Caucasus Business Week #217

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November 20, 2017 #217

November 20, 2017, Issue 217 - www.cbw.ge

Real Estate Real Estate Forum and Awards Recognizing Top Projects and Leaders of the Market Pg. 6

Megaproject KING DAVID - Complex sets new standards in Luxurious living in Georgia

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Newsroom Anaklia Deep Sea Port Land Construction Works start in December 2017 Pg. 2 What is happening in the development business of Georgia? Over the past period, scales of construction works are evidently growing in Georgia, especially in Tbilisi. Foreign investors find Georgian development market more and more attractive. Today, various development projects are being implemented in Tbilisi districts. Besides the central part of the capital city, development companies give priority to the Tbilisi outskirts too. The Caucasus Business Week (CBW) has inquired how successful and progressive Georgia’s development sector is and whether investors find it attractive. Over the past period, scales of construction works are evidently growing in Georgia, especially in Tbilisi. Foreign investors find Georgian development market more and more attractive. Today, various development projects are being implemented in Tbilisi districts. Besides the central part of the capital city, development companies give priority to the Tbilisi outskirts too.

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Whether Demand for Suburban Life in Tbilisi Grows

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A certain part of our citizens prefers to move to suburban areas for living because of traffic jams, polluted air and ecological problems in the city center. According to real estate agencies, over the past 4-5 years, number of citizens seeking houses and land plots in Tbilisi outskirts has considerably increased. Tskhvarichamia, Tskneti, Kiketi, Tsavkisi, Saguramo and other settlements are among popular locations. According to World Health Organization indicators, every 9 persons out of 10 ones in the world live in the environment with a high level of air pollution. Air pollution is a problem in Georgia too, especially in the capital city. As a result, number of diseases catastrophically grows every year. Therefore, ecologists assert that it is better to live in suburban areas than in Tbilisi. Because of a growing number of transport and glass structures, the city lacks for ecologically clean environment. Pg. 15


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Harvard Business School Shows Interest in Georgian Experience of Implanting Blockchain Technologies in Public Registry

Anaklia Deep Sea Port Land Construction Works start in December 2017

Anaklia Deep Sea Port land construction works are to kick off on December 20, it was announced at a meeting between Anaklia Development Consortium and Georgian business sector representatives held at the Tax Payers Union’s office. “Anaklia Deep Sea Port is a project of unprecedented scale for our country, with which the process of creating a new reality both for Georgia and for the entire region has begun,” Mamuka Khazaradze, Anaklia Development Consortium Co-Founder said. “Work on the Anaklia Deep Sea Port project started last year and we made a promise that within one year we would start the actual construction process,” he added. “It has been an intense year, seeing our team working alongside experts, professionals and world-leading international companies in marine infrastructure and environmental assessment. We managed to fulfil our promise and now we’re starting yet another important stage of the project, launching the actual construction works of the Anaklia Deep Sea Port”.

Papuna Ugrekhelidze, head of National Agency of Public Registry (NAPR), met with Harvard Business School representatives Mitchel Weiss and Elena Kors on September 13. At the meeting the NAPR chairman updated representatives of Harvard Business School on details of implanting blockchain technology in registration process. Georgia is one of the first countries in the world, which has successfully applied blockchain technological achievement in real estate registration. This factor has raised the interest of the leading business school. The Harvard Business School representatives are preparing a document on introduction of blockchain technology in real estate registration transactions in Georgia. The document will comprise the history of the project implementation, strong aspects and risk

appraisals, implementation terms and other important issues. Harvard Business School will apply the case study prepared in Georgia regarding the ongoing blockchain project in curricula. The Georgian experience will be discussed in various events of the business school. Inclusion of Georgia’s successful experience in Harvard Business School curricula will raise the interest of international academic and business circles, improve international reputation of the country and popularize it.

Georgian Seamless Pipes Exported to the US Market

The Rustavi Metallurgical Factory exported its own brand of seamless pipes to the US market. 1000 tons will be sent to the largest export market on November 25. Company aimed at international market with its own brand two years ago. It required permanent and intensive work of company management, sales team and production staff to attract clients, improve quality and reduce production costs. Export started with our region – Azerbaijan and Kazakhstan.

