To buy a real estate in Paraguay is not too difficult. However, you have to take care, especially if you don’t know the local regulations. In this post, you will find information about how to purchase property in Paraguay, legal processes, tax on real estate business and the necessary documents of a property purchase.
First of all, the most common market situation is that your Paraguayan real estate is still under construction, so you can get a much better price and pay in instalments. In Paraguay, there is a construction and real estate boom, and everyone is building or speculating with lands. Costs have gone high (although still very cheap) and there are some dangers for foreign property buyers to look at and, of course, you have to know what documents are needed to buy property in Paraguay.
If the buyer is a Paraguayan national, he or she can buy property anywhere in the country. If the buyer is a foreigner, there is a law, which states that foreigners cannot purchase land and property in the fifty-kilometre range from borders.
Necessary documents for real estate purchase in Paraguay
Documents for the purchase of property in Paraguay presented by the buyer
The necessary documents and records required for the various types of sales contracts are not complicated from the buyer’s side. However, a substantial justification must be obtained from the Paraguayan authorities. This paper is necessary even if the foreigner does not have a permanent residence permit in Paraguay. The required official document is the “libre disposición bienes”, which proves that the buyer does not have an indebtedness and is not subject to any legal proceedings for debt. After signing the sales contract, the parties must file the agreement in the central register. (Registro Central). Then the registered contract must be authenticated again with a notary, and the deal practically finished. Foreigners have to prove their identity with a passport or other appropriate document.
How can we know that we buy the property in Paraguay from the real owner? Also, how to avoid scammers in Paraguay?
If the owner is not new and the property is also old, then the necessary documents can be requested from the registry. “Certificado de Registro Nacional” indicates who the owner is. Also, it contains information about the property and its exact location. There is another essential document to get from the “Registro Publico”, which again shows who the real estate is (pay attention to the match with the previous document!) And it also indicates whether there is a mortgage loan or similar debt on the record.
You also have to check that the contract includes the real owner, the exact location. The contract must also contain the seller’s data and identification and the details of the property sold. After that, the agreement must be filed in the “Cartorio Central”, (Central Registry). The whole procedure lasts about one month.
What taxes do you have to pay during the purchase of a Paraguayan property?
- VAT (Value added tax) must be paid, which is calculated on the value of the property and is ten per cent of the thirty per cent of the purchase price.
- There is also a fee in the registry. The buyer pays VAT to the seller and then paid by the seller to the State Treasury.
What problems can arise when foreigners buy real estate in Paraguay?
The first is that if you do not get the necessary documents, you can sell it with false papers. For example, houses with expired credentials are advertised. So an old owner sells the property several times. This happens not only with foreigners but also with Paraguayans.
The other problem is that the buyer does not obtain the document indicating whether there is a mortgage on the real estate bank or other lenders. This debt is included in the central register. Moreover, when a procedure is underway to alienate the property, so to take it away from the seller.
The next source of the problem is if the property owner did not pay the property tax (Impuesto inmobiliario). Sometimes there is no mortgage on the property, no other burden, but still, there is debt against the prefecture (municipality). In Paraguay, the law is that if the owner of the property does not pay the property tax for two years, then an official procedure will start to recover it. Also, if the debtor does not react, then another process begins to freeze the property.
Bank loan to buy real estate in Paraguay
The most common form of real estate purchase that foreigners encounter in Paraguay is when the bank does not borrow the cost of a house or building plot, but paid back to the builder or some third party. At this point, it is worth knowing that the most common fear is that residential real estate will be not ready at all or with massive delays. What are the benefits and precautions to be taken in such cases?
There are several options. It can be paid to a bank or a third party. If you borrow from a bank, the bank immediately registers the mortgage before you withdraw the loan. From this point on, the property cannot be lost at least, because the name of the buyer and the mortgage bank is on the paper.
If the instalments are paid to the builder, that is another legal relationship. Here in Paraguay, payments to the builder are made as the construction progresses, by stages. When you finance a property with a private company, then the contract is about that private company is funding the purchase, which will be included in the agreement. This contract automatically guarantees the right to live in the property, but not the ownership. So you can go in, have a key, etc. So far, your only security is the contract, but this is what the buyer owns, and can use it if they have to take legal action against the financier, if the buyer reclaims the money, or later the property does not come into their possession.
Financing your property in Paraguay
It is crucial to consider whether the buyer is financing with the builder, or possibly with other third parties, or with a bank. If the bank lends, they will provide further instalments as the construction progresses. Until then, they do not transfer the full amount of the loan, but pay it off after each completed stage of the construction. Let’s say the construction is divided into 5-6 stages. You will need to take the certificate to the bank, proving that the first phase has been completed and that the second tranche will finance the next step.
The same process is a bit different in the case of private financing. Usually, 20-30% of the final purchase is paid, the rest in small instalments. So when construction is complete, they ask for the remaining amount. For example, the buyer gives 30% before the building process starts. Later, the buyer pays more 60% in instalments until the amount arrives at, let’s say, ninety per cent. The remaining ten per cent is funded by the buyer when the property is completed.
Many offer non-transparent, seemingly dubious options at first in Paraguay, but very cheaply, such as occupy lands, how does it go?
This possibility exists. The government has a lot of lands, such as seized land, which does not really own or use. Some of them have been virtually forgotten. Moreover, many Paraguayans occupy land or abandoned real estates. To not only to live there in the occupied area legally but to obtain it as well, you must live there for at least ten years before you can apply for the ownership. Many people do this, especially the poorest. For example, many occupy riverside plots that are owned by the government but do not care at all. They stay there for 20 or 30 years, and when they apply for the change of ownership, they try to register it and then resell it. However, they have to be and live there for ten years when it comes to government territory.
However, if they occupy a private property, this form still exists, but the occupier must live in the private property for 20 years. After 20 years, they can apply for a change of status. However, just living in one place for twenty years does not mean you can get one. In many cases, for example, if the owner has shown no interest and has not, for twenty years, initiated any legal action to recover or reclaim his property, then the owner will lose the property. The other condition is that the occupier has not only occupied the area but can prove that he or she has never paid any rent. In this case, the applicant may acquire the property or land due to the owner’s lack of interest.
How to buy real estate in Paraguay?
Do you want to buy a house or land in Paraguay? Don’t forget that foreigners can buy (or rent) property and land in Paraguay without becoming local residents. However, obtaining a property and become a permanent resident of Paraguay is a good idea! I think you should contact us and ask for legal assistance.