FDI in real estate investments: strategic insights for international clients

Between 25 July 2021 and 31 December 2022, a total of 139 reviews were completed in Austria, with the vast majority concluding in Phase I through simple approval and without any conditions imposed.

Real estate investments that may be subject to FDI approval include dams, data centres, defence-related relevant and assets in the health sector. However, as noted above, the definition is broad and vague, leaving it unclear which specific investments would be subject to approval.

Legal framework

In Austria, the legislation on FDI screening is regulated in the ICA at the national level, in force since 25 July 2020. The ICA covers foreign direct investments by a non-EU, non-EEA and non-Swiss person or legal entity.

FDI, as defined by the ICA, includes the direct or indirect acquisition of (i) an Austrian asset or company that is operating in a relevant sector; (ii) a threshold of voting rights in the target; (iii) a controlling influence over such an undertaking; or (iv) the acquisition of essential assets of the target. The relevant sectors are listed in an annex to the ICA and include areas such as water and operation of critical energy infrastructure, among others.

If a transaction subject to FDI approval is not notified or is rejected, the agreements are deemed to be under the condition precedent of FDI approval. Although only a few notified transactions have been rejected, several key considerations should be taken into account for transactions in the relevant sector.

Time management and scope

The approval process can take up to three months. The ICA covers various sectors that lack precise definitions, including water and critical infrastructure sectors such as energy, information technology, transport, health and food. The broad scope of the annex and the lack of published decisions create uncertainty about whether a real estate transaction falls within these sectors. Therefore, it is crucial to evaluate whether a certain real estate transaction is subject to FDI approval requirements.

Conditions and land transfer restrictions

The authority may impose conditions for the transaction to mitigate the potential risks of FDI. It is essential to consider contractually how to proceed with conditions that may be imposed. In addition to the ICA, real estate transactions in Austria are subject to land transfer restrictions that vary depending on the Austrian state where the property is located.

Non-jurisdiction confirmation

It is possible to apply for a non-jurisdiction confirmation before signing the transaction to clarify whether the planned acquisition requires FDI approval. A decision on the non-jurisdiction confirmation will be issued within two months of receiving the application.

With proper planning and strategic foresight, foreign investors can effectively navigate the FDI landscape, leveraging the market's growth potential while mitigating uncertainties and delays in the transaction through proactive measures, such as applying for a non-jurisdiction confirmation. The absence of a clear scope, with no specific screening decisions being published so far, continues to create significant uncertainty, making a careful and detailed review essential, ideally at the early stages of a transaction.

authors: Markus Buchleitner, Rebecca Schretzmayer