My article has been featured in IMI Daily, discussing the two chief vulnerabilities of Cyprus’s Citizenship by Investment Programme (CIP): the need for stronger governance and, more fundamentally, the lack of diversity in the types of investment permitted under the programme.

The objectives of the CIP were fundamentally sound. Foreign investors seeking citizenship could provide foreign direct investment and, in turn, contribute to economic growth. The problem was how that investment was structured.

Cyprus became excessively dependent on real estate. According to the analysis in my IMI Daily article, more than 95% of the foreign investment generated through the programme had gone into real estate in some form. This concentration helped create an artificially overheated property market, particularly in Limassol, while making the broader economy increasingly dependent on continued demand from investment-migration applicants.

That dependence becomes particularly problematic when the policy supporting the capital inflow is suddenly removed. With the termination of the CIP, the property market faces the prospect of a significant adjustment. Developers, banks, investors and related businesses are all exposed to the consequences of the withdrawal of a major source of foreign capital.

But the deeper problem is not real estate itself. Cyprus has a genuine and diverse small-business economy encompassing technology, professional services, manufacturing, healthcare, food and beverage and other businesses. These enterprises form the real economy and should have had a greater opportunity to benefit from investment-migration capital.

The structure of the CIP made that difficult. Although alternative investment options existed, the programme’s additional property requirement created an uneven playing field that continued to favour developers. A better approach would have been to reform the programme while substantially rebalancing its investment criteria.

Investment funds could have played an important role in that process. Properly structured funds could have channelled foreign capital into a diversified portfolio of Cypriot businesses and productive assets rather than concentrating investment in residential property. This would have connected investment migration more directly with the broader economy.

The experience of Cyprus therefore provides an important lesson for investment-migration jurisdictions. Real estate can be an important component of foreign investment, but an economy should not become dependent on a single asset class.

The COVID-19 crisis has made this lesson even more apparent. As discussed previously in Global Real Estate Collapse, excessive dependence on property can become particularly dangerous when economic conditions change rapidly.

Cyprus still has the opportunity to develop a more diversified investment-migration model. Stronger governance, more robust due diligence and a broader range of qualifying investments could allow foreign capital to support the real economy rather than simply inflate one segment of the property market.

The closure of the CIP therefore represents more than the end of a citizenship programme. It exposes a structural weakness in the way foreign investment had been channelled into the Cypriot economy.