Conditions for Buying French Real Estate

The French real estate market is astonishing in its diversity. Here, one can find properties to suit any taste and budget. In 2021, there was a sharp increase in demand for luxury housing as well as middle-class housing. Foreign investors view French real estate as a reliable asset with the potential for price appreciation per square meter, making them willing to pay substantial amounts.

However, it's important to understand that acquiring property in France without specialist assistance can be quite challenging. The country has its own rules for property sales, which potential investors need to be aware of.

Is it Worth Investing in French Real Estate?

Since 2015, there has been a steady growth in the French real estate market. Purchasing housing is a profitable investment! For instance, buying property in Nice or Paris (a two-bedroom apartment) can yield at least 1,000 euros monthly from renting out the living space. Additionally, such a purchase allows for the issuance of a French multiple-entry visa for up to 5 years. A multiple-entry visa can be the first step toward obtaining residency, permanent residency, and citizenship. An EU passport holder can travel freely to many countries worldwide, access high-quality European healthcare, and enroll in prestigious universities.

One of the major drawbacks of French real estate is its cost. In 2022, it remains among the most expensive in the world. The country also has a rather archaic and stringent bureaucratic system, with taxes directly linked to income levels, sometimes reaching up to 47%.

What Type of Property Can Foreign Citizens Purchase?

Current legislation does not restrict foreign citizens from purchasing any type of real estate. You can choose properties in Cannes, Marseille, Paris, and any other city and region among residential, commercial, ready, and even under-construction projects. The acquisition can be made in the name of an individual or a legal entity using personal funds or a bank loan from France. Property in France can also be purchased “remotely” through a power of attorney to an authorized person.

Key Stages of the Property Purchase Process

French legislation does not restrict the rights of foreign citizens to buy property in the country. An important condition is providing information on the source of the invested capital. This requirement is to protect the domestic market from money laundering attempts.

Real estate transactions involving foreign investors are carried out through a notary. As a representative of state interests and guarantor of the legality of the property owner's rights to sell the property, the notary is also responsible for registering the real estate.

Main stages:

1. Selection. Initially, the buyer needs to determine the main parameters:
   • Choice of city and district;
   • Budget;
   • Desired area;
   • Purchase method (personally/remotely);
   • Payment method (own funds/borrowed capital);
   • Purpose of purchase (residence or investment).
2. Properties can be selected independently or through a realtor, although the latter is not mandatory. In the second case, the search will be more personalized, quicker, and more competent. The specialist can help assess the liquidity of the property, point out neighborhood details, and consider aspects such as future maintenance costs, changes in local infrastructure, proximity to noisy highways and restaurants, and other important factors.
3. Opening a bank account in France. Due to the disconnection of Russian banks from SWIFT and worsening international relations, Russian clients face transfer difficulties. In such cases, foreign bank accounts or services of licensed agencies specializing in immigration issues can be used. Clients of GARANT IN can rely on our assistance.
4. Property viewing. During the pandemic, France successfully implemented online tours, where a realtor remotely showcases the property to the buyer in real-time. This helps reduce travel expenses.
5. Signing a preliminary agreement. The Compromis de Vente is a document outlining the main terms of the deal (property cost, purchase conditions, sale agreement signing date), as well as conditional terms (e.g., mortgage approval).
6. The preliminary agreement is concluded with a notary's participation. The notary acts as the state's representative and ensures transaction safety. At this stage, the buyer transfers 10% of the total cost to the notary's account. The buyer can change their mind within 10 days and get the deposit back. If loan funds are involved and the bank refuses the loan, the deposit is also returned.
7. Technical inspection. This procedure is carried out by the notary and takes about 2.5-3 months. The authorized intermediary checks the technical documentation for the property and verifies whether it has any encumbrances (such as size compliance, asbestos, and lead use, electrical and gas network conditions, etc.). This helps reduce buyer risks.
8. Signing the main agreement. The Acte de Vente is the main agreement signed by the parties in the presence of a notary and a licensed translator. The buyer can be represented by an intermediary through a power of attorney. By the time the sale agreement is signed, the buyer must transfer the full property cost to the notary's account. After signing, the buyer receives the keys and the property attestation in their name. The transaction must then be registered in the registration office, a process that takes up to 2 months, but the owner can already undertake any actions with the purchased property.
9. Property insurance. This is a mandatory requirement controlled by the notary.

Conclusion of the Purchase-Sale Process

Once all preparatory stages are completed, both parties, with the certified translator's participation, sign the document confirming the sale. This procedure is mandatorily conducted in the notary's office and confirmed by the notary's signature.

By the signing time, the buyer should transfer the agreed amount to the notary's deposit account. Once the document is signed by both parties and the notary, the buyer is considered the property owner, receiving the keys. The notary also hands over the attestation sheet confirming ownership rights. Based on this sheet, any actions with the property can be undertaken.

The certified ownership certificate is issued to the buyer several months later (its preparation takes time).

Additional Costs When Purchasing Property in France

The costs of purchasing property in France, like in other countries, are not limited to the property's price. Legislation provides for several mandatory payments, which depend on the type of real estate.

A definite plus for non-residents is that the notary handles all the paperwork when concluding a sales contract in this country. The notary issues a single invoice, known as a "notary fee," which includes the notary's services, state fees, and taxes.

The costs for secondary market properties amount to 7-10% of the total cost. These include taxes payable on existing property purchases, ownership transfer fees, notary service fees, and other payments (stamp duty, land registration, etc.).

For new property purchases, additional costs in the form of fees and taxes amount to 2% of the contract value. This is because some procedures typical for secondary market purchases, such as property re-registration from the old owner to the new one, are skipped. Additionally, France has a 20% VAT, often included in the new property's price.

The established notary fee is 1% of the notary's fee amount, with the rest going to taxes and other payments.

Features of Investing in Under-Construction Properties

When purchasing primary market properties under construction, the investor can make payments in installments. Of course, there is a risk, but there are also guarantees and insurance. For example, the structural warranty for the property is 10 years, and for internal works, it's 2 years.

Features of Leaseback Investment

It should be noted that Leaseback programs are unsuitable for foreign citizens who want to acquire a new home or vacation spot in France. The reason is the restriction on the owner's right to freely manage such property.

The scheme provides for investments only in new constructions, which must be insured and guaranteed by the state. Hotel complexes and residences are the most popular objects under the French Leaseback program.

For those seeking income from investments, the French Leaseback can be an ideal capital investment scheme:

• State guarantee of property commissioning;
• Up to 4% annual return;
• Guaranteed payments from the management company, regardless of whether the property was rented out or not;
• Tax benefits and the possibility of VAT reimbursement upon meeting contract conditions;
• The right to personal use of the property for up to 4 weeks per year (standard contract) or more (special contract);
• All financial risks and property maintenance costs are borne by the management company.

If you are interested in purchasing property in France, seek assistance from a licensed agent. GARANT IN, a leading company in investment immigration, is ready to assist you at any stage: from selecting a property to accompanying and processing all necessary documents.