Building a house in Mexico

The Caribbean coast of Mexico (Riviera Maya, Tulum, Cancun, Playa del Carmen, Puerto Aventuras, etc.) is the dream of many, but the process of buying and building has its own important nuances.

Let's say you've decided to buy a plot of land and build a house, but haven't figured everything out yet.

Below I'll describe a detailed analysis of some issues, their solutions, and approximate costs.

The main problems and difficulties, as well as ways to avoid and overcome them

1. Restrictions for foreigners on purchasing land in the "Restricted Zone" (Zona Restringida)

Problem: According to the Mexican constitution, foreigners cannot directly own land within 50 km of the coast (Caribbean Sea) and 100 km from the border. This is the so-called "Restricted Zone."

Solution: There are two completely legal and proven options:

• Bank Trust (Fideicomiso): This is the most popular option. You purchase the land, but a Mexican bank (e.g., HSBC, Banamex) becomes the legal owner, holding it in trust for you. You are the beneficial owner and have all rights: you can sell, bequeath, build on, and lease the land. The trust is for 50 years and can be renewed indefinitely.
• Creating a Mexican company: You register a company in Mexico that will own the land. This method is often used for commercial real estate or large projects. It requires more administrative effort (bookkeeping, reporting, which can also be easily resolved).

How to avoid problems: Never try to circumvent this rule by buying land in the name of a Mexican friend or front man. This is a sure way to lose your property. Always use an official trust through a reputable bank.

2. Fraud and "Unclean" Property Rights

Problem: As in any popular tourist area, there are scammers here. The property may be subject to a dispute, have outstanding taxes, be encumbered (servidumbres), or the seller may not have full legal authority to sell it.

Solution: Hire an independent attorney (Abogado): This is YOUR most important step. Don't use a lawyer recommended by the seller. Your lawyer will conduct a comprehensive due diligence:

• Check the property title (escritura).
• Ensure there are no outstanding taxes (predial) and utilities.
• Check the land for encumbrances (rights of way, utilities).
• Confirm that the land is suitable for construction (zoning).
• Work with trusted realtors: Look for agencies with a long history and an impeccable reputation (like us).

3. Utilities and Infrastructure

Problem: Not every property has access to water, electricity, sewer, and internet. Connecting utilities can be very expensive and require approval.

Decision: Before purchasing, be sure to find out:

• Electricity: How far is the nearest line? Connecting can cost thousands of dollars.
• Water: Is there a main line? If not, a well (pozo) will need to be drilled, which requires permission from CONAGUA (National Water Commission).
• Sewer: No main sewer? A septic system (fosa séptica) will need to be designed and approved.
• Internet: Which providers are available in the area? Starlink is often a solution for remote areas.
• Build these costs and hassles into your budget and plan.

4. Environmental Regulations and Development Rules

Problem: The Quintana Roo coastline is a protected area with a fragile ecosystem (jungle, mangroves, underground rivers). There are strict regulations regarding tree felling, distance from the shore, type of sewer system, and even roof color (to avoid disturbing the natural landscape).

Solution: Check with your town hall (ayuntamiento) about the specific regulations for your site: development coefficient (what percentage of land can be built on), maximum height, and setbacks from plot boundaries.

• SVIOT (Manifestación de Impacto Ambiental): Construction will almost certainly require this Environmental Impact Report. It is prepared by a certified ecologist. Without it, a building permit will not be issued.

Required Construction Permits

The permitting process is a step-by-step process, and your architect/developer should manage it.

1. Building Permit (Permiso de Construcción): Submitted to the municipality (Dirección de Desarrollo Urbano). The documents include:

• Check the property title (escritura).
• Ensure there are no outstanding taxes (predial) and utilities.
• Check the land for encumbrances (rights of way, utilities).
• Confirm that the land is suitable for construction (zoning).
• Work with trusted realtors: Look for agencies with a long history and an impeccable reputation (like us).

3. Utilities and Infrastructure

Problem: Not every property has access to water, electricity, sewer, and internet. Connecting utilities can be very expensive and require approval.

