New law will let Cubans buy and sell real estate

HAVANA -- For the first time in a half-century, Cubans will be allowed to buy and sell real estate openly, bequeath property to relatives without restriction and avoid forfeiting their homes if they abandon the country.

The highly anticipated new rules instantly transform islanders' cramped, dilapidated homes into potential liquid assets in the most significant reform yet adopted by President Raul Castro since he took over the communist country from his brother in 2008.

But plenty of restrictions remain.

Cuban exiles continue to be barred from owning property on the island, though they can presumably help relatives make purchases by sending money. And foreigners can also hold off on dreams of acquiring a pied-a-terre under the Caribbean sun, since only citizens and permanent residents are eligible.

The law, which takes effect Thursday, limits Cubans to owning one home in the city and another in the country, an effort to prevent speculative buying and the accumulation of large real estate holdings. While few Cubans have the money to start a real estate empire, many city dwellers have struggled over the years to maintain title to family homes in the countryside, and the new law legalizes the practice.

A woman looks out from her balcony in an old building Friday in Havana, Cuba. With the announcement that Cubans will now be able to buy and sell homes, President Raul Castro has delivered on his second major promise this year to relax the government's iron grip over all aspects of the economy. The new housing law and a similar one on automobile sales comes after the island's opening to a growing class of small-business owners. (Franklin Reyes ~ Associated Press)

The change follows October's legalization of buying and selling cars, though with restrictions that still make it hard for ordinary Cubans to buy new vehicles. The government has also allowed citizens to go into business for themselves in a number of approved jobs -- everything from party clowns to food vendors and accountants -- and permitted them to rent out rooms and cars.

While Castro has stressed that there will be no departure from Cuba's socialist model, he has also pledged to streamline the state-dominated economy by eliminating hundreds of thousands of state jobs and ending generous subsidies the state can no longer afford.

Cuba's government employs about 80 percent of the workforce, paying wages of just $20 a month in return for free education and health care, and nearly free housing, transportation and basic foods.

Economists and Cuba experts say the new property law will have a profound impact on people's lives, though probably will not be enough by itself to transform the island's limping economy.

"This is a very positive step in the right direction toward greater economic freedom and individual and family rights of private property," said Ted Henken, a professor at Baruch College in New York who has extensively studied Cuba's economy. "It will immediately increase the personal wealth of millions of Cubans."

'Small things'

Omar Everleny Perez, lead economist at Havana University's Center for Cuban Economic Studies, said legalization of the sale of cars and property could help Cubans who want to go into business for themselves acquire seed money.

"These are small things, but they point us toward an economy that is more normal compared to the rest of the world," he said.

According to the Official Gazette, a government publication that disseminates new laws, the new system will eliminate the need for approval from a state housing agency, meaning that from now on, sales and exchanges will only need the seal of a notary.

Cubans will also be allowed to inherit property from relatives, even if they don't live together, and they will be able to take title of property of relatives or others who emigrate.

Previously, such properties could be seized by the state. One caveat contained in the new law is that the government retains the right to nullify any sale if it finds that it resulted in someone being left homeless.

Cuban exiles in South Florida -- many of whom lost family homes when they left the island -- were ho-hum about the changes.

"How in the world are they going to establish the title for these homes?" asked Jorge Amaro, a retired realtor in Miami.

Amaro said he came to the U.S. from Cuba in 1961 at age 13 on the so-called Peter Pan flights. His parents later joined him, leaving behind the family's six-bedroom home on one of Havana's main boulevards.

"For instance, the property that my family had, who owns it? They're going to have to pick an arbitrary date to decide ownership," he said.

The ban on property sales was probably the most resented among the many restrictions in Cuba's state-dominated economy.

The old regulations took effect in stages over the first years after Fidel Castro came to power in 1959, and they have remained in force even as Cuba opened its economy -- albeit slightly -- following the collapse of the Soviet Union.

For decades, Cubans could only exchange property through complicated barter arrangements or through even murkier black-market deals where thousands of dollars change hands under the table, with no legal recourse if transactions go bad.

Some Cubans entered into sham marriages to make deed transfers easier. Others made deals to move into homes ostensibly to care for an elderly person living there, only to inherit the property when the person died.

Even divorce hasn't necessarily meant separation in Cuba, where estranged couples have often been forced to live together for years while they worked out alternative housing.

The new law requires that all real estate transactions be made through Cuban bank accounts so that they can be better regulated, and it sets a tax rate of 8 percent of the assessed value -- split equally by buyer and seller. There is no mention of any capital gains tax, a boon to property owners.

At an intersection in central Havana that for decades has served as the city's underground real estate bazaar, people said the tax rate seemed reasonable in the abstract, but it will depend greatly on how authorities end up valuing the properties.

"This was necessary, and it will bring results," said Maria Fernandez, who has been arranging home swaps for seven years as an unofficial real estate broker. "It'll help us move forward and change many lives."