The construction sector has needed to taken on $6 billion of extra debt over the last 2.5 years amid the dramatic decreases in lira’s value against the US dollar.
The lira’s loss in value over the last two-and-a-half years has hit a number of sectors, causing their debt burdens to increase, including the construction sector.
The lira was around 1.79 against the dollar in mid-2012. The construction sector took out 10 percent of the $111 billion in banking loans in foreign currencies at the time, and the sector’s debt would have increased to around $16 billion if the lira’s value had remained at 1.79 to the dollar.
However, the sector’s debts to banks have increased up to $29 billion (40 billion liras), as the value of the lira is now at around 2.47 to the dollar. Additionally, the sector has taken $5 billion in loans from banks in the last 2.5 years, adding an extra $1.3 billion interest burden on the sector.
This has also affected the Turkish people, as the sector has two potential courses of action to reverse the negative effects of rising debt – either abandoning profits or raising housing prices.
Construction costs were announced in the general notification for real estate taxes in the Official Gazette in August 2014. According to figures in the notification, the construction sector could have built 250,000 more houses at a cost of 60,000 liras per house if its debts had not increased so much.