiation and if your realtor doesn’t see you too interested with the property he or she will try to get a good bargain for you in the final price.

Once you have found the apartment you like you should make an offer. Nowadays there is a high demand on properties and what is available this week, might not be able the next. Remember prices are usually higher than the real expectations of the seller, so the there is room to negotiate. Getting to know the real property prices in each district is of great help in this phase of the transaction. I have lived in Lima all my life and know perfectly what the prices of apartments are, how to negotiate and save money. Locals usually offer higher prices for tourists or foreigners, so having a local participate in the negotiation is beneficial.

In order for foreigners to be able to sign contracts in Peru they must have a special permit and the process has to be initiated in the “Dirección de Inmigración o Jefaturas de Inmigración.” (DIGEMIN). And the authority that approves the permit is the “Director de Inmigración o Sub-director de No Inmigrantes o Jefes de Migraciones.” The process can be finished in one day if you have all the required documents.

The general requirements include filling out an F-004 form, having a receipt for the payment made in the Banco de la Nación for the right to start the procedure (S/.12.60/approx. US$4.50) and having the receipt for the payment made in the Banco de la Nación of the immigration tax  (US$50.00). An original and copy of the passport and the Tarjeta Andina Migración (TAM) is necessary too, the TAM is a document given by the Peruvian authorities when foreigners enter the country. It is also required to have a valid stay permit. If you don´t live in Peru and want to delegate to another person the authority to do the procedure in his name, the person going to Immigrations must have a letter of authorization with authenticated signature by a public notary or power of attorney.  In case the foreigner can enter Peru with another document (not only with his passport) he should remember it is necessary to come into Peru with his passport in order to get the special permit.

In order to safely purchase a property in Peru the first step is to have the Apartment’s Property Legal Study which should include three things, the Construction Title Deed or Declaracion de Fabrica, which is the legal recognition of the existence of any kind of construction in an urban property, this has to be inscribed in the Public Registry called SUNARP (Superintendencia Nacional de Registros Públicos) with an Independence Certificate or Independizacion, which means the apartment must have its own Certificate registered in the Public Registry as a result of the legal separation of each of the apartment from the Certificate of the original property, it should also have the Buildings By-laws or Reglamento Interno, which is a very important document because it establishes all internal agreements among the owners and tenants (specially their rights and obligations) as to allow for a correct administration of the building and a peaceful relationship between them.  

If the apartment is still under construction or sold in maps it should have a Construction License, which is the permit given by the District Municipality which allows for the construction of the building. It should also have an ownership without legal issues, this means the individual or company that sells the apartment under construction or in maps must be the legal owner and his property should not be under question. 

Things that should be studied before deciding on buying an apartment are the abstract of title, legal burdens (like a usufruct), liens (like an easement), seizures of property (like in the case the previous owner has a debt and the judge has determined that it must be paid with the selling of the property), mortgages, legal power of the seller to transfer the property, payments of the property tax by the previous owner and legal acts which are pending to be registered. All this information you find with a CRI or Certificado Registral Inmobiliario, any lawyer can interpret it for you.

We work with legal professionals who can help you out with all this in a very short time so you can get into the purchase procedure. This procedure requires three things in Peru. First, elaborate a Purchase Contract which will contain the description of the apartment, the price and the terms of payment. This agreement transfers property between two parties according to the Peruvian Civil Code. Second, the Purchase Contract must be taken to the Public Notary and the owner must obtain a Public Deed. Third, and last, the Public Deed must be taken to the Public Registry to inscribe the apartment on the buyer´s name. Payments will depend on the fulfillment of these three steps, according to the negotiations.

Be careful with the covenants and other deed restrictions of the property you intend to buy. These are dictated by the municipality and dictate what you can or cannot do with the property. You cannot have an office in a residential area for example, or some buildings have a floor limit and if you want to make them higher you can´t. The municipality will also tell you if the original owner has paid all his taxes or not.

Once everything is in order the purchase agreement is produced, it must be certified by a Notary and then registered in SUNARP.

Anyone who buys a property in Peru must pay the taxes called “alcabala” which are 3% of the value of the property and there is also a municipal service tax which will need to be payed.

Comparison of Property Prices Around the World

 

City

Average Luxury Property (Price per square meter)

Neighborhood

London

$19,000 - $24,000

Kensington, Notting Hill, Chelsea

New York City

$12,000 - $15,000

Greenvich Village, Upper East Side of Manhattan

Paris

$9,000 - $12,000

6th, 7th, 8th Arrondissement

Lima

$1,600 - $3,500

San Isidro, Miraflores