The regulation of foreign ownership of real estate in the Republic of Iraq is considered a legally sensitive matter, given its direct connection to sovereignty, economic policy, and investment requirements. The legislative framework governing this subject has gone through several successive phases, reflecting the Iraqi legislator’s varying approach across different periods—ranging from restricted permissibility, to absolute prohibition, and ultimately to exceptional permissibility linked to investment. In this article, we review the key legislative stages that have regulated foreign ownership of real estate in Iraq, and clarify the legal foundations and controls that currently govern this right.

First: The Stage of Law No. (38) of 1961 (as amended) Governing Foreign Ownership of Real Estate in Iraq

This law was issued to regulate foreign ownership of real estate in Iraq, adopting the principle of reciprocity as the governing basis of this right, while imposing strict restrictions and controls. The following is a brief overview of its most important provisions:

• Foreign ownership of real estate in Iraq is subject to the principle of reciprocity. A foreigner may not own property except to the extent permitted for an Iraqi in the foreigner’s country, in terms of the type of property, its area, location, and use (Article 1).

• The Council of Ministers may restrict, suspend, or halt the registration of a foreigner’s ownership of real estate if required by public interest, reciprocity considerations, or in the event of exceptional circumstances (Article 2).

• The provisions of this law do not apply to nationals of Arab countries, as they are subject to the provisions of other applicable special laws (Article 3).

• For a foreigner to own real estate, approval must be obtained from the Minister of Interior, residency in Iraq for no less than seven years must be established, there must be no administrative or military objection, and the property must not be located near Iraqi borders, agricultural lands, or state-owned lands (Article 4).

• A foreigner’s ownership is limited to one residential property and one business premises only, and the foreigner is prohibited from endowing the property or bequeathing it to a foreign entity outside Iraq (Article 5).

• If a foreigner exceeds the legally permitted ownership limit, they must transfer the excess portion to an Iraqi within the legally specified period; otherwise, it shall be sold compulsorily in accordance with the law (Articles 11 and 13).

• Any contract, transaction, or registration made in violation of this law is deemed void and does not grant the foreigner any acquired rights (Articles 16 and 17).

These provisions demonstrate that Law No. (38) of 1961 did not recognize a foreigner’s right to own real estate as an absolute right. Rather, it treated it as an exceptional and restricted right based on reciprocity, surrounded by strict administrative and security conditions.

Through this law, the legislator sought to narrow the scope of foreign ownership of real estate in Iraq in terms of number, location, and usage, and to link it to official approvals and long-term residency requirements. This includes Paragraph (3) of Article (4), which prohibits foreign ownership of any property located within (30) kilometers of the Iraqi borders, in addition to declaring void any unlawful transaction. Accordingly, this stage established the principle of limited permission for foreign ownership of real estate as an exception subject to state oversight, rather than an original or unrestricted right.

Second: The Stage of Absolute Prohibition – Revolutionary Command Council Decision No. (23) of 1994

This decision was issued by the dissolved Revolutionary Command Council and remains applicable in Iraq. It constituted a fundamental shift in the regulation of foreign ownership of real estate in Iraq, as the legislator adopted a comprehensive suspension of all laws and decisions that previously permitted non-Iraqis to own real estate or invest their funds inside Iraq.

The decision suspended the application of all legal provisions allowing non-Iraqis to own real estate or invest in companies, or engage in any other form of ownership or investment, regardless of its form or legal basis.

It also imposed criminal penalties on violators, including imprisonment for a period not less than one year and not exceeding three years, with harsher punishment if the violator was Iraqi—where imprisonment would be no less than two years—along with confiscation of funds or properties acquired or invested in violation of the decision.

Thus, this stage represented the phase of absolute prohibition of foreign ownership of real estate in Iraq and foreign investment, until later legislation reintroduced this right under exceptional and limited frameworks.

Third: Recognizing Foreign Investor Ownership Rights within the Investment Framework

Article (10) of the Investment Law No. (13) of 2006 (as amended) represents a decisive stage in the development of Iraqi legislative policy regarding foreign ownership of real estate in Iraq, as the legislator moved from general prohibition to restricted permissibility tied to investment.

In Paragraph (First), the article establishes the principle of equality between Iraqi and foreign investors, granting both the same advantages, facilities, and guarantees provided by the law, while subjecting them to the same obligations, thereby affirming a unified legal status for investors regardless of nationality.

