In Istanbul and Dubai, Russians pile into property to shelter from sanctions

Wealthy Russians are pouring money into real estate in Turkey and the United Arab Emirates, seeking a financial haven in the wake of Moscow’s invasion of Ukraine and Western sanctions, according to many property companies.

“We sell seven to eight units to Russians every day,” said Gul Gul, co-founder of the Golden Sign real estate company in Istanbul. “They buy in cash, they open bank accounts in Turkey or they bring gold.”

In Dubai, Thiago Caldas, CEO of the Modern Living property firm, has hired three Russian-speaking agents to meet Russian interest, which he says has leapt tenfold.

Sanctions imposed since the Feb. 24 invasion include Russia’s exclusion from the SWIFT banking system, and the targeting of individual such as oligarchs deemed to be close to President Vladimir Putin.

While Turkey and the UAE have criticised the Russian offensive, Ankara opposes non-UN sanctions on Russia and both countries have relatively good ties with Moscow and still operate direct flights, potentially offering routes out for Russians and their cash.

“They are wealthy Russians but not oligarchs,” said Gul of Golden Sign, one of a dozen real estate companies interviewed by Reuters. “They are finding ways to bring their money to Turkey.”

“There are customers buying three to five flats,” Gul added.

Russians have been big buyers of Turkish property for years, behind Iranians and Iraqis, yet the real estate players said there had been a spike in demand in recent weeks.

Though it’s still early days, industry figures bolster their accounts; In February, as troops massed on Ukraine’s border before advancing, Russians bought 509 houses in Turkey, nearly double the number they snapped up last year, according to the country’s statistics office.

That data was still before Western sanctions took hold, and real estate agents said they expected the numbers to grow further, driving up demand already primed by the world’s emergence from the COVID-19 pandemic.

Ibrahim Babacan, whose company in Istanbul builds and sells real estate mainly for foreign buyers in Turkey, said in the past many Russians had wanted to live in resorts such as the Mediterranean Antalya region. Now they were buying apartments in Istanbul to invest their money.

Reuters contacted some Russian homebuyers but they declined to give interviews due to the sensitivity of the situation.

Both Turkey and the United Arab Emirates offer residency incentives for property buyers. In Turkey foreigners who pay $250,000 for a property and keep it for three years can get a Turkish passport. For a slightly smaller sum Dubai, a major Middle East business hub, offers a three-year residency visa.

Apartments worth 750,000 dirhams ($205,000) - the threshold for visa entitlement - have seen the bulk of the demand but more expensive property on artificial islands such as Dubai’s glitzy Palm Jumeirah have been bought for up to 6 million dirhams, according to the real estate professionals.

“Investors are looking for both capital protection and the opportunity to receive a residential visa in the UAE for temporary relocation,” said Elena Milishenkova of real estate brokerage Tranio, based in Moscow and Berlin, which has a focus on Russian clients buying property overseas.

Her company received almost three times more requests for apartments in Dubai in the first three months of 2022 compared to the same period last year, she said.

Some companies say demand is even higher.

“Right at the beginning of the invasion of Ukraine, we launched a campaign in the region and the number of people who contacted us was ... at least 10 times higher than usual,” said Caldas of Dubai’s Modern Living.

The CEO, who hired the Russian-speaking agents last week, said the really wealthy buyers appeared to have been making their preparations and shifted funds out of Russia even before the war broke out a month ago.

For Russians who have bank accounts in Dubai, the process is relatively simple, said Elena Timchenko of broker Royal Home Real Estate, which is based in the emirate.

Others have turned to friends or contacts for help, but for some, the challenge of getting the money together for a purchase has so far been too much, she added.

“The wish to buy in Dubai is one thing, the ability to do so is another,” she said, referring to the difficulties of bringing funds to the Gulf state.

Some newly arrived Russians in Turkey have struggled to make deposits and transfers at banks that are wary of contravening sanctions. Extra layers of compliance and exclusion from Visa and Mastercard add to the difficulty.

The UAE issued guidelines to banks last year to tighten procedures identifying suspicious transactions in an attempt to stem illicit financial flows. That did not stop the country, like Turkey, being added to a list of countries monitored by the FATF global financial crime watchdog.

A senior executive at an Emirati bank said the bank was making the same checks on customers as before, and had received no new guidance from the central bank.

In Istanbul, meanwhile, real estate builder and seller Babacan said that so far those Russian customers he dealt with were paying via banks without problems.

Caldas and Alex Cihanoglu, a realtor also based in Turkey’s largest city, said some Russians were using cash converted from cryptocurrency, now that sanctions had made financial transfers more complex.

“I would say most of the transactions that we’re seeing are in crypto,” Caldas added. “Crypto, especially for this market now, in the difficulties they’re facing, is the channel that is being used.”