Mongolia probably isn’t the first place that comes to mind when thinking about investing in foreign property, but the country should be on the minds of astute investors because of its growth potential and the relative ease in which foreigners can buy. With plenty of regional infrastructure plans underway (including a 2030 master plan for the city of Ulaanbaatar, and new mines, a new airport and a new power plant, among others), Mongolia is poised to attract more foreign investment. 

There are no restrictions on foreign ownership of property in Mongolia, says Andrew McGregor, Chief Financial Officer at Asia Pacific Investment Partners, a Mongolia-focused operating group primarily engaged in property development, cement production and financial services industries. APIP owns Mongolian Properties, the largest property manager in the country.

“There is no difference in treatment between foreigners and locals, there is no concept of ‘foreign’ in the property laws in Mongolia,” says McGregor. “The property laws are very clean and clear.”

Most of the new stock being built is apartments catering to the expatriate workers being lured to Mongolia by the mining industry. Purchasers get freehold title to an immovable property certificate for the apartment, and the building’s Home Owners Association (formed by all the owners of the property certificates) holds a long-term land lease from the government for the underlying land. These certificates are registered in a central database that is very efficient and organised, says McGregor. Land ownership by foreigners is restricted, but pretty much all property in Mongolia works under the above system, he says.

“The steps to buying are basically what you would see in most developed markets,” says McGregor. “Find a good agent; find a good property; check and confirm the immovable property certificate to make sure the seller owns a clean, unencumbered title; sign a contract with seller and have that contract notarised; pay the property taxes (usually borne by seller); register the change in ownership with the Immovable Property Office; move in.”

McGregor says foreigners via a power of attorney can do all these steps outside of Mongolia, and Mongolian Properties do this often.

In terms of financing, you’ll have to come with your own money. “Generally speaking, for all purchasers (foreigners and locals) financing is not available as the banks there don't really offer an attractive mortgage product and there are no foreign banks present,” says McGregor. Only about 7 percent of all housing stock in the country has a mortgage on it. In practice, the only mortgages out there are for low-income housing (a social program funded by the government that offers subsidised loans to low-income Mongolian families for small, cheap ‘starter’ apartments.

Tax wise, there is a simple 2 percent stamp duty (based on contract value) usually paid by the seller, with no taxes on buyers. Landlords pay 10 percent income tax on rental income. There are no other taxes, and no restrictions on sending money out of Mongolia. There are also no restrictions on foreigners opening local bank accounts.

In terms of managing your property, Mongolian Properties is the largest property manager in the country, and there are a few companies that offer this service. McGregor says the typical cost for a luxury condo is between $1 and $2 per square meter per month. Property management services for non-luxury buildings can be $0.5 - $1 per square metre per month.

“The Central Bank of Mongolia is the country’s banking authority, and they are optimistic about an economic recovery on the back of returning foreign direct investment into the country,” says McGregor.