Honduras has been considered for many years as a paradise in the middle of Central America. Its location in the center of the continent, the high investment in roads, and numerous airports allow efficient transportation to and throughout the country, with easy access to islands, beaches, mountains, traditional towns, cities, and much more. The low cost of living compared to developed countries has also generated high interest among people of retirement age seeking to enjoy a life of comfort.
Honduras has 4 international airports and the construction of the Comayagua (Palmerola) international airport is currently being completed. Located 45 minutes from the capital, it will provide greater security and increase the flow of commercial flights.
Foreigners attracted by a tropical life-style have 3 clear options, which are not mutually exclusive:
- Visit Honduras as a tourist
- Invest in Honduras in different niches
- Acquire a property as a “second home
When a foreign visitor decides to acquire real estate in Honduras either as an investment and/or a “second home,” the following questions arise.
1. Can a foreigner own real estate?
In Honduras, every national or foreign person has the right to acquire real estate directly or indirectly. The only exceptions and/or limitations refer to properties in the border area or coastal beaches.
2. Are titles to real estate registered with an official registry?
Yes, the Property Institute, through the Real Estate and Mercantile Property Registry, controls property ownership at the national level, providing greater legal security to future owners and investors through a virtual platform that shows the updated status of a given property by registration number or registration information.
3. How to acquire real estate?
Anyone interested in acquiring real estate in Honduras may do so easily and safely through a sales contract (i) directly in the buyer’s name, or (ii) indirectly through a Honduran entity constituted by the buyer.
4. What to do before acquiring the property?
- Identify the property and enter into negotiations with the current owner. We recommend performing a preliminary investigation from the property’s registration information.
- Perform due diligence to determine that the real estate does not have any problem, lien, defect, or possible contingency, and can be used for the desired purpose. Depending on the location, owners, and history of the real estate, the scope of due diligence can vary.
- Determine whether to acquire property directly or indirectly.
- Sign the closing documents. The most common legal way to acquire a property or house is by signing a public deed of sale before a Notary Public chosen by the parties.
- Pay the taxes and registration fees required by the acquisition as follows:
- Transfer tax equivalent to 1.5% of the total value of the transaction.
- Registration fee paid before the Property Institute calculated as follows: L.200.00 ($8.06) will be paid on the first L.1,000.00 ($40.29) of the property value and L.1.50 ($0.06) for every thousand or fraction of a thousand thereafter.
- Capital gains tax: Compliance with the payment of this tax is the seller’s obligation and amounts to 10% on the difference between the registered value of the property and the price at which it is being sold.
- Notary fees that range between 1% and 3% of the value of the property to be acquired in addition to the corresponding stamps from the Honduran Bar Association (1 stamp of L.10.00 [$0.40] for each L.100,000.00 or fraction).
- Registration of the deed of sale in the corresponding Property Registry according to the location of the property.
5. What legal obligations does the foreign person incur on becoming the owner, directly or indirectly, of a real estate?
The owner of real estate is responsible for the annual payment of the Real Estate Tax in August of each year. For the calculation of this tax, the cadastral value or the declared value will be taken into account, as the case may be; however, the amount to be paid is a municipal tax that depends on the applicable Municipal Tax Plan. In the case of Tegucigalpa, the amount to pay for this tax is as follows:
- a. Real estate located in an urban area will pay L.3.50 ($0.14) for each L.1,000.00 ($40.29) of the total value of the property;
- b. Real estate located in a rural area will pay L.2.50 ($0.10) for each L.1,000.00 ($40.29) of the total value of the property.
The aforementioned rate will be established by the Municipal Corporation (highest governmental authority within the municipal structure), but in no case may the increase be greater than L.0.50 ($0.02) for each L.1,000.00 ($40.29) under the rates approved and established at the time.
- If the property is part of a Condominium (private and special property regime), the owner must comply with the Administration Regulations and pay the maintenance fees.
- If the property is leased, other taxes may apply depending on the type of income and value of the lease.
6. If a foreign person acquires undeveloped real estate to build a house to his satisfaction, he must follow the following procedure:
- Contract and sign a consulting contract with an engineer, architect, or consulting company registered with the College of Engineers of Honduras and make preliminary consultations (confirmation that the proposed dwelling complies with the applicable guidelines and regulations – usually part of these studies are carried out before purchase).
- Request a construction permit from the corresponding municipality. Depending on the location of the property and the magnitude of the construction, environmental permits, such as permission to cut trees, may be required. The plans presented must comply with the guidelines established for each region according to the municipality.
7. What are the benefits to a foreign person who acquires a property in Honduras?
The Investment Promotion and Protection Law provides additional protection to those nationals or foreigners who acquire assets in Honduras to obtain a profit through lawful means. This law recognizes the following additional protections for investors in real property:
- Insurance or guarantee on the property title;
- Conflict prevention methods; and,
- A system that guarantees the recovery of investments in improvements and continuity of a project under development on the real property in dispute.
In addition, a foreign person who acquires real estate valued at more than $50,000.00 can qualify for resident status as an investor.