Image: Property exchange sign in Havana
Franklin Reyes  /  AP
Nilda Bouzo, right, speaks with her husband Ives Lopez next to a sign that reads in Spanish " Exchange Apartment Two for One" in their home balcony in Havana, Cuba, Nov. 3. Property exchanges and signs such as the one in the picture were already legal in Cuba. The government announced Thursday they will also allow real estate to be bought and sold for the first time since the early days of the revolution.
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updated 11/4/2011 12:59:27 AM ET 2011-11-04T04:59:27

For the first time in a half-century, Cubans will be allowed to buy and sell real estate openly, bequeath property to relatives without restriction and avoid forfeiting their homes if they abandon the country.

The highly anticipated new rules instantly transform islanders' cramped, dilapidated homes into potential liquid assets in the most significant reform yet adopted by President Raul Castro since he took over the communist country from his brother in 2008.

But plenty of restrictions remain.

Cuban exiles continue to be barred from owning property on the island, though they can presumably help relatives make purchases by sending money. And foreigners can also hold off on dreams of acquiring a pied-a-terre under the Caribbean sun, since only citizens and permanent residents are eligible.

PhotoBlog: New law allows Cubans to buy and sell real estate

The law, which takes effect Nov. 10, limits Cubans to owning one home in the city and another in the country, an effort to prevent speculative buying and the accumulation of large real estate holdings. While few Cubans have the money to start a real estate empire, many city dwellers have struggled over the years to maintain title to family homes in the countryside, and the new law legalizes the practice.

The change follows October's legalization of buying and selling cars, though with restrictions that still make it hard for ordinary Cubans to buy new vehicles. The government has also allowed citizens to go into business for themselves in a number of approved jobs — everything from party clowns to food vendors and accountants — and permitted them to rent out rooms and cars.

While Castro has stressed that there will be no departure from Cuba's socialist model, he has also pledged to streamline the state-dominated economy by eliminating hundreds of thousands of state jobs and ending generous subsidies the state can no longer afford.

Cuba's government employs about 80 percent of the workforce, paying wages of just $20 a month in return for free education and health care, and nearly free housing, transportation and basic foods.

Economists and Cuba experts say the new property law will have a profound impact on people's lives, though probably will not be enough by itself to transform the island's limping economy.

"This is a very positive step in the right direction toward greater economic freedom and individual and family rights of private property," said Ted Henken, a professor at Baruch College in New York who has extensively studied Cuba's economy. "It will immediately increase the personal wealth of millions of Cubans."

Image: Apartment building in Havana
Franklin Reyes  /  AP
Cuba announced Thursday it will allow real estate to be bought and sold for the first time since the early days of the revolution, the most important reform yet in a series of free-market changes under President Raul Castro.

Omar Everleny Perez, lead economist at Havana University's Center for Cuban Economic Studies, said legalization of the sale of cars and property could help Cubans who want to go into business for themselves acquire seed money.

"These are small things, but they point us toward an economy that is more normal compared to the rest of the world," he said.

According to the Official Gazette, a government publication that disseminates new laws, the new system will eliminate the need for approval from a state housing agency, meaning that from now on, sales and exchanges will only need the seal of a notary.

Cubans will also be allowed to inherit property from relatives, even if they don't live together, and they will be able to take title of property of relatives or others who emigrate.

Previously, such properties could be seized by the state. One caveat contained in the new law is that the government retains the right to nullify any sale if it finds that it resulted in someone being left homeless.

Cuban exiles in South Florida — many of whom lost family homes when they left the island — were ho-hum about the changes.

"How in the world are they going to establish the title for these homes?" asked Jorge Amaro, a retired realtor in Miami.

Amaro said he came to the U.S. from Cuba in 1961 at age 13 on the so-called Peter Pan flights. His parents later joined him, leaving behind the family's six-bedroom home on one of Havana's main boulevards.

"For instance, the property that my family had, who owns it? They're going to have to pick an arbitrary date to decide ownership," he said.

The ban on property sales was probably the most resented among the many restrictions in Cuba's state-dominated economy.

