A non-resident asked me if he could buy property in South Africa.

Favourable exchange rates and a world-renowned deeds registration system have encouraged foreigners to snap up properties here.

A “foreigner” means an individual who is not a citizen of South Africa. The right to own property in South Africa does not extend to an illegal foreigner in the Republic in contravention of the Immigration Act.  Land may be made available to a foreigner who is the holder of a permanent residence permit subject to the conditions of such licence and a refugee with a permanent residence permit after five years of continuous residence in the Republic.

Letting or selling any immovable property in the Republic to an illegal foreigner is illegal.

Foreigners may acquire immovable property (including agricultural land) in their names or jointly in undivided shares or via entities such as companies, trusts, or similar entities registered outside South Africa.

These formalities apply:

• Foreign legal entities which buy property in the country must be registered here and appoint a South African resident public officer on behalf of the local company whose shareholders are non-residents.

• There is a ‘non-resident’ endorsement on the property’s title deed. If the owner sells, they may repatriate all funds introduced from outside South Africa to acquire fixed property in the country and any profit from the sale.

• Non-residents must pay capital gains tax (CGT) on the disposal of immovable property in South Africa, including any right or interest in immovable property. If they want to repatriate funds, they must register as taxpayers and submit income tax returns reflecting the capital gain calculation.

• Suppose the South African Reserve Bank approves foreign loans to fund a land purchase via a corporate entity. In that case, the entity may repatriate the funds and any profits, subject to payment of CGT.

• Loans by a South African bank to non-residents are subject to foreign exchange approval from the Reserve Bank. The bank secures its loan by a mortgage bond registered in its favour.  Banks will only lend non-residents up to 50% of the purchase price of a property.

• Non-residents who have brought funds into South Africa over several years may borrow up to 100% of the total funds invested in the country. This may amount to more than 50% of the purchase price of the property.