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  • Writer's pictureMarc Pinter

And the new Hungarian “Golden Visa Act” has already been modified ...

Updated: May 20

The legislation has been changed the first but not the last time.

Laws passed under time pressure usually have to be amended or extended after a short time. This is exactly what happened in Hungary with the new “Golden Visa Act”, which came into force on January 1, 2024. Real estate buyers and fund management companies are particularly affected by the changes.


Not yet in force and already modified

The law that also regulates residence permits for investors in Hungary, the Immigration Act, came into force on January 1, 2024. This law regulates all forms of migration to Hungary, from student and work visas to scientific and sports visas. There are around 20 categories in total. A relatively small part of the law is dedicated to investor residence permits, the Golden Visa. Although this part of the law can only be applied from July 1, 2024, it has just been amended.


Mostly minor changes, but two bombshells burst

Most of the changes are relatively minor and resolve ambiguities in the original version of the law. The most important minor detail concerns the validity of the investor visa: previously it was valid for two years, now it is only valid for six months. What does this change mean? The path to a 10-year residence permit involves three stages. First, the investor applies for an investor visa. Then they invest according to their choice. Finally, they receive the residence permit. Previously, investors had two years to make their investment after the visa was issued. This period has now been reduced to six months. This change does not have a major impact, as another rule remains unchanged, according to which the investor has three months to make the investment after entering Hungary for the first time. In concrete terms, the change means that the investor must invest relatively quickly after receiving the visa and can therefore no longer take as much time as before.


But what bombshells have actually been dropped?

The investor still has two investment options: Either they invest €250,000 in a real estate fund or they acquire direct ownership of a residential property worth at least €500,000. Previously, both options were open to investors from July 1, 2024. What is new is that direct property purchases will only be permitted from January 1, 2025. Purchases made before this date will not be recognized as valid proof of investment for obtaining the Golden Visa. From July 1, 2024 to January 1, 2025, the only option will therefore be to purchase fund shares.


The second piece of real news concerns real estate fund managers. Until now, any real estate fund manager registered in Hungary was entitled to accept investor funds from Golden Visa investors. The only requirement was a state security certificate, which is still required in the new version of the law. Minimum sizes of funds under management are now prescribed, which must be reached for a fund manager to be allowed to accept Golden Visa funds. There are three groups. Groups a.) and b.) concern management companies of alternative investment funds (AIF) within the meaning of the Alternative Investment Fund Managers Directive of the EU. 


a.) Fund management companies that manage alternative investment funds (i.e. real estate funds) with a total value of at least EUR 100 million. Assets acquired by means of debt financing (leverage effect) are also included.


b.) For fund management companies that manage alternative investment funds that are not leveraged or where redemption of fund units is excluded after five years, the minimum value of assets under management is EUR 500 million.


c.) All other investment fund management companies must manage at least 600 million euros in funds.


What are the effects on the market?

The elimination of the possibility to invest directly in a Hungarian residential property until January 1, 2025 will cause some applicants to delay their applications until 2025. The proportion of applicants who prefer direct real estate ownership to investing in a fund is unknown. It is likely that a minority will be affected, as the minimum investment amount required is twice as high as for a fund investment (500k€ vs. 250k€). Real estate agents are certainly not happy about this change.


For fund management companies, the new, high capital requirement will clearly make it more difficult for fund management newcomers to enter the Golden Visa business. This favors the existing, larger Hungarian fund management companies. 


The legal threshold for entering the real estate fund management market was and remains relatively low. A fund management company and a first real estate fund can be established, approved and provided with all licenses in 8-12 months, at a cost of less than EUR 100,000. It is also possible to take over an existing Hungarian fund manager together with the funds it manages. Capital-strong start-ups therefore still have a good chance: the required minimum capital of 100 million euros corresponds to the investment of 400 applicants investing 250,000 euros each. If we assume a conservative debt ratio of 50%, 200 investors are sufficient. That is not a small amount, but anything but impossible. The large providers from Portugal, Spain and Greece, who are looking for a successor market because the Golden Visa has either been discontinued in their home markets or the legal requirements have been significantly tightened, will feel addressed here. 


We regret the delay in the possibility of purchasing a property directly. It is probably due to the fact that the authorities are not yet prepared to handle such transactions.

As far as property managers are concerned, we consider the changes to be beneficial and sensible, as the market and its reputation will be spared from any fortune hunters. The new regulation gives local fund managers a certain degree of protection, but does not exclude financially strong new providers from home and abroad. 


So it remains exciting.


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