Analysis: Cuba’s ‘new’ real property rights — one year later

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By José Manuel Pallí, Esq.

A year ago, the buzz in Miami about the incipient real estate market in Cuba was almost deafening. My phone rang and rang, and I had to recharge its battery every three hours or so. But once again, we have to concede that Cuba moves at a pace that neither Americans, nor even Cuban-Americans seem to be able to grasp.

Sure, there are some who have gone ahead and ‘invested’ — through straw friends or relatives living in Cuba — in Cuban real estate, bent on benefiting from being among the “first movers.” But all indications are that such ‘investments’ have only had a negligible impact in Cuba, if any (which is not to say they might not still have a significant, and likely negative, impact on the pockets of those intrepid ‘investors’ who dared to make their moves while skirting present Cuban laws).

The two derechos reales, or real property rights, which currently — and under the limits Cuban laws place on private property rights — could come closer to fulfill the expectations of a sensible real estate investor or developer, the derecho de superficie and the derecho de usufructo, still lack, in my humble opinion, the level of clarity or transparency required to answer the questions of a prudent investor. And this should not be an issue framed by ideology: As soon as I perceive a sufficient degree of legal certainty with regard to these two rights, even if limited by Cuban “socialism,” I will gladly report it here. But I do not see that yet.

It is not as if the “liberalization” process begun late last year has stalled. Cuban banks will have authorized around 100,000 loans to individual Cuban citizens by the end of the year, many of them for improvement of housing units and for the purchase of building materials. But the average amount of these loans is under $300, roughly 15 times the average monthly salary.

The number of real property (or housing) titles recorded at the Registro de la Propiedad has also increased substantially, with people realizing the importance of being able to show — and prove — their rights.

Over the past four years, Cuba has ‘granted’ its farmers over 1.5 million hectares under usufruct rights, and a recent piece of legislation (Decreto Ley 300/12), effective Dec. 9, 2012, gives those who have benefited from this distribution of idle lands more leeway in what they are allowed to do with them. The families involved can now build their housing premises on the land they have received; their usufruct rights over that land can be renewed every 10 years (the maximum length of usufruct rights remains at 10 years for individuals or natural persons, but it is now 25 years for cooperatives and other personas jurídicas or entities).

But at this slow pace, it is Myanmar (Burma, as I still prefer to call it), and not Cuba, that is staking a claim to become the newest attraction for serious real estate investors. A recent visit by President Barack Obama reinforces that perception — and should invite us to wonder why a presidential trip to Cuba remain inconceivable when a visit to a still authoritarian regime that is slowly emerging from behind its bamboo curtain is kosher. But I am digressing, and probably inviting the usual shower of claptrap that passes for an explanation of this absurdity.

And I am not suggesting that we Cubans should seek any guidance in Burma’s transition. Looking for a game plan for post-Castro Cuba in the experiences of people who hardly resemble the Cuban people (be they Hungarians, Estonians, or now Burmese) has long been a staple of that uniquely Miamian science known as ‘Cubanology.’ I have always thought that perhaps the only people whose ‘transition’ from an authoritarian system into a democratic one merits a closer look by all Cubans is the Spanish people, whose idiosyncrasy, for better of for worse, truly matches ours. And I still do.

But when it comes to nurturing and developing a healthy real estate market, the hyper-leveraged Spanish model and the Spanish people’s most recent experiences with it would probably scare most Cubans used to taking their housing for granted and understanding the right to housing as protected under existing international human rights law (see Article 25(a) of the 1948 Universal Declaration of Human Rights and the first paragraph of Article 11 of the 1966 International Covenant on Economic, Social and Cultural Rights). What with people jumping from balconies to avoid eviction, while foreigners are being offered legal residence in Spain if they buy a little piece of the huge unsold real estate inventory widely scattered over the landscape of Spain’s financial crisis.

And the rain in Spain falls mainly from clouds that originally gathered over our own American plains. So when we talk about the Spanish model for a real estate market, we are talking about our U.S. model. For Miamians, the model is one where real estate prices are set by wealthy Brazilians, desperate Venezuelans and cash-rich Canadians (and now even Chinese), with no regard whatsoever for the true buying power of our local workers’ salaries. We seem to be, yet again, at the stage in the cycle where the usual suspects among our real estate tycoons shed their last vulture feathers and are reborn like the Phoenix. I can almost hear the trumping sound made by a scrum of semiliterate businessmen with egos as tall as the Petronas Tower and laughable political ambitions (although one lesson apparently learned from “the crisis” is to stay away from christening buildings after themselves).

My hunch is Cubans will not buy into this model, whether it comes from Spain or from the United States. It makes little sense to pay close to $1,000 a month to a landlord for renting an apartment that does not look much better than their present housing units in Centro Habana, as a series in a Miami newspaper  showed not long ago.

And that very human need for housing is what Cubans should be focusing on — not on 18-hole golf courses, shopping malls, or hotels with marinas — as far as their “real estate market” is concerned. It is hard to see how the changes made to Cuban housing laws over a year ago have made a dent in Cuba’s chronic housing shortage. And for that failure, the blame lies squarely with the Cuban government, which has been slow to open its housing market to foreign capital, while tentatively opening up to touristic developments and similar ventures.

José Manuel Pallí is a Cuban-born member of the Florida Bar, originally trained as a lawyer in Argentina. He is president of Miami-based World Wide Title and can be reached at jpalli@wwti.net

2 Responses to “Analysis: Cuba’s ‘new’ real property rights — one year later”

  1. Sunnyside Real Estate says:

    Sunnyside Real Estate…

    Analysis: Cuba’s ‘new’ real property rights — one year later « Cuba Standard, your best source for Cuban business news…

  2. cubic zirconia rings…

    Analysis: Cuba’s ‘new’ real property rights, one year later | Cuba-L Direct – News and Views from Cuba…

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