EU countries added to the list later: the Netherlands, Italy, Germany, Poland, Romania, Bulgaria and Hungary. Nowadays factory will export to the larges market, less fragmented and, meanwhile it regulates strict norms. These kinds of pipes are used for construction of road infrastructure, for transportation of liquid and gas substances, as well as exploitation of oil and bore, automobiles construction and general technical purposes.

Nenskra HPP Project to arrange cleaning works in the Nakra River Valley Nenskra Hydropower Plant Project company, JSC Nenskra Hydro will finance cleaning works of Nakra River tributaries’ beds in the Nakra village of Mestia municipality – Lekverari and Laknashera rivers. Cleaning works will be carried on request of the Nakra village community. As a result of natural events, occurred in recent years, the beds of Lekverari and Laknashera rivers were blocked, which, in case of high waters on these rivers, could expose the village to the risk of flooding. The first stage of clearing works in the valley of Lekverari River will start on November 15. The equipment will be mobilized on the spot, which will be used for cleaning the river’s bed, then for disposal of gravel and sand and its storage at specially designated place. This process will take place in close cooperation with Mestia municipality. Local population will be employed in cleaning works and local equipment will be used as well. The second stage, which includes Laknashera River bed cleaning, will be carried out in 2018. Abovementioned works will be executed within the framework of Community Investment Program. The Community Investment Program is an associated investment program of Nenskra Hydropower Plant Project, which was developed based on the needs of population residing in the villages Chuberi and Nakra of Mestia municipality. The project’s aim is to facilitate sustainable economic development of the region and create more opportunities for the local population.The Community Investment Program includes such directions as: support of small and medium-sized enterprises development, skills improvement, fast track projects and small-scale infrastructural projects.

BUSINESS WEEK caucasus

The Editorial Board Follows Press Freedom Principles Publisher: LLC Caucasian Business Week - CBW Address: Aleksidze Street 1 Director: Levan Beglarishvili Sales: Mob: +995 558 36 61 07 WWW.CBW.GE Email: caucasianbusiness@gmail.com

Saving In REAL Estate Is REAL In Georgia Buying Stocks, opening savings accounts - People with some extra money now can find an alternative usage of their finances and invest in real estate. Dr. h.c. Sascha Ternes, Managing Partner/Founder of TERNES Real Estate Fund, speaks about the benefits this world-famous investment practice has to offer and what change it can make in Georgia. If you take a look at the economic environment in the region, you’ll see that currently Georgia performs better than most of the countries around. The other thing is that lots of foreign investors have interest in emerging markets, considering that part of them exit from Russia and Ukraine and are looking for alternatives, Georgia is a nice option. Overall, the profit yields for Georgian real estate investments are probably 3-times higher than in Western-Europe. We have investors coming for example from Germany, Switzerland, Austria, United Kingdom, Ukraine, Turkey, Azerbaijan - still the majority are foreign citizens. Maybe, it’s because investing in real estate is a well-practiced business model abroad while in Georgia we still have to create more awareness, that this asset-backed investment opportunity is very secure and profitable.

Editor: Nutsa Galumashvili. Mobile phone: 595 380382 Reporters: Nina Gomarteli; Mariam Kopaliani; Merab Janiashvili Technical Assistant: Giorgi Kheladze;

Source: www.commersant.ge, www.bpi.ge, www.gbc.ge, www.agenda.ge, www.civil.ge


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What is happening in the development business of Georgia?

