Saint Kitts & Nevis CIP Sees 90% Reduction in Approved Real Estate Following Reform

Before the new administration took office last year, Saint Kitts & Nevis’ CIP had 95 approved real estate investment options. Today, it has nine.

On December 23rd last year, just weeks into his tenure as the CEO of the Saint Kitts & Nevis CIU, Michael Martin introduced a comprehensive set of new, stricter rules for citizenship-by-investment-approved real estate in the country. At the same time, he informed developers that, to continue receiving investment under the CIP, each project would need to seek and attain re-qualification under the new rules.

While the CIU amended some of its new rules a few weeks later, following consultations with stakeholders (initially, it had prohibited re-sales of CBI property, but later said it would allow this if the property had been subject to “substantial further investment approved by Cabinet”), it decided to keep many tough new restrictions despite protestations from developers. As we explained when the rules came out in December:

In a move no doubt aimed at tackling the problematic practices of “financing” and ghost projects under the program’s real estate option, the new CIU board is emphasizing that the US$200,000 minimum investment does not include:

    • International Marketing Agent commissions;                                    
    • Authorized agent fees;                               
    • Advances to the main applicant or dependents of any nature;
    • Financial returns, guaranteed returns, advances or any type of payments to the main applicant or dependents of any nature;                        
    • Due diligence background check fees;                    
    • CBI application fees; 
    • CBI application form fees; 
    • Any other commissions of any nature; and 
    • Any other related fees listed in regulation 35. 

The above-listed new conditions will have wide ramifications for some developers that have routinely paid commissions and agent fees out of the principal investment amount.

The deadline for applying for re-designation as an approved CBI investment option was March 31st this year. For the first five months of the year, the CIU’s website listed no approved real estate developments. In May, however, the list of approved developments re-appeared. This time, however, only nine developments were listed, which means fewer than one in ten real estate projects have re-qualified.

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Why haven’t more real estate projects re-qualified?

First, real estate projects that had already finished construction and sold out years ago and for which substantive upgrades were not planned would have no reason to seek re-designation, since properties already sold to CBI investors can no longer be re-sold unless new capital is injected into the project.

Second, the new rules about what the developers may and may not do with the US$200,000 minimum investment funds have disrupted the business model of many developers, which typically included paying agents and promoters commissions out of the principal investment sum, a business model that continues uninterrupted in other Caribbean CBI countries. We explained this predicament in our Q4 2022 Private Briefing to our Pro members:

The new regulations stipulate that developers will, effectively, be unable to pay any commissions at all. Commissions to marketing agents or payments to local accredited agents typically come out of the funds the developer is able to raise by selling shares in a project to CBI investors. If the developer isn’t allowed to do that, the entirety of the US$200,000 minimum real estate investment will have to go toward construction.

But where will the developer then find the funds to pay commissions to agents? How will agents make money? Will they have to charge higher client fees? They will have to raise their client fees by a factor of at least four to make the same amount of money they would have made in the past from real estate commissions. It is unlikely the clients will accept that. More likely, they will almost uniformly opt for the donation route instead, which means the regulations, as currently formulated, will effectively kill CBI real estate in Saint Kitts.

One local CBI marketer (not a developer) remarked that “[CBI developers in Saint Kitts & Nevis] now can’t pay commissions. But it is not clear if they can pay consultants a fee, marketers a fee, or, for that matter, if they can pay any other supplier a fee at all, as it could all be considered commissions. Basically, they told their developers that they will be the only real estate developers in the world who are not allowed to pay commissions. I assume this will hamper the sales of real estate, which is probably the intention.”

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