The old regulations took effect in stages over the first years after Fidel Castro came to power in 1959, and they have remained in force even as Cuba opened its economy — albeit slightly — following the collapse of the Soviet Union.

For decades, Cubans could only exchange property through complicated barter arrangements or through even murkier black-market deals where thousands of dollars change hands under the table, with no legal recourse if transactions go bad.

Some Cubans entered into sham marriages to make deed transfers easier. Others made deals to move into homes ostensibly to care for an elderly person living there, only to inherit the property when the person died.

Even divorce hasn't necessarily meant separation in Cuba, where estranged couples have often been forced to live together for years while they worked out alternative housing.

The new law requires that all real estate transactions be made through Cuban bank accounts so that they can be better regulated, and it sets a tax rate of 8 percent of the assessed value — split equally by buyer and seller. There is no mention of any capital gains tax, a boon to property owners.

At an intersection in central Havana that for decades has served as the city's underground real estate bazaar, people said the tax rate seemed reasonable in the abstract, but it will depend greatly on how authorities end up valuing the properties.

"This was necessary, and it will bring results," said Maria Fernandez, who has been arranging home swaps for seven years as an unofficial real estate broker. "It'll help us move forward and change many lives."

___

Associated Press writers Andrea Rodriguez and Peter Orsi in Havana and Laura Wides-Munoz in Miami contributed to this report.