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Investors Find Georgia’s Development sector Very Attractive Over the past period, scales of construction works are evidently growing in Georgia, especially in Tbilisi. Foreign investors find Georgian development market more and more attractive. Today, various development projects are being implemented in Tbilisi districts. Besides the central part of the capital city, development companies give priority to the Tbilisi outskirts too. The Caucasus Business Week (CBW) has inquired how successful and progressive Georgia’s development sector is and whether investors find it attractive. Over the past period the development sector’s attractiveness has considerably increased and investors also demonstrate adequate «reaction» to this sector. According to Geostat, national statistics service of Georgia, in 2013 foreign direct investments in the development field marked 49 847.5 thousand GEL, in 2014 – 316 588.1 thousand GEL, in 2015 – 110 678.4 thousand GEL and in 2016 – 106 183 thousand GEL (total amount – 15%). Givi Korinteli, owner of Green Capital investment fund, noted that foreign investors find Georgian development business quite attractive as a result of growing demand for various types of real estate. «Two directions are very attractive, including, hotel business, especially 3-star and 3+ star hotels, including branded hotels. This segment records a growing number of tourists and this factor raises the interest of investors», Korinteli pointed out. According to the last estimations, there is serious demand for 3-star hotels. As a result, investors are able to return their investments and receive profits in 6-7 years, he noted. As to residential houses, this sector also records the booming signs thanks to quite flexible bank products and rising interest of commercial banks in this business, Korinteli said. «There are two reasons why commercial banks are interested in this segment: 1. construction works are financed with business loans and these works also represent the so-called retail product for commercial banks as they finance clients with mortgage loans. This is double interest which are re-insured in each other. 2. There are signs of commercializing the new outskirts; For example, new districts in Didi Dighomi, Dighomi, Lisi Lake zone and so on. These directions generate demand for new infrastructure, new complexes that will be different from ones in the city center. Emphasis is made on ecology issues too», Korinteli noted. This construction boom differs from the 2007 processes. Previously, only the city center was developed, but now more reasonable projects are being implemented, he said. Tornike Abuladze, representative of Association of Developers, noted that the development market is very attractive in reality, including in terms of simplicity of taking licenses. «There is serious demand for real estate in Post-Soviet space and therefore, it is very attractive. Secondly,

Georgia is an exceptional country in terms of simplified licensing regime», Abuladze noted. Investors show growing interest in Georgian development market. Today, ratio of foreign investments in the sector is about 30-40%, Abuladze said. «Before 2007 any person, doctor or designer used to go a commercial bank, take a loan and start construction works with money of other parties. This was a wrong model. There was a boom of construction works in that period, but that process was based on wrong model. A major part of developers were Georgians. After the crisis period, the market was revitalized starting 2014-2015. Today, considerable amount of foreign investments circulate in the Georgian development sector», Abuladze said. Irakli Kilauridze, managing Director of Colliers International Georgia -Real estate market in Georgia has a stable development course. Residential market is one of the most active sectors of real estate market. On average, 75% of total transactions represent the residential sector. Retail market is shifting from outdated buildings to modern shopping centres. Since 2012, 10 new modern shopping centers have opened and few more are under the construction. The Hospitality market in Georgia is fueled by a consistent growth of tourism sector. In 2016, the number of international arrivals exceeded 6 million. The government is supporting the hospitality market by improving infrastructure, and implementing policies to support business growth and attract investment. Colliers International Georgia provides bespoke valuation, development, and brokerage real estate services which are based on the research, and local and international market expertise. Our valuation team can provide a reliable assessment of property value which will ease the client’s decision-making process. Our development consultancy team can resolve complex real estate challenges and offer comprehensive development plans for mixed use developments. Our brokerage team helps clients to lease or sale real estate to advance their business goals. Malkhaz Kunelauri, Redco development company’s projects manager, says that Georgia is a regional center in terms of economic aspects thanks to the most flexible taxation system, flexible, less bureaucratic state sector shaped thanks to several reforms. «Business sector needs flexible taxation system with less taxes, less bureaucratic state offices, new technologies and services. All these aspects will provide additional comfort for development sector. Moreover, there is the lowest criminal level in the country», Kunelauri said. Advantage of Georgia is that the number of tourists has considerably increased and it permanently rises and this factor creates preconditions for growing interest in hotel tourism, he said. «Development and hotel business is being developed in the country and this is real tendency», Kunelauri noted.

