Home / Real Estate / Development Business – Positive and Problematic Year of 2016
Development business

Development Business – Positive and Problematic Year of 2016

The year of 2016 has brought quite positive results for Georgian development business. Despite GEL depreciation created certain problems, the field representatives appraise the current year as a quite attractive and active period in terms of sales and many other aspects.

Though, there were a lot of problems too, but development companies show content with increased sales indicators.

Representatives of many companies noted that development companies started sales of apartments in GEL or fixed exchange rate amid GEL exchange rate devaluation. According to their information, revision of sales strategy have brought certain results and this factor makes the year of 2016 positive for developers.

Developers Association

Tornike Abuladze, representative of Developers Association, noted that  the best indicators of sales in development business were recorded in 2014. In that period, apartments of about 1 billion USD were sold in Tbilisi, he said. It is interesting fact that a half part of these apartments were financed by bank institutions, both old and new apartments. It is also interesting that in the midst of 2015, amid GEL exchange rate depreciation, sales indicator declined by only 7%. As to 2016, sales indicators on the market have increased by about 20% as compared to the previous year, Abuladze noted.  «I do not count the last month and a half, because GEL volatility may suspend activities», Abuladze said.

One of the reasons for sales growth on development market in 2016 is related to the initiative of Developers Association. This initiative calls for reducing the rental incomes by 5%, Abuladze said and added that much money is preserved on deposits at commercial banks, interest rates have also decreased and that’s why population prefers to put money in real estate.

It is also important that a half part of sold apartments are bought by mortgage loan and another part is bought by cash. This signifies our population has money, he added.

Previously, traditionally, 3 months earlier before elections, real estate sales were paused on the market. This year, this practice was not repeated amid parliamentary elections. This is a very good fact. In general, the year of 2016 was very positive for development sector, Abuladze said.

Red-Co Development Company

Malkhaz Kunelauri, manager of Red-Co development company, noted that the current year of 2016 was successful, because the company expanded the investment package. This year Red-Co bought a land plot of 500 000 square meters for 12 million USD to construct a large resort. The project plan has been developed by Canadian architects, Kunelauri said.

 «After the project implementation we will have an European-standard ski resort that will not have analogy in the Region. We have already started construction of the mentioned project», Kunelauri noted.

As to other ongoing projects, Red-Co company has finished them in planned timeframes, he said.

When a country faces certain economic difficulties, problems arise in the sector too. Naturally, there were difficulties in 2016, but we have overcome them. We have implemented projects amid many obstacles in 2016, but the main thing is that we have attained our objectives, he said.

«It should be noted that there were more problems in 2016 compared to previous years. This was directly related to currency situation in the country. Because of this factor many issues were frustrated, including in terms of sales. Despite a major part of our clients are foreign citizens, problems arose anyway. Georgian segment takes wages in GEL and they face problems with payments. Some of them even had problems with purchase of property. This situation continues even today. We hope currency crisis will be resolved», Kunelauri noted.

As to future plans, Red-Co company plans to expand business activities and launch large-scale projects.

G&G Development Company

Bezhan Tsakadze, head of G&G development company, noted that the year of 2016 was not bad in terms of sales. However, the situation worsened over the past month because of extreme depreciation of GEL. In general, December is an active month and currency volatility are rarely recorded in this period, however, it is difficult to make long-term forecasts.

According to Tsakadze’s words, in 2017 the company may revise prices and this fact may reduce sales. «Consumers will have to get adapted to new reality. It would be difficult, but I believe GEL will be stabilized anyway and everything will go OK», Tsakadze said.

As to problems, bureaucratic barriers in the process of issuing licenses were not removed in 2016 and this factor makes quite serious problems in the sector. «We believe they will adopt the construction code in spring finally and this code will bring order to the sector in all directions. Processes should be settled at Tbilisi City Hall too, because licenses are issued too late. I have two projects and I could not finish procedures for either of them. Previously, it was possible to accelerate the process thanks to payment system, but now this practice does not work any more and deadlines are violated. Years pass in the waiting regime», Tsakadze noted.

Sveti Development Company

Tornike Janelidze, director of Sveti development company, noted that the year of 2016 was quite active for the company, because it introduced many innovations that were absent on the Georgian market previously. This factor has created ground for upturn. According to the 2016 indicators, the company started construction of 4 new blocks, including the finished project in Bakuriani was set out for sales, he said.  «This year Sveti company has insured two projects. This is innovation on the market. This factor has increased our sales and interest in our company. Despite competitors appeared on the market,  the market was expanded considerably anyway. This signifies, unlike previous years, the market was loaded significantly. Licenses issued by Office of Architecture prove this assertion» Janelidze noted.

Sveti company director also overviewed the existing problems in 2016 and noted that GEL depreciation was the major obstacle.

«This situation has badly affected customer payments and prices of materials. Our clients receive wages in GEL, but have to pay in USD at high rates and this factor generates certain problems in terms of payments. I hope this situation will be stabilized as soon as possible», Janelidze said. The market should be regulated by legislation, including in terms of issuance of licenses, shaping correct position on green plants and so on, he said.

Atori Development Company

Beso Tkhelidze, Atori development company founder, noted that the year of 2016 was very positive for the company. Atori has finished several projects and this is expressed in quite considerable upturn in sales.

It is also very important that the company has received licenses for new projects, he said.

«It was difficult to obtain licenses in 2016. These procedures are delayed at the city hall. We can finish one project within a year, while I have to wait for licenses for 2 years. This factor creates artificial barriers and makes huge problems», Tkhelidze said.