___

Paul Haven can be reached at www.twitter.com/paulhaven

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Photos: The new Cuba

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  1. People walk on a street adorned with a national flag in Havana on July 29, 2010, three days after the 57th anniversary of the start of the Cuban revolution. (Desmond Boylan / Reuters) Back to slideshow navigation
  2. Children in Havana listen to their school director in September on the first day of the 2010-11 school year. Free education for all is one of the pillars of the socialist society bulit since Fidel Castro's 1959 revolution. (Desmond Boylan / Reuters) Back to slideshow navigation
  3. A private coffee shop in Havana in January. In 2010, Cuba's private sector for the first time spent more on electricity consumption than state enterprises. This has been attributed to the increase in sales of electric appliances. (Alejandro Ernesto / EPA) Back to slideshow navigation
  4. Chef Jose Salgado works at the Partenon, a private restaurant owned by Javier Acosta in Havana, in January. After Cuban authorities announced in September 2010 that they were opening the island's closed Marxist economy to a limited amount of private enterprise, tens of thousands like Acosta are chasing their entrepreneurial dreams. (Javier Galeano / AP) Back to slideshow navigation
  5. Honor guards march in front of the hearse with the ashes of the late revolutionary guerrilla Pastorita Nunez during a homage ceremony in Havana in January. Nunez, who died in December, fought with Fidel Castro during the Cuban revolution. (Desmond Boylan / Reuters) Back to slideshow navigation
  6. A city employee sweeps a street in Old Havana in February. The government has said it will lay off 500,000 workers, yet more than five months after the announcement, layoffs have been delayed, leaving workers in an anxious limbo. (Javier Galeano / AP) Back to slideshow navigation
  7. Children prepare to perform an Afro-Cuban dance during an AIDS awareness event in Havana in November. The event was aimed at promoting AIDS awareness and tolerance of same sex relationships. (Desmond Boylan / Reuters) Back to slideshow navigation
  8. Cuban dissident Guillermo Farnias, center, is arrested in January with a group of 20 others in Santa Clara, Cuba, as they walked toward a monument to Jose Marti, a national hero who died in 1895. (Alejandro Ernesto / EPA) Back to slideshow navigation
  9. Cuban dissident Hector Maseda hugs his wife, Laura Pollan, as he arrives home in Havana in February after nearly eight years in prison. Pollan is the leader of the Ladies in White, a group of family members of imprisoned dissidents. (Enrique De La Osa / Reuters) Back to slideshow navigation
  10. Supporters of the Cuban government shout slogans against the Ladies in White, a group made up of family members of imprisoned dissidents, in Havana in March. Supporters of Cuba's communist government protested as the dissidents tried to mark the anniversary of a 2003 crackdown that sent 75 government opponents to prison. (Enrique De La Osa / Reuters) Back to slideshow navigation
  11. A worker at the Cuba Cafe factory in Havana in April. Cuba's state-run coffee company says the country has spent $9.5 million in the last five years to modernize production, but meager harvests mean it must import to cover domestic consumption. (Franklin Reyes / AP) Back to slideshow navigation
  12. Workers stand next to a water tank used to supply residents in Havana in April. The city is suffering its worst drought in more than 50 years, with more than a million residents affected, according to the government. Waterworks that waste more than 50 percent of the water pumped and a near record dry spell are being blamed for the crisis. (Enrique De La Osa / Reuters) Back to slideshow navigation
  13. Cattle walk along a road leading to the Soviet-era Juragua nuclear plant, 200 miles southeast of Havana, in January. . Cuba's nuclear power project started in 1983 and stalled in 1991 with the collapse of the Soviet Union. Then-leader Fidel Castro announced that Cuba would explore alternative energy options, dropping the nuclear solution. (Desmond Boylan / Reuters) Back to slideshow navigation
  14. A tobacco worker sorts Cuban cigars at the Partagas cigar factory in Old Havana during the 13th Habanos Festival in February. Cuban cigars are considered to be the best in the world but cannot be sold in the United States due to embargo restrictions. Money raised from the annual festival will be donated to the Cuban public health system. (Sven Creutzmann/mambo Photo / Getty Images Contributor) Back to slideshow navigation
  15. A man works cultivated land in Havana on April 5. Cuba hopes to improve its deficit in food production with urban and suburban farms that produce vegetables and fruits. In January, state banks began issuing microcredits to would-be farmers who have leased land. (Adalberto Roque / AFP - Getty Images) Back to slideshow navigation
  16. A man carries a lamb home aboard a motorcycle in the municipality of San Antonio de Los Banos in Havana in January. (Franklin Reyes / AP) Back to slideshow navigation
  17. Residents from the town Santiago de las Vegas, in the outskirts of Havana, participate on Feb. 5 in an odd tradition: the fake burial of Pachencho. The burial has been celebrated in this town for the past 27 years with rum and Caribbean music. A resident plays the part of Pachencho, while two others play the part of the widow and the priest who drinks rum. (Alejandro Ernesto / EPA) Back to slideshow navigation
  18. Martial arts instructor Maria Regla Saldivar watches her students warm up in the ruins of a destroyed industrial laundromat in Havana on Jan. 19. After Cuban authorities announced in September that they were opening the island's closed Marxist economy to a limited amount of private enterprise, tens of thousands like Saldivar are chasing their entrepreneurial ambitions. (Javier Galeano / AP) Back to slideshow navigation
  19. Alicia Alonso, left, Cuba's prima ballerina assoluta and director of the Cuban National Ballet, watches a rehearsal with dancers Anette Delgado and Dani Hernandez in Havana in March. The Cuban National Ballet, led by the 90-year-old Alonso, is taking part in a festival of Cuban arts in locations around New York this spring. The festival, called “Si Cuba!,” is an indication that cultural relations between the United States and Cuba are thawing after nearly a decade in a deep freeze. (Desmond Boylan / Reuters) Back to slideshow navigation
  20. A teenager exercises in an improvised gym in Havana in January. (Javier Galeano / AP) Back to slideshow navigation
  21. Jose Salazar works out at a training session in Havana on Jan. 24. Boxers from Argentina, Bahamas, Dominican Republic, Peru and Cuba were attending a month-long training camp in Havana. Boxing is one of the most popular sports in Cuba, with thousands of people participating. (Javier Galeano / AP) Back to slideshow navigation
  22. A man passes the former St. Francis of Assisi convent, currently a museum, in Old Havana in July. Despite the government's restrictions on religious practice, the Roman Catholic Church estimates that 70 percent of the population is Catholic. (Javier Galeano / AP) Back to slideshow navigation
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