Turkey rules property sales, rental agreements must be in lira

ISTANBUL (Reuters) - Turkish President Tayyip Erdogan ruled that property sales and rental agreements must be made in lira, putting an end to such deals in foreign currencies, in a fresh step to support the ailing local currency.

The decision, published in Turkey's Official Gazette on Thursday, said that sales contracts and rental agreements in foreign currency must be converted into lira within 30 days.

Real estate sale and rental deals in foreign currency are common in Turkey, particularly in the retail sector.

The lira has lost some 40 percent of its value against the dollar this year over concerns about Erdogan's influence on monetary policy and a diplomatic spat between Turkey and the United States.

It stood at 6.370 against the dollar at 0609 GMT, slightly weaker than Wednesday's close.

Erdogan, who has declared himself an enemy of high interest rates, has cast the lira crisis as an 'economic war' targeting Turkey and has repeatedly urged Turks to sell their dollar savings to shore up the lira.

Turkey's central bank meets on Thursday and is expected to raise interest rates to support the lira. According to a Reuters poll, the benchmark rate is expected to be hiked by 225-725 basis points.

The decision on transactions also included contracts for business and services. The contracts cannot be agreed in foreign currency or indexed to a foreign currency, according to the Official Gazette.

It was the latest in a series of steps Turkey has taken since August to choke dollar demand. The central bank has launched a forex swap market for banks, while the banking watchdog limited derivative transactions.

It has also required Turkish exporters to convert the bulk of their overseas revenue into lira.

Against expectations, the central bank did not raise rates at its last meeting in July. Since then, the lira has lost some 25 percent of its value and data last week showed annual inflation surged to 17.9 percent in August.

Investors expect the central bank to deliver a rate hike in Thursday's meeting but analyst forecasts for the scale of the increase vary widely as the bank balances concerns over lira weakness with worries about an economic slowdown.

The interest rate decision will be announced at 1100 GMT.

(Writing by Daren Butler and Humeyra Pamuk; editing by Richard Pullin and John Stonestreet)