BRUNO BALVANERA | Director for Caucasus, Moldova and Belarus at EBRD
IRAKLI KILAURIDZE | MRICS Managing Director at Colliers International | Georgia
THEA GIGIBERIA | IFC Georgia Country Representative
Thea Gigiberia, IFC Georgia Country Representative: “IFC’s financing continues to set the standard for developing energy- efficient buildings and fostering competition in the housing sector.”
With almost $500 million in investments in Georgia’s financial sector since the 2008 crisis, the International Financial Corporation (IFC) is continuing to finance significant projects in different fields, including real estate.
"We see good potential in Georgia, which has also been reflected in the World Bank Group’s Doing Business report. Globally, Georgia improved the most in the areas measured by Doing Business over the past 12 years. During this period output per capita in Georgia increased by 66% and business density more than tripled. Many factors contributed to this improvement in economic outcomes, and the effort to make it easier for local entrepreneurs to do business may have been one of them (source: Doing Business 2016 report).
We believe that there is strong rationale for investors in that Georgia is located along a strategic corridor connecting Europe and Asia. It has significant renewable hydropower energy resources, diverse climates and landscapes that bode well for tourism, and strong potential for higher value-added agricultural production. Georgia’s Association Agreement with the European Union (EU)—signed in June 2014—is also improving the country’s longer-term growth prospects by offering more opportunities for trade and investment.
IFC, a member of the World Bank Group and the largest global development institution focused on the private sector in emerging markets, has been supporting private sector development in Georgia for the last two decades through its investment and advisory services.
Among other sectors, IFC has also invested in property development. In terms of hotel development, tourism and travel is one of Georgia’s fastest growing sectors, and a key generator of jobs. Yet the budget and mid-market hotel segments are particularly underserved, resulting in a sizable gap between supply and demand. To help address this challenge, we provided a $7 million loan to JSC m2 Real Estate’s wholly owned subsidiary in 2015 for construction and operation of a three-star hotel under the Ramada brand-name.
We aim to help develop business infrastructure, like this budget and mid-market hotel, because the availability of such infrastructure can boost both business and tourist activities. The hotel sector also generates economic activity for small businesses, which supply goods and services during construction and operations, supporting economic growth.
To help improve business infrastructure in Georgia, earlier, in 2008-2009, IFC provided financing to build the first large-scale shopping mall in the capital city, Tbilisi Mall, to help create jobs and develop the local retail sector.
Another area of support is housing. A vibrant housing sector—in addition to helping to provide shelter—is vital for economic growth. Housing is a strong job creator. Studies show that for every home built, at least three jobs are created, both directly through construction, real estate and finance and indirectly through manufacturing and services.
The residential real estate market in Georgia, especially in the capital city, has been characterized by increased demand in the last couple of years. Poorly insulated, Soviet-era apartments represent a significant part of Tbilisi’s housing stock. This as well as other factors, including mortgage lending activities from banks, are contributing to improved demand prospects in the long-term. Residential real estate is also seen as an attractive investment tool for the local population, and demand on newly constructed apartments is likely to continue growing, especially as the Soviet-type refurbished buildings are gradually replaced.
However, demand, especially for high-quality affordable housing, remains largely unmet. To help address the challenge, in 2015, IFC provided a $23 million loan to m2 Residential LLC (which includes $11.5 million mobilized from the Green for Growth Fund, Southeast Europe) to finance construction of around 1,800 apartments, which are expected to increase the efficient use of energy, water, and materials thus reducing negative impact on health and the environment.
Earlier, in 2013, IFC provided the same company a revolving loan in the amount of $14 million (including $4 million from the IFC-Canada Climate Change Program) to help develop Georgia’s first energy-efficient, affordable housing projects.
IFC’s financing continues to set the standard for developing energy-efficient buildings and fostering competition in the housing sector. In addition to improving people’s living standards, the project is expected to create jobs through local procurement during and after construction, contributing to country’s economic development.
Why To Invest In Georgia
Investors sentiment towards Georgia's property market remains promising and buyer's appetite trends are growing:
- Affordability of real estate prices
- High occupancy rates
- Competitive yields (as number of tourists visiting Georgia is increasing dramatically)
- Property appreciation potential
- Transparent and easy taxation
- Simplicity of registering property
- Permanent residence possibility
- Liberal Visa Regime