No foreign currency for property - Turkey

Turkey flag
All business deals inside the country should be conducted in lira, President Tayyip Erdogan said. Photo credit: File

Turkey has ruled that property sales, rental contracts and leasing transactions must be made in lira from now on, halting the use of foreign currencies for such deals in a fresh step to support the ailing local currency.

All business deals inside the country should be conducted in lira, President Tayyip Erdogan said, adding that nobody apart from exporters and importers should cross paths with foreign currency.

"We are solving the issue of rent in foreign currency, which concerns a lot of our vendors, once and for all," Mr Erdogan told a meeting of a traders' confederation.

"Every business in this country needs to be priced, discussed and carried out with our own currency," he said, adding that further moves to support the lira were on the way.

But economists and industry participants doubted the move would have a permanent positive impact, saying it hampered predictability and was likely to bring additional burdens for firms with foreign currency debt.

Real estate sales and rental deals in foreign currency are common in Turkey, particularly in the retail sector.

"Around 70 per cent of the rental contracts in shopping malls are in foreign currency," Hulusi Belgu, chairman of the council of shopping centres told Reuters. "There is tremendous uncertainty right now. What further regulation will follow after this decision is important."

Turkey's shopping mall industry has more than US$15 billion (NZ$22.84 billion) of debt which firms could struggle to repay if they are unable to generate foreign currency revenues, Mr Belgu said.

In a decision published on Thursday in the Official Gazette, the government said any contracts previously made in foreign currency but which are currently in effect must be converted into lira within 30 days.

The decision also covers contracts for business and services. Contracts cannot be agreed in foreign currency or indexed to a foreign currency.

The lira has lost some 40 percent of its value against the dollar this year over concerns about Mr Erdogan's influence on monetary policy and a diplomatic spat between Turkey and the United States.