A change in the constitution could permit foreign real estate investors to purchase beachfront property in Mexico.

Can foreigners buy beachfront real estate in Mexico? This questions comes up frequently due to a common misconception that foreigners cannot acquire beachfront property in Mexico. However, the answer to this question is yes, and the country’s House of Representatives voted to begin simplifying the process further this past Tuesday 23rd April 2013 through a constitutional amendment.

The misconception stems from Article 27 of the Mexican constitution introduced in 1919 after the Mexican revolution which prohibited foreign nationals from owning land within 31 miles (50 km) of Mexico’s coastline and within 62 miles (100 km) of Mexico’s borders. The purpose of the law was to keep potentially threatening foreign invaders from strategically important areas.

With spectacular property developments and luxury homes springing up in beachfront areas and attracting real estate investors from overseas, a system was introduced in 1973 to enable foreign buyers to bypass the restrictive 1919 law, whereby real estate is acquired through a 50 year renewable “fideicomiso” (or trust), which is set up through a local bank. The foreign investor is the sole beneficiary and the property is not considered an asset of the bank. The foreign buyer retains the right to renovate, sell or pass the property on to heirs.

According to a report produced by Mexican Congressmen, 49,000 foreign nationals (the largest proportion being Americans and Canadians) bypassed the 1919 law between 2000 and 2012 and acquired Mexican beachfront real estate via the “fideicomiso” system, such as beautiful condos and luxury homes for sale in Mexico’s Riviera Maya.

With foreign property buyers now perceived as a welcome source of foreign investment that stimulates the Mexican economy rather than a threat to national security, the 1919 law is considered rather outdated. Mexican Congressmen voted on Tuesday in favour of changing the law and enabling direct foreign ownership of beachfront real estate in Mexico. One of the main sponsors of the proposal Congressman Manlio Beltrones commented:

“For historical reasons, it was considered risky to allow foreigners to permanently settle along the coasts and borders… What we are trying to do is eliminate this simulated form of property owning in Mexican beaches, and eliminate middlemen who have profited from the current prohibitions… We want to facilitate investment in tourism and generate jobs.”

To pass into law, the constitutional amendment will now also require the approval of the Mexican Senate, the President and a majority of the state legislatures. In the mean time, the “fideicomiso” system is alive and kicking.

Read more: “Mexico Wants Foreigners to Buy Beach Homes”, ABC News