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How did the Lari Depreciation Affect the Construction Business?

The lari depreciation reduced the value of construction and, therefore, the cost of the new spaces, which caused the price decline in the market, however, this trend is not of mass character.

Only some construction companies lowered prices, some of them in the frames of discount actions  in order to retain the right to raise prices considering instability of the national currency. “CBW” wrote that the lari depreciation had not brought the exporting companies positive results as  they are largely dependent on imported raw materials and loans taken in dollars.

This time we are interested in how the depreciation of the national currency affected construction companies who sell apartments  in  dollars, accordingly, which revenues in the lari increased. In addition, we should considering a fact that  part of the building materials – armature, concrete, cement, block, sand and other  are  locally produced. It should be noted that national currencies depreciated against the dollar in the countries from which companies are bringing building materials – for example, Ukraine and Turkey, and, consequently, their prices are competitive. There are cases when Georgian companies pay the Ukrainian and Turkish suppliers in their currency that  excludes the rise in prices for products.

As for other construction costs, 50% goes to wages and salaries. Accordingly, their  costs in this regard  reduced as  only a small number of companies increased salaries. Tornike Abuladze,  Executive Director of “Arci” , explains that  the costs increased in  20%  of  construction companies while in  80% of companies they lowered.

As for the selling prices, a slight decrease is being observed  in the market, some companies announced discount actions  but the process will not become a trend until the developers and users have a sense of stability with respect to the lari exchange rate. In his words,  not the national currency rate but its stabilization at one mark, even by 2,3 points,    is important for the construction companies.

According to him, bank loans  in dollars hinder a positive effect from the lari devaluation for the majority of  developers. In  Abuladze’s opinion, the lari devaluation creates problems for  those who wish to purchase an apartment and have   income in the lari but  have to  acquire an apartment at the dollar rate.

Considering all this, Tornike Abuladze believes that anyway it is a good time to  buy an apartment, but advises customers to take out a loan in the national currency. They  say in “Tri -D”  company that their profits  increased due to  the prices set  in  dollars, but at the same time they increased  salaries. In addition, some  materials are imported from abroad, in dollars, and in this direction the costs have increased.

At this stage the cost of the  apartment built by the company reaches  $ 680. The company speaks about  a high demand due to high and stable quality. Chairman  of the Supervisory Board of m2 company Irakli Burdiladze says  that construction materials are mainly  imported and therefore they’ve failed to reduce prices.