In Paragraph (Second / A / 1), the legislator allowed Iraqi or foreign investors to be granted ownership of land allocated for housing projects belonging to the state or the public sector. It also allowed them to purchase land belonging to the private or mixed sector, exclusively for the purpose of establishing housing projects, provided that the project does not conflict with the approved master plan land use.

This article indicates that the legislator did not grant the foreign investor an unrestricted right of ownership, but rather subjected it to key restrictions, most notably:

• Limiting ownership to housing projects only.

• Linking ownership to the existence of a licensed investment project.

• Requiring compliance with urban planning and the approved master plan.

• Ensuring equality between foreign and Iraqi investors in rights and obligations within the investment framework.

Accordingly, this article constitutes a clear legislative exception to the general rules that previously prohibited foreign ownership of real estate in Iraq, establishing a third stage based on allowing restricted ownership for foreign investors as a tool to implement licensed investment projects, rather than as an independent and absolute ownership right.

This legislative direction is further reinforced by Article (34) of the Investment Law, which states:

“No provision shall be applied if it contradicts the provisions of this law.”

This text indicates that the legislator suspended the application of all previous laws and decisions that conflict with the provisions of the Investment Law, including the Revolutionary Command Council decision referred to in the second stage, which had prohibited non-Iraqis from owning real estate or investing funds in Iraq.

Therefore, Article (34) serves as an explicit legislative suspension and an implicit repeal of the aforementioned decision, within the scope of investment activities governed by the Investment Law—particularly the ownership rights granted under Article (10) concerning land allocated for housing projects under the prescribed legal controls.

Legal Alternatives to Ownership (Musataha Contract and Lease Agreement)

Musataha is considered one of the real rights regulated under the Iraqi Civil Code No. (40) of 1951. Article (1266) defines it as follows:

“A real right that grants its holder the authority to construct buildings or other structures (excluding plantations) on the land of another, pursuant to an agreement between the holder and the landowner, whereby the agreement specifies the rights and obligations of the musataha holder.”

Given the legal nature of musataha as a real right, the legislator imposed special restrictions on establishing it in favor of foreigners. Article (15) of Law No. (38) of 1961 (as amended) provides:

“It is not permissible to establish any real right in favor of a foreigner over state-owned properties, nor to grant them a privilege to exploit the property of an Iraqi person except through a concession contract in accordance with the law.”

Additionally, Article (152) of the Real Estate Registration Law No. (43) of 1971 provides:

Article 152
“The registration of real rights in the name of a foreign company is subject to the following conditions:

1. Certification by the Companies Registrar that the company is registered in Iraq in accordance with the law and that it is entitled to own real estate under its articles of incorporation.

2. Certification by the competent minister that the property is located within the boundaries of cities and towns, or that ownership is permitted pursuant to an agreement or concession ratified by law.

3. Approval of the Minister of Interior.”

Since musataha is considered a real right, establishing or registering it in favor of foreign companies is subject to the above conditions, which are particularly strict—especially the requirement to obtain the approval of the Minister of Interior—making this legal route highly difficult in practice.

Accordingly, the more practical legal alternative for foreign companies is a lease agreement, as its duration may be agreed upon by the parties’ mutual will, especially since Iraqi law does not set a maximum limit for lease duration, as long as it does not violate public order and does not constitute a concealed real right.

Conclusion and Findings

It is evident that the regulation of foreign ownership of real estate in Iraq has passed through three main legislative stages: the first adopted the principle of reciprocity with strict restrictions; the second imposed absolute prohibition under Revolutionary Command Council Decision No. (23) of 1994; and the third reinstated permissibility in a restricted manner within the investment framework under Investment Law No. (13) of 2006.

In the most recent stage, the legislator recognized the right of the foreign investor to own real estate exclusively for the purpose of implementing licensed housing projects, under specific conditions and controls, while suspending any previous provision that contradicts this right pursuant to Article (34) of the Investment Law. Therefore, the general rule remains prohibition, and the exception lies in restricted permission linked to investment, which does not amount to an absolute ownership right for foreigners.

In light of the restrictions imposed on establishing real rights for foreigners—particularly musataha as a real right subject to strict registration conditions and approvals—resorting to this alternative remains limited in practice outside the investment framework. Consequently, a lease agreement, with a duration agreed upon by the parties and within the limits of public order, remains the broadest and most applicable legal alternative for foreigners seeking to benefit from real estate without acquiring ownership or establishing a real right over it.

Need accurate legal advice on foreign property ownership in Iraq? Contact Osama Tuma for Legal Services and Advisory today for a trusted legal opinion and a clear action plan.