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Buying Property

Peru - Buying Property

The price of land and property in Peru started rising significantly in 2006, and took off into double digit price inflation from 2010 until 2016. Whilst the increases are slowing down, talk of a property bubble collapse has not materialized. In fact, the volume of sales still continues to rise.

Whilst the majority of the population live in basic homes, there are upscale places such as coastal Miraflores in Lima which offer Western standards of living at prices unaffordable to many Peruvian people. Large homes with en suite bathrooms and accommodation for domestic workers can sell for millions of dollars, and are popular with Spanish, Chilean, Chinese and American buyers. You will have more difficulty finding well-appointed accommodation for a single person, as it is normal in Peru to live with your parents until you are married.

There are no legal barriers to expats buying land or property in Peru, even if you do not intend to live in the country at any time. The only exceptions are properties close to either government installations, military bases or the Peruvian border. However, there are a number of issues which you will need to consider before looking to invest a significant sum in the country.

Firstly, there are a number of environmental factors to bear in mind. Peru is sitting on the border of two tectonic plates. This makes it vulnerable to earthquakes; small ones occur very frequently, while occasional larger earthquakes can cause substantial damage and loss of life. Earthquakes have also been known to trigger tsunamis, which destroy or seriously damage the coastline properties they hit. Earthquakes and very heavy rainfall can both cause landslides, which are capable of burying entire villages and their unfortunate occupants within minutes. Floods are also another risk, even in areas of drought which suffer unusual weather patterns in El Nino years.

Secondly, Peru is a country of great poverty and crime. On the streets, bags and wallets can be snatched by gangs using distraction techniques, whilst buses can be held up by armed gangs. The increasing amount of drugs-related crime in the country is leading to money laundering and more violent crime. More complicated financial crimes can be visited on the unwary if you do not employ honest and reliable professionals to look after your interests when purchasing property.

Never buy property or land in Peru that you have not personally visited. A lovely set of pictures on the internet might actually be those of another property altogether, and even if they are genuine, they can never give you an accurate feel for the area that the property is set in. Farming, fishing or industrial processes nearby may smell and be polluting. A development that looks underway may have been started and then stalled many years ago. Along with “for sale” signs on developments, there are often “in legal dispute” signs. If the estate agent tells you of a superb investment opportunity that you should buy without visiting, someone will make money from your investment but it won’t be you!

Peru also suffers from poor land registration practices, meaning you must tread carefully to avoid problems. It has been common for local people to arrive at a piece of land, put up a fence or a wall, and add a notice claiming possession of the land. They then build their home, or build a house for sale. The legal owner may then discover what has happened and start fighting through the courts. If you have bought the house or land in the meantime, you will find yourself on the receiving end of the court action.

With the help of a solicitor, you need to obtain a certificado registral inmobilario from the public registrar Superintendencia Nacional de los Registros Publicos (SUNARP).The document will give you the name of current and previous legal owners of your property. It also shows the location and size of the property, and identifies any mortgage or other liens against it. Do not accept any copies of this document, however convincing; always see the cost of obtaining the document through a trusted solicitor as a good investment.

Further searches are required to find out whether there are any restrictive covenants or other deed restrictions. It could be that the property is on an estate where an extension or an office is not permitted. Obtain a certificado de parámetros urbanísticos (building parameters certificate), and certificado de zonificación, which are official documents showing the building parameters and zoning verification documents under which the property falls.

You can check the current owner is not going to leave you with their unpaid bills by asking the local municipal authorities if the municipal services tax (arbitrios) and property tax (impuesto predial) have been paid up to date. If bills are outstanding and you buy the property, you have assumed responsibility for paying them regardless whether you knew about them or not.

Only once all these checks have been completed should your lawyer draw up and certify the purchase agreement. They will then file it with SUNARP.

You will be asked to pay three percent of the property purchase value for the alcabala (stamp duty) tax. Local property taxes will be due from the beginning of the year following your purchase, and will be due to the municipality, who will also charge you each year for the municipal services tax.

The estate agent will charge you a fee for finding your new property. As with the lawyer, always insist that the terms are set out in writing at the very beginning or you risk finding yourself with an unexpectedly large bill. A reasonable fee for an estate agent is between three and five percent of the purchase price.

With both the estate agent and solicitor, do not pay up front. The estate agent should only be paid once the purchase is all concluded. The solicitor may ask for a deposit and stage payments in accordance with your written agreement, but pay the bulk at the end when you are satisfied the job has been completed to the required level.

Be aware that procedures in Peru are bureaucratic. Paperwork may move slowly, but handshakes and verbal agreements are a bad idea. The bonds you may think have been established are unlikely to be respected, and without the paperwork you will have a difficult time getting the courts to sort out any issues.

The mortgage market in Peru is small by international standards, and mortgages for expats are expensive. There is a significant housing shortage for nationals, especially amongst poorer households. The government has run a number of schemes to financially assist families with low household incomes who wish to buy homes or land. Eligibility for this assistance is strict and is only available to qualifying Peruvian citizens.

Read more about this country

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