Land in Lima: Real Estate Investment in Lima, Peru

Written By: Jacquelyn Annete García Vadnais

Lima is a city that is often missed as a popular investment destination in South America. The reason for this is that many travelers use this city to get to other famous parts of Peru such as Puno, Lake Titicaca or Machu Picchu. That said, Lima has an excellent coastal location that is home to stunning views with a mix of Spanish and indigenous Inca culture. Due to Peru’s rich history it has a unique fusion of cuisine that is rivaled by very few countries in the world. If you are considering investing in Lima, Peru, consider the information below:

A Brief History of Peru

Peru has a fascinating history that is truly diverse mix of cultures. There have been indigenous cultures living in Peru since 2,500 BC. Particularly in the period from 200 BC to 1400 AD, there were many isolated groups of cultures within Peru that still have an influence on the modern culture today. One of the most influential indigenous cultures that impacted Peruvian culture were the Incas. The Incas had their capital city in Cuzco and their empire’s reach spanned across Chile, Bolivia, Chile, Ecuador, and Argentina. Their empire was at its height in the 1400’s when it was destroyed by the influence of the Spanish conquistadors and European diseases such as small pox. Over time, the Spanish gained control of Peru as viceroy, which has impacted the architecture of Peru substantially. That said, the recent influx of immigrants from Asia has also created new portions of Peruvian gastronomy that are sought out by many culinary experts. Today, Lima is the cultural epicenter of the fusion of Old-World Spain, Asia, and Indigenous Cultures, which is what makes Lima truly a hidden gem.

Modern Peru reflects this varied history in its culture, architecture, and food. There are many churches, several mosques, and synagogues, as well as top class museums, restaurants, and sightseeing to enjoy.

Benefits of Investing in Lima, Peru

Consider the following benefits when deciding whether Lima, Peru is the ideal investment choice for your real estate portfolio:

Ease of Foreign Property Ownership

Lima, Peru has many potential benefits to prospective foreign investors there. One such benefit is that foreign investors are legally able to own property without government approval. This helps a great deal as many countries do not allow foreigners to own land so freely. Recently, there was legislation passed that reduced the capital gains tax for non-domiciled property owners from 30% to 5%. A drop such as this will make a substantial difference for foreign real estate investors.

Impressive infrastructure Development

Peru, overall, has invested in further development. One such example is a large pipeline project that is aimed at making the market more appealing to investment. In addition, there have been attempts to construct more connected railway lines to make the transport of minerals easily accessible to port cities.

Stable Government & Economy

Even though Peru went through a chaotic phase twenty years ago, today it has a stable government and economy. This is important for prospective real estate investors so that they do not have their property titles or other assets within Peru at risk.

Possible Pitfalls to Investing in Lima, Peru

While there are many potential benefits to investing in Lima, Peru, there are also potential pitfalls to consider as well that are listed below:

Depreciation of Rental Yields

The rental market has changed in Lima, Peru in recent years partially due to the depreciation of the Peruvian currency in the years of 2013 – 2015 along with the decrease in rental yields, which currently hovers between 4 – 5 %. This is quite low compared to other countries in Latin America, which is why it is wise to invest in smaller apartments rather than larger ones if you are looking to make a higher profit.

Land Title and Covenant Issues

Before investing in real estate in Peru, it is important to have a look at whether the title to the property is in fact clean. Many individuals do not know this and obtain incorrect information from property sellers. Having original documents to be sure of authentic ownership of the seller is vital. In terms of covenants, it is important that you verify whether there are any unusual rules or protocols that must be followed in terms of how the land is used. Doing so will help to avoid unnecessary costs and surprises.

Property Purchases Must Be Completed in Cash

Be sure to bear in mind what the full cost is of the property that you are trying to purchase. This is something that you will likely have to pay up front. It is very difficult for foreign citizens to get bank loans in Peru due to the relationship that must be established first. Additionally, it is important to be aware that if you are able to secure a loan, it will potentially have interest rates in the double digits.

Final Remarks on the Subject

Investing in Peru does have several benefits to explore. Due to good governance, and economic success in recent years, Peru really does have a great stable investment environment to offer foreign real estate investors. The lack of government approval required to purchase property in Lima is another major benefit to prospective real estate investors as well. That said, it is important to be aware of any issues with the title of the property or covenants that run with the land. The depreciation of rental yields on larger apartments is something to bear in mind when assessing whether investing in Lima, Peru is in fact worthwhile. However, due to the incredible developmental projects that the Peruvian government is investing in along with the unique culture that Peru has to offer, Lima, Peru is an excellent locale to consider investing in a piece of property that will either be a second home to you with long term gains or a potential rental option to earn a reasonable profit. When considering your global property potential destinations, absolutely look into what Lima, Peru has to offer.

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Jacquelyn Annete Garcia Vadnais is an Investment Consultant and field expert blogger for Barracuda Consulting.

Jacquelyn has a JD/MBA from Suffolk University, an LL.M in International Law from the University of Miami, and a B.A. from the George Washington University in International Affairs with a Concentration in International Politics. Jacquelyn speaks English, Spanish, French, and Portuguese and has lived in ten countries. Jacquelyn has done work for firms such as Boston Consulting Group and has worked with firms based in over ten countries in the fields of Real Estate, International Law, Expat Living, International Business, Forex Trading, and Travel. She has also volunteered her time and expertise at the Victims Rights Law Center based in Boston, MA.

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