As known, the construction
sector was one of the sectors of the Georgian economy which strongly opposed to
the introduction of credit regulations. Developers said this would reduce the
number of loans that is will cause a decline in housing sales.
At the beginning of the year
the regulations caused serious damage to developers, but as a year passed, it
turned out that the construction industry didn’t suffer losses, but on the
contrary, according to the National
Bank, at the end of the year, mortgage lending rose.
In particular, as of
October 2018, the volume of mortgage lending in Georgia amounted to GEL 5.7
billion, while in the same period of 2019 - 7 billion.
However, the developers do
not trust these statistics and appeal to their data, which show a decline in
mortgage lending and sales.
Apart from credit regulations,
the construction sector is also unhappy about professional ones, such as the
mandatory availability of underground garages in multifamily housing apartment
escape stairs, the introduction of certain standards for the width and height
of corridors, etc.
Developers agreed that the
regulations were necessary, but feared they would increase construction costs as well as the price of housing.
In 2018 the volume of
investments in construction was approximately at the level of 2017 and reached about $ 170 million. The 2019 data
gave not been published yet. Statistics also show an increase in local
investment in development that has a negative effects - foreign companies make
longer-term investments and give preference to multifunctional residential
complexes, which are well proven in Europe.
At the same time, local
investors make shorter-term investments that is justified as a local business has much
lower access to finance than a foreign one.
Another factor that
seriously hinders the development of local real estate sector is the non-core
assets of commercial banks.
In reality, commercial banks
are not partners for developers, as it should be, but competitors. For example,
a construction company, if it wants to get a loan for a project, is forced to tell
all its plans to banks that can be used to gain competitive advantage - for
example, not to give a loan to developers and to carry out their projects.
Moreover, banks help subsidiary
construction companies to sell apartments, offering various favorable
conditions to their customers.