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Construction Companies Complain About Difficulties With Financing

Construction Companies Complain About Difficulties With Financing

As is known, the Georgian construction business isfocused on short-term projects – that is, the construction of houses and their quick sale, while almost no one is engaged in a long-term development – the construction for the purpose of renting the apartments.

Most developers interviewed by Commersant say that the main reason for this is the difficulty of obtaining financing and reduced demand for rental property. In particular, according to the founder of thecompany Iverioni Archil Jakeli, such projects require a lot of funding while the income is meager  and payback is long-term. Business in the current Georgian realities cannot afford to wait so long  because the money invested in projects should be returned not in 10 years, but now.

“During the construction of apartments for the purpose of rent, developers receive a meager income, even commercial spaces are more profitable – despite the fact that they are not very interesting for developers.Those who start construction, one way or another are  focused on the sale of apartments. All have the resources in order to start a project, to dig a pit, make a foundation and build the first three floors, but if atthis time sales of apartments do not begin, the catastrophe can happen,” – he says.

According to Redix company founder Lasha Papashvili, he agrees with the view that the Georgian developers do not look far ahead, but this is not because the developers are stupid and short-sighted, but because such an approach is dictated by reality.

“The reason for lack of interest in long-term projects is the lack of finance. The companies do not have their money, and they are deprived of the possibility of obtaining large bank loans. Our company ismainly engaged in such long-term projects and does it quite well. But Redix is  a large company and smaller developers can not afford to keep capital so long that is the reason for  such an  approach,” – Lasha Papashvili notes.

 In his words, Redix carries out  many long-term projects, but they mainly concern the lease of commercial premises and hotels.

According to CEO at the  construction company GDG Bezhan Tsakadze, today 20-25% of the buyers of apartments acquire them for rent, as a result the market is saturated that makes developers’ activityunprofitable.

“The developer’s business is  to build and sell apartments. Lease of apartments in itself could be  profitable, but it is not our business. Our task is  to build and sell” – he concludes.