DOMINICAN REPUBLIC: An Introduction to Real Estate & Tourism

A Country on the Rise 

The Dominican Republic has been the fastest-growing economy in the Caribbean since 2014. With a population of 10.8 million inhabitants and a GDP of USD85.5 billion, it is the tenth largest economy in Latin America and the largest in the Caribbean.

The Dominican economy, formerly dependent on the export of agricultural commodities, mainly sugar, cocoa, and coffee, has transitioned successfully in the past few decades to a well-diversified mix mainly comprised of services, manufacturing, agriculture, mining, real estate, and trade. The service sector accounts for almost 60% of GDP and includes the tourism, telecommunications, and finance industries. This year, the country experienced continued dynamic growth within key economic sectors, including construction, agriculture, financial services, healthcare, hospitality, transportation, and local manufacturing, with inflation holding relatively steady when compared with previous years.

International trade has also been growing increasingly each year between the Dominican and its most important trading partners: the US, China, Haiti, Mexico, Colombia, Spain, Brazil, the Netherlands, Belgium, the UK, Jamaica, and Cuba.

A country in constant transformation 

The country has taken important steps to ensure that education, business, and the legal environment continue to improve and rise up to meet global standards.

1. The recently amended securities market law and its regulations, approved by the National Stock Market Council this year, will have a great impact in the strengthening of corporate governance and operational transparency.
2. One of the most important laws recently enacted was the Anti-Illegal Trade, Smuggling, and Counterfeiting of Regulated Products Law. This Law reinforces the system and strengthens the mechanisms that prevent the smuggling of merchandise through customs and the consequent tax evasion that this generates. Its scope includes counterfeiting and smuggling of regulated products such as medicines, hydrocarbons, alcohol, and tobacco and its derivatives.
3. Important bills include the Public-Private Partnerships Law, which serves as an important framework to boost relations between investors and the different government ministries involved in infrastructure and utilities. There is also a customs law, the Law of Reciprocal Guarantees, and Guarantees on Moveable Assets.
4. The government has established an advanced legal framework for disaster risk management and put in place an epidemiological surveillance system and rapid response mechanism to speed up the detection and management of sanitary risks.
5. The criminal justice system leaders have set a key goal to accelerate judicial processes through the “100 Days Challenge”, making it possible for thousands of cases to get solved within the first 100 days.
6. The Dominican has passed an insolvency law to speed up and reduce the cost of commercial restructuring and has simplified its online business registration. The country, as well, is one of the world’s top 50 economies where trading across borders is easiest.
7. The Dominican Republic made enforcing contracts easier by establishing specialised commercial court divisions and by adopting a framework for mediation and conciliation, including in commercial cases. Starting a business was also made easier by reducing the minimum capital requirement.
8. The government has doubled education spending as a percentage of GDP since 2013 and implemented a series of reforms to improve learning outcomes. The government has also joined the World Bank Group’s Human Capital Project, which provides a platform for countries to share experiences on improving human capital outcomes.
9. In 2019, The Travel and Tourism Competitiveness Report, an insight report from the World Economic Forum, ranked the Dominican Republic as the most improved country in the North and Central American subregion, thanks to above-average regional and global improvement on 11 pillars, including environmental sustainability, cultural resources, and business travel.

Foreign investment in the Dominican Republic

During the past two decades, the Dominican Republic has sought to foster a highly receptive environment for international investors, adopting policies that minimise regulatory obstacles and provide incentives to foreign companies and individuals to bring in capital. As a result, the Dominican Republic has become the primary destination in the Caribbean for foreign investors.

The Dominican Constitution gives equal treatment under the law to foreign and local investors: foreign investors are bound by the same rules and regulations applicable to local investors and can freely hold equity in local businesses and joint ventures, and own real estate.

There are no major restrictions on foreign investment and investors can repatriate their profits and capital.

Income convergence progression 

The Dominican leads Latin America in rapidly narrowing the income gap with the US.

A recent report by the International Monetary Fund (IMF) stated that the Dominican Republic has the potential to become an advanced economy in the next 40 years.

“What is remarkable about the Dominican Republic’s progress is not just the level of convergence but also its speed compared to other countries in the region. By examining the average convergence velocity, or the rate of change in income convergence per decade, it is evident that the Dominican Republic has exhibited the highest average convergence velocity, or blue shift, in Latin America over the past 50 years,” according to the study published on 3 August 2023 by IMF advisors Frank Fuentes, Emilio Fernández, and Alejandro Santos.

Looking ahead, for the IMF there are reasons to believe that the Dominican Republic can sustain its high growth. IMF staff estimate potential growth at 5% per year, similar to the average of the past 50 years.

Real estate market trends 

The real estate market in the Dominican Republic is no longer impacted by the COVID-19 pandemic. It also does not appear to have been affected by rising inflation and increases in interest rates.

The main trends in the real estate market in the Dominican Republic continue to be the development of important projects in the tourism sector, as well as new projects for the cruise sector after the success story of the Amber Cove project in Puerto Plata.

Many well-known international developers have continued with multiple projects, some of which are already operational, in the areas of Punta Cana, Bani, Miches, Puerta Plata, Santo Domingo, and the southwest provinces of Pedernales, Barahona, and Peravia (in particular, Bani in Peravia).

Developments of note in the past 12 months have been Club Med’s Miches Playa Esmeralda hotel, a five-star, 400-room hotel just built on a 93-acre beachfront property in Miches. As the first major hospitality project in the Miches area, it is destined to become the next Punta Cana in terms of tourism development in the Dominican Republic. Club Med acquired the property, permits, and tax exemptions under the Dominican Republic’s Tourism Incentive Tax Law (“CON-FOTUR”).

Impact of disruptive technologies 

Disruptive technologies have transformed every step of the real estate value chain, providing massive opportunities for the industry. The technologies with the highest rate of adoption include augmented reality (AR), drones, and artificial intelligence (AI), along with instant communication channels and social media, big data, and the 5G network.

So far, the fastest adoption has been in AR and drones for surveying properties and neighbourhoods and for providing virtual tours. At the same time, due to the fast-paced nature of the business, instant communication tools and social media have also had a significant impact.

There is still room for improvement in the way big data is being used by the industry, but this will likely change as AI-powered customer relationship management and listings become more prevalent.

There are high expectations of the 5G network, to which the President has given priority, as this will influence real estate development, from the way existing structures are used, to the way new structures will be integrated into the internet of things. Smart buildings have been the standard for new constructions in the country for some time now.

The outlook is that as blockchain technology becomes more mainstream, it will permeate the industry, having been touted as a far more secure and transparent way to conduct transactions.

Proposals for reform 

On the legislative front, the much-anticipated statute on real estate evictions, Law 396-2019, has been in force since October 2019. This Law regulates the formerly relaxed practice of real estate evictions and, at the same time, brings added security to the protection of real estate rights against unlawful eviction processes.

The new rules and obligations for housing rental in the Dominican

The Chamber of Deputies approved a bill that seeks to regulate the rental of real estate in the country and that establishes a series of novelties, obligations, and requirements for the owners and tenants mentioned in the project.

The project argues that its objective is to determine and regulate the legal conditions arising from the rental of real estate that is used for housing or other uses.

The bill approved by the deputies was forwarded to the same special commission that studied it, to be later approved in the second reading and sent to the Senate for study and analysis.