According to Geostat, national statistics service of Georgia, in 2013 foreign direct investments in the development field marked 49 847.5 thousand GEL, in 2014 – 316 588.1 thousand GEL, in 2015 – 110 678.4 thousand GEL and in 2016 – 106 183 thousand GEL (total amount – 15%).


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EEa Real Estate Forum

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Real Estate Forum and Awards Recognizing Top Projects and Leaders of the Market “If the event works for business, business will not miss an opportunity to be there” Olga Solovei Managing partner and Co-Founder of Ukrainian Real Estate Club - When was the EEA Real Estate Forum founded and who initiated it? - The first EEA Real Estate Forum took place November 2015. Honestly, it was a challenging and at the same time very positive experience for the whole team. First of all, URE Club as a local player and EuropaProperty.com as an international player acted as co-organizers. Just year before in 2014 the two organizations had signed a memorandum on strategic partnership. It was an unprecedented practice for the market. However, we were at the same page and agreed that we should bring new experience for real estate players, and go beyond one country. As a result, 5 Eastern European countries were involved. Among them were Kazakhstan, Azerbaijan, Belarus, Georgia and Ukraine. Secondly, the first event was held right after Revolution of Dignity in Ukraine. Guests from every participating country understandably had controversial feelings when they were invited to the country with armed conflict in place. So, we had a task to show people a different picture. In reality, Ukraine turned out as a good location in terms of geography for all guests of the event. - What is the goal of the forum and what are your resolutions for this year? - The Forum has several key goals. They are quite straightforward. First, the Forum brings countries, which still seem unclear for the international investors and businesses. It gives them an opportunity to have the whole picture covering 5 countries of the region at the same place, to differentiate and compare markets and, of course, to understand these markets and the way people do business here. We as organizers aim to grow each year, improve the quality and to make the event efficient and beautiful at the same time. Beautiful as after good job, everybody deserves to celebrate and enjoy the atmosphere. - What are the consequences of the past awards? How did it change the market? - This year we will hold third event. As a result we can compare and see trends and impacts for the market for sure. Forum and Project Awards

together allows companies and projects to compete. Competition is always a good motive force for market development and it helps to increase the quality of the projects. We also believe, that strong players and hard workers should be visible on the market and play as a role model for others. In 2015 we had 12 nominations; last year we had 15 nominations. This year the number of nomination is more than 25. At request of the Awards’ participants, we added several new nominations. Among them are innovative green building project; renovation of the year; public building of the year. Other than that, we raise requirements for the nominated companies. Thus, service companies such as law firms, brokerage companies; consulting companies should attach recommendations or comments of their clients/partners. As a result, we see the sense of the nominees’ responsibility is growing. It is good sign. - Awards is getting bigger and bigger every year, how do you plan to raise awareness about it? How other people will be encouraged to take part in the development in the real estate sector in the country and region with this event? - It is true. The EE Forum and Project Awards is getting bigger. This year we have 200 people in the guest list, and 200 nominees. It has been doubled since last year. We believe that with help of strong international partners, high-quality business media publishers like CBW there is a very good chance for the event to become more popular among our target audience internationally. Also, of course, we count on word-of-mouth. It works well when you are consistent and show positive tendency. In other words, if the event works for business, business will not miss an opportunity to be there. - Will this year’s awards be different from previous events? What are your plans? - It will not be completely different from previous years as we are consistent and keep moving the same direction. This year it will be bigger and I would say more enthusiastic. But you should come and see it by your own eyes.


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Nick Cotton Managing Director of Cushman & Wakefield in Ukraine (formerly operating as DTZ)

Andrey Aleshkin Colliers International In Minsk, Partner And Director Of Cre Department