Decision: Before purchasing, be sure to find out:

• Electricity: How far is the nearest line? Connecting can cost thousands of dollars.
• Water: Is there a main line? If not, a well (pozo) will need to be drilled, which requires permission from CONAGUA (National Water Commission).
• Sewer: No main sewer? A septic system (fosa séptica) will need to be designed and approved.
• Internet: Which providers are available in the area? Starlink is often a solution for remote areas.
• Build these costs and hassles into your budget and plan.

4. Environmental Regulations and Development Rules

Problem: The Quintana Roo coastline is a protected area with a fragile ecosystem (jungle, mangroves, underground rivers). There are strict regulations regarding tree felling, distance from the shore, type of sewer system, and even roof color (to avoid disturbing the natural landscape).

Solution: Check with your town hall (ayuntamiento) about the specific regulations for your site: development coefficient (what percentage of land can be built on), maximum height, and setbacks from plot boundaries.

• SVIOT (Manifestación de Impacto Ambiental): Construction will almost certainly require this Environmental Impact Report. It is prepared by a certified ecologist. Without it, a building permit will not be issued.

Required Construction Permits

The permitting process is a step-by-step process, and your architect/developer should manage it.

1. Building Permit (Permiso de Construcción): Submitted to the municipality (Dirección de Desarrollo Urbano). The package of documents includes:

• Land title deeds.
• Architectural design (plans, elevations, sections).
• Structural calculations (engineering).
• Electrical and plumbing designs.
• Impact Ambiental (SWIOT) report.
• Statement from a certified builder (director responsable de obra - DRO).

2. Tree Felling Permit (Permiso de Desmonte): Issued by SEMARNAT (Ministry of Ecology). Felling trees without this permit is prohibited; fines are substantial.

3. Well Permit (Permiso de Pozo): Issued by CONAGUA. Without it, your well will be illegal.
It's crucial to hire a local, trusted architect who works in the region, as an outsider may not be familiar with all the intricacies and nuances of laws and standards.

Taxes

Taxes in Mexico are relatively low compared to many countries.

1. Property Acquisition Tax (ISAI): A one-time tax paid upon purchase. It ranges from 3% to 4% of the transaction price (stated in the deed, which is often below market value to save on taxes). The exact rate depends on the state and the notary's fee processing the transaction.
2. Annual Land Tax (Predial): Paid to the municipality annually. Extremely low. For an undeveloped lot, it can range from $50 to $300 USD per year, depending on the size and location. There's often a discount if you pay early in the year.
3. Rental Income Tax (ISR): If you rent out your home, you'll be required to declare the income and pay income tax in Mexico. The rate is progressive, depending on the amount of income.
4. Capital Gains Tax (Plusvalía): Payable when selling a property if it has appreciated in value. There are various deductions and calculation methods.

Important: As the owner of a property in a trust, you are required to provide the trustee bank with a Predial tax payment receipt annually.

Summary

1. Hire an independent lawyer with experience working with foreigners.
2. Conduct a full due diligence of the site: title, debts, zoning, encumbrances.
3. Make sure utilities (electricity, water, internet) are available and affordable.
4. Research environmental restrictions and development regulations for your specific zone.
5. Be prepared to buy through a bank trust (Fideicomiso).
6. In addition to the cost of land and construction, budget for:

• Lawyer and notary fees (approximately 5-7% of the transaction).
• Trust cost (approximately $500-1000 USD annually to the bank).
• Acquisition tax (ISAI, 2-4%).
• Cost of obtaining all Building permits (architects, environmentalists, engineers).

7. Contact our construction company for a consultation and construction assessment, and our real estate agency will find a clean, problem-free lot.

Buying and building on the Mexican Caribbean coast is a feasible task that requires careful planning, a reliable team of professionals, and an understanding of local specifics.

We have been working in this market since 2015 and know all the pitfalls and how to avoid them.

Contact us for more information on selecting, purchasing, building, and registering real estate in Cancun, Puerto Morelos, Playa del Carmen, Puerto Aventuras, Tulum, and the surrounding areas of the Riviera Maya.