President Recep Tayyip Erdoğan signed a decree early yesterday that requires using the lira for buying, selling and renting real estate and leasing vehicles.
The decision has put an end in such deals in foreign currencies, the latest in a series of steps Turkey has taken since August to support the Turkish lira.
The decision, published in the Official Gazette yesterday, said that the purchase, sales contracts and rental agreements and vehicle leasing made in foreign currency will be converted into lira within 30 days.
Real estate sale and rental deals in foreign currency are common in Turkey, particularly in the retail sector. The decision on transactions also included contracts for business and services. The contracts cannot be agreed in foreign currency or indexed to a foreign currency, according to the Official Gazette.
It added that in the current contracts, the agreed prices in foreign currencies will be redefined as Turkish lira within one month and the terms of the decree will be executed by the Finance and Treasury Ministry. Treasury and Finance Minister Berat Albayrak announced at the end of last month that strong countries like Turkey should leave the problem of dollarization behind, and that the government will take steps to prevent foreign currencies from being used for real estate purchases and mall rent and sales.
The Turkish lira has depreciated more than 40 percent against the U.S. dollar since the beginning of this year and most of this loss occurred in August with the escalation of a diplomatic crisis between Turkey and the U.S. Over the last few years, representatives of the main players of the retail sector in Turkey have repeatedly been asking for the end of foreign currency indexed rent at shopping malls. Their call had become more frequent recently due to the high volatility in exchange rates. The Turkish economy administration has answered with its decision to promote the use of the Turkish lira in commercial property rentals and sales at numerous malls across the country, particularly in metropolitan cities. The government's step found major support from local and international retailers in Turkey as they look forward to the fast implementation of the decision.
As many of the shopping mall investments in Turkey were financed with dollar or euro loans, the owners have seen their debt burden rise recently.