Cyprus plans to hike the minimum investment requirement under its Citizenship by Investment program.
It says it will use the extra annual revenue of an estimated €35 million to subsidize rents for vulnerable households and fund an affordable housing program.
The Real Estate Tradeoff
Virtually all investment immigration programs offer real estate as an eligible asset class for investors to qualify for fast-track permanent residence or citizenship.
Investors prefer real estate because it is low-risk compared to equity or other investments and offers greater scope for capital appreciation compared to asset classes like government or corporate bonds.
Further, investing in real estate frees the investor from having to separately buy a home in the foreign country.
For countries, such programs result in assured foreign investment into high-impact and high-visibility sectors like construction, real estate, and infrastructure, giving a boost to the economy as a whole.
Yet, an unavoidable tradeoff is costlier real estate, with prices often rising far beyond affordability for local residents.
Cyprus’ Innovative Solution
Cyprus plans a €50,000 increase to the existing €2 million investment requirement under its economic citizenship program.
With an annual cap of 700 visas, Cyprus plans to generate €35 million and divert it into rent subsidies for poorer sections of its population.
The government plans to increase rent subsidy for eligible vulnerable households by 10 per cent without disrupting its fiscal balance sheet.
The economic citizenship program is considered the primary factor contributing to the 50 per cent surge in property rentals in the country.
Current Cyprus Investment Requirements
| Purchase of financial assets issued by Cypriot companies | €2 million |
| Investment in real estate, land development, or infrastructure projects | €2 million |
| Purchase, creation, or participation in Cypriot businesses or companies | €2 million |
| Combination of the three investment options (may include purchase of special government bonds worth €500,000) | €2 million |
While the second-passport program does not permit investors to qualify by leasing property, the Cypriot permanent residence by investment program does allow investors to rent a home and qualify for PR.
Rising demand for luxury properties draws resources and funds from other projects and developments including affordable housing schemes.
All this leads to a situation where ordinary citizens find themselves unable to buy or rent properties.
The government’s attempt to link its investment immigration program to social welfare comes at a time when the EU is speaking out against all golden visa and economic citizenship programs offered by member nations.
The OECD has placed numerous investment immigration programs, including the Cypriot one, on its blacklist. Transparency International continues to highlight money laundering risks involved in such programs.
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The Cypriot government has signaled its commitment to thorough vetting and comprehensive due diligence of all foreign nationals applying under the program.
The government plans to hire specialist firms that will conduct comprehensive background checks on all applicants.
Further, there will be greater emphasis on preventing applicants facing international sanctions from qualifying for citizenship or permanent residence in Cyprus.
Between 2013 and 2018, around 3,300 investment immigrants have qualified for citizenship, the Cypriot passport, and virtually unrestricted access to the EU by investing close to €5 billion under the controversial investment immigration program.