Cuba to permit buying, selling of real estate

Reuters, by Jeff Franks, HAVANA, Thu Nov 3, 2011

A woman hangs her laundry from the balcony of her colonial-era

apartment in Havana July 3, 2011. (Credit: Reuters/Desmond Boylan)

(Reuters) - Cuba's government has given Cubans the right to buy and sell their homes for the first time since the early days of the 1959 revolution in a long-awaited reform that creates a real estate market and promises to put money in people's pockets.

The reform, published on Thursday in the government's Official Gazette, is one of the most substantial undertaken by President Raul Castro to liberalize the island's Soviet-style command economy while maintaining the communist system.

Castro has promised the change for a while and Cubans have looked forward to it as a way of finally being able to cash in on the value of their homes, which for five decades could not be sold but were swapped through a legal subterfuge.

As word of the new rules spread, visions of big money danced in the eyes of Cubans who earn an average salary equivalent to $18 a month.

"I could probably sell my house for $100,000. If I had that kind of money I could do a lot of things, include get out of here if my family wants to go," said teacher Isabela Menendez, who lives in a 19th century apartment in central Havana.

Cuba expert Phil Peters at the Lexington Institute in Arlington, Virginia, said the move could have broad ramifications for the Cuban economy, where the cash-strapped government is encouraging the growth of self-employment as it slowly whittles a million jobs from its bloated payrolls.

"The ability to sell houses means instant capital formation for Cuban families. It becomes a source of capital at the grassroots level," Peters said. "It is a big sign of the government letting go."

The new law is likely to stimulate a new housing market and attract money from Cuban exiles for their family members to buy homes and pieces of property, either for the family or as a bet on Cuba's future, experts said.

DESPERATELY NEEDED HOUSING

The government hopes it will lead to more housing construction, which is desperately needed to address a housing shortage that officials put at 600,000 units in the Caribbean island nation of 11 million people.

The Communist Party, Cuba's only legal political party, approved the notion of property sales at a congress in April.

The new rules give people the right to buy and sell, swap, donate or pass their houses on to heirs. They can do the same with small pieces of land.

Cuba's communist government allows people to own homes, but in theory has not previously permitted their sale for money. Homeowners who remained on the island after the revolution got to keep their homes, while those many who fled lost theirs to the government.

The swap, or "permuta," of houses has been acceptable for years on an informal black market where Cubans supplemented exchanges with under-the-table money if they were trading a smaller house for a bigger one.

Many other subterfuges have been used to thwart official restrictions, but now Cubans can do a straight up purchase or sale without fear of reprisal.

"Many people have lived and live with the fear of losing their homes because they acquired them in an illegal way. Now they'll be able to legalize them and to sleep in peace," said Osmel Gonzalez, a self-employed food vendor in Havana.

Both buyer and seller will have to pay taxes, which will be a welcome new source of income for the government.

The reform will eliminate some bureaucratic steps required to do a deal, but also limit people to owning one home as a permanent residence and another as vacation place.

While Castro has said Cuba must update its system to assure its survival well into the future, most reforms so far have been tempered by rules aimed at limiting the accumulation of wealth and property.

For the first time, the new rules permit Cubans emigrating legally from the island to leave their homes to family members, instead of being forced to hand them over to the government.

Permanent foreign residents in Cuba also will be allowed to buy a home.

The housing change follows the recent reform of allowing people to more freely buy and sell cars, another change overturning one of the early tenets of the revolution.

But it came with limits, the primary one being that only foreign residents and Cubans with special status -- such as athletes, artists and doctors -- can buy new cars.

The government has opened up about 180 occupations for self-employment and according to the latest figures, 338,000 Cuban are working for themselves, more than double the total two years ago.

(Additional reporting by Nelson Acosta and Marc Frank; editing by Anthony Boadle)