Real estate of Cuba

A one-party Communist state with a command economy, Cuba depends heavily on external assistance and a captive labor force. Officially, buying or selling property is forbidden.

But the island has a dire housing shortage, despite government-sponsored new construction. And that has led many Cubans to subdivide their often decaying dwellings or to upgrade their surroundings through a decades-old bartering scheme known in Cuban slang as permuta.  Some of those housing transactions are simple swaps. Those the government permits, tracking each one to keep an up-to-date record of the location of every last Cuban. Many moves, however, are illegal and involve trading up or down, with one party compensating, with money, another party giving up better property. 

The largely untapped Cuban market, with exquisite mansions, majestic colonial homes and virgin beaches, is a potential gold mine for U.S. developers and builders. And it could be a powerful economic engine in the rebuilding of Cuba in the post-Castro era. Fidel Castro’s government nationalized most private property after the 1959 revolution. Cubans lost land, homes and businesses. For now, most foreign investment is limited to hotels and other properties in Cuba’s $2-billion-per-year tourism industry. In 1994, the Havana condominium market appeared to open a crack when a state-run company began selling new condos to foreigners.  By 1998, buyers had snapped up 300 properties. But in 1999, the government abruptly halted sales and bought out the foreigners’ interests in the condos. Now only rentals and leases are allowed.   

Investing in Cuba
The Government of Cuba actively encourages certain types of foreign investment, but tightly regulates the conditions under which investors operate. A foreign company wishing to invest in Cuba has two principal options. It can negotiate a partnership with a Cuban government entity, or it can set up commercial or manufacturing operations in one of the country's three free trade zones. The government has long promoted the formation of joint ventures between Cuban government entities and foreign corporations. But the law also allows fully owned foreign ventures in circumstances that are deemed to be in the national interest.   New alternate modalities of investment vehicles have come into play, those being the cooperative production agreement and the management contracts, both of which are generally used for relatively small investments.