For Swap… but also for sale

Illustration: Fabián Muñoz

In the Cuban comedy Se permuta (ICAIC 1983), by director-screenwriter Juan Carlos Tabío, the memorable Rosita Fornés plays the role of Gloria, a humble seamstress with dreams of getting ahead in life who begins a career as a “permutera”, or real estate agent, by moving from Guanabacoa to El Vedado to take her daughter (Isabel Santos) away from her suitor, a lowly mechanic (Mario Balmaseda), and in the end almost ends up with the mansion that she always dreamed of having.

Back then, only a Cuban who was already a property owner could swap one residence for another, and only after many difficult bureaucratic procedures. No one imagined that this complicated swapping system would last another 30 years. And nobody anticipated that, despite unquestionably efficient business skills, an unflagging “Gloria” today would have to pay no less than $25,000 to $50,000, or its equivalent in CUC (Cuban Convertible Peso), to move to such a house.

New legislation enacted in November 2011 set the regulations for the transfer of real estate  — either by buying and selling, swapping, donating or allocating — between Cubans who reside in the country and foreign permanent residents. It also eased regulations for individuals who build or make changes to their homes. It continues to be the law that an individual can own just one home as a permanent residence and a second home at the beach or as a vacation property.

Every real estate transfer requires an update of the property title and appraisal, registration with the Property Registry, a notary public (eliminating the requirement of approval from housing authorities); transfer and inheritance tax payments, equivalent to four percent of whatever price has been established for the property.

When a home is bought or sold, each party must pay a four percent tax on the property’s declared value; for the seller, it is a personal income tax, and for the buyer it is an asset transfer and inheritance tax.

In the case of a donation, the owner can donate the property to whomever he/she wants. For swaps, the new legislation eliminates the requirement of “parity” between the homes exchanged. A new legal concept was introduced: compensation, or the exchange of money, to offset any difference in value between properties that are swapped. This “compensation” always existed illegally, but now is recognized by law. The parties involved can freely decide on the sale price but it is the appraisal value, which is determined by the “Community Architect,” that is used for calculating taxes.

According to the director of the Ministry of Justice’s notary and registry services department, some 2,730 home sales and 10,660 donations were reported nationwide between January and March of 2012.

For decades, Cuban homeowners who moved other countries lost their rights to their homes. In recent years, this led many people to maintain the costly status of “temporary traveler” by returning to Cuba every eleven months to request a new travel permit in order not to lose their property. However, under the new law, Cubans who permanently emigrate may transfer their homes to their spouses or former spouses or to blood relatives up to the fourth degree, without any need for cohabitation. They also can transfer their property to non-relatives with whom they have cohabitated for a minimum of five years.

Despite these changes to housing laws, described by some as the most popular measures to date implemented by the current government, the Cuban real estate market still needs a number of complementary mechanisms and services in order to become efficient.

These include bank loans for buying homes. Right now, financing depends on personal savings or informal loans. Some people who were interviewed by the Reuters news agency said that many people are buying homes with financial help from relatives who live abroad. Some do it to help their relatives on the island, while others invest to open restaurants, cafeterias and other businesses. Some want to buy a vacation or retirement home.

Another problem is that the occupation of real estate agent is not included on the list of authorized self-employment activities. The “permuteros” still operate outside the law and they earn sales commissions of five to ten percent.

Except for word of mouth, there are hardly any channels for market information. Local radio and TV broadcast home sales or swap ads as a community service, but these are very few. People who have access to the Internet can read look up websites that have been created to fill this void. Since the new real estate legislation was passed, announcements for homes sales on these websites have sky rocketed.

This virtual disinformation has hindered research on market trends and prices. Informal real estate agents who have been interviewed said that from November 2011 to date, prices for choice homes in the capital have risen thirty to fifty percent, driven primarily by speculation, not a lack of supply. In the best neighborhoods, houses cost from $200 to $600 per square meter ($20-$60 per square foot). Some observers point to a recent trend toward lower apartment prices. This is not the case for single-family homes, few of which have been built in Havana since 1959 and thus are relatively more expensive.

Some six months after the limited opening-up of the Cuban housing market, very little price and transaction information is available; trends are not yet evident and forecasts are risky. But what is evident is enthusiasm, as well as apprehension, given the new situation of stronger citizen rights, but one that is more unstable; real property rights for those who are already in the market, but a more expensive entry into that market for those who are not property holders, and an expected economic expansion associated with the growth in the construction sector. And even though a “Gloria” in 2012 – and beyond – will need to spend much more effort and money in order to move from Guanabacoa to Vedado, I suspect that she appreciates having more options, more effective rights and more possibilities for making her dreams come true.

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