On Cuba's Fledgling Real Estate Industry

| Aug. 11, 2013 | Havana, Cuba

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I meet Ray on Havana’s Paseo del Prado, a major thoroughfare in the east of Havana where you can taste the salt in the air that comes off the Florida Straits. The 65-year-old leads me to an apartment in central Havana, through the city’s crumbling and faded streets.

“This next one is lovely,” he says to me, having asked me to keep a few paces behind him lest the police hassle him for dealing with a foreigner. “It has a view of the sea from the balcony and you have all the shops nearby.”

We climb the stairs to the apartment. The transistor radio and other furniture would fit nicely into a museum. “It needs work,” Ray admits, but is a bargain at 20,000 euros.

Ray’s spiel is as practiced as estate agents the world over. But here in Cuba, there is one difference: his work is illegal. For it, he will receive 10 percent of the sale price and perhaps a tip from the buyers, he suggests with a smile in the living room he is showing off.

In November 2011, the buying and selling of property on this Communist island became legal, in one of many cautious reforms enacted by the government of President Raúl Castro to open up the country’s economy.

Ray’s commission makes him a broker and puts him on the wrong side of the law.

“I do this because I make money,” says Ray.

Since his takeover of the presidency in 2006 from 86-year-old brother Fidel, Raúl Castro, himself 82, has cautiously attempted to grow Cuba’s fledgling private sector.

Yet, as with all the reforms in Cuba, the property laws are progressing extremely slowly, offering time for the government to gauge progress and calculate its next move, “without haste,” in Raúl’s words.

But not everyone involved in this industry is as rudimentary in their methods as Ray. Yosuán Crespo runs EspacioCuba from an office in Havana’s more upmarket western district of Vedado.

Up some stairs in his grand building are laminated signs printed just as at any other estate agent in the world, with pictures, details of the property and of course an asking price. Prices range from 30,000 to 300,000 Euros.

Crespo insists that his business, which opened three months after the law came into effect, is not a brokerage and says that he does not receive commission. Rather, he charges clients for photographing their properties as well as preparing and publishing the adverts both at the office and online. His published fees are just a few dollars.

“It’s not legal to work as a broker in Cuba,” the 28-year-old insists to me. “We are not brokers and we not willing to be brokers. We don’t get commission.”

Cuba’s low average wage of some 30 Euros a month means that many simply do not have access to the sums of money required to purchase properties. It is foreigners who are beginning to realize what a huge investment opportunity Cuba’s real estate market represents.

With prices now relatively low, the price of Cuban real estate is likely to rocket in the coming years as the island inevitably opens up to foreigners. Those who do not hold permanent Cuban residence—a requirement to purchase property—must use a Cuban spouse, friend or some other proxy as a front. This carries inherent risk but investors may see it as a worthwhile gamble.

Back in the crumbling apartment, Ray offers assurances that it will be easy to renovate: “You can have anything you want in Cuba if you have money.”

For World Report, this is Girish Gupta in Havana