Igor Zabulonskiy Karkat Fashion Ukraine, Ceo

Natalia Kochergina Partner, Head of Real Estate DLA Piper Ukraine

Irakli Kilauridze Managing Director of Colliers International Georgia

Ukrainian Real Estate Trends in 2017 Cushman & Wakefield project that office rents will see upward movement in 2017 as vacancy is further squeezed however, pipeline delivery with the exception of Astarta BC and UNIT city will remain very low. Accordingly, we anticipate that developers will begin to formulate plans for further office development in response to improving market conditions. Retail activity is also set to increase however, with the ongoing pipeline delivery in Kyiv of a number of large scale projects including Retroville, Rivermall, Blockbuster, Rive Gauche, Ocean Mall and possibly the recommencement in due course of Respublika additional pipeline in Kyiv will need to be carefully planned and positioned with only the best strategic sites offering viable development opportunity. Cushman & Wakefield are witnessing increased development interest however in the larger regional cities where often the markets remain structurally under supplied. Pipeline logistics development remains elusive at present however there are signs that some bespoke turn-key development may commence in 2018. A major consideration in relation to both the development and investment market in future years will be the availability of affordable long-term debt finance which remains presently in very low supply. If and when such debt becomes available then this will have material positive impact on overall activity in the sector. - What are your expectations of participation in the EE Awards 2017? How do you assess the role of such an event in the development of real estate market within the region? - The EE Awards is an important platform for developers and consultants alike to demonstrate to the market the increasing importance of the provision of high quality properties and levels of service. No longer can it be the accepted approach to meet the best levels of competition in the market but, to now seek to exceed the best in class, continually raising the bar. Cushman & Wakefield believe that the quality of projects and, levels of professional service in the market quite simply demonstrate the maturing of the market.

Real Estate Trends in Belarus in 2017 When talking about retail market, it is certainly Inditex entrance. The company presented all of their store brands in one of the Minsk shopping malls. Moreover, the opening of large shopping malls like Dana Mall and Galleria Minsk attracted significant number of popular brands and as a result their expansion within the market, namely Gloria Jeans, Koton, Reserved, House, Cropp, Mohito, Sinsey, Intimissimi, Calzedonia, Finn Flare, Pandora, Quiksilver and others. The offices face tremendous demand from IT companies which absorb almost all vacant areas. This is because the government has created very attractive conditions for doing business in the IT cluster. The increasing of IT industry causes the growth in rental rates and insufficient supply. Accordingly, the construction of high-quality office projects is expected. - How Belarusian companies follow new trends of real estate market and how they respond to new challenges? Some older shopping centers initiated reconception to meet new market demands. They try to engage new brands, where the last ones need large modern stores. Furthermore, Inditex group entrance triggered particular interest from new brands that are still not presented in the country. - What are your expectations of participation in the EE Awards 2017? How do you assess the role of such an event in the development of real estate market within the region? First and foremost, it is networking opportunities and a new fresh look from the other side to neighboring markets, new projects, trends, experience. I am sure that this platform will be useful for all professional market players (bankers, investors, retailers, developers, international real estate consultants etc.) both in terms of experience exchange and networking. It is no secret that the commercial real estate market of Belarus is still evolving and those tendencies that exist in neighboring markets are likely to come to Belarus. Even more important, we can take into account the mistakes and make the industry flawless.

Ukrainian retail market has come to life in the last year turnover is growing The main trend is the shock rate of house construction. Despite the fact that demand is not growing, the number of square meters offered to the market is increasing, and the foundations of new buildings and blocks are being laid. Without a government mortgage lending program, the situation threatens to turn into a crisis. At the same time, the market for office space is stagnant. New office centers can be counted on the fingers of one hand. The huge reserve of vacancy, accumulated in previous years, is slowly declining. Practically not heard about laying the foundations of new business centers. If we maintain or increase the current pace of business activity in a couple of years, we may face a shortage of office space. The construction of shopping and entertainment centers is going on in spurts. The crisis stopped most of the construction projects. Having seen signs of warming, many developers have resumed construction. The results of their work will be seen in the next year or two. - What are 3 main trends of the retail market in Ukraine? What is the future for? The retail market has come to life in the last year - turnover is growing, vacancy in the shopping center is decreasing. The growth is still modest, as the incomes of the population grow slowly. Customers who survive the crisis tend to postpone the “black” day and spend less on current needs. They are more picky about prices and are ready to go around a few stores before making the final choice. Nevertheless, positive signals of the market have already attracted new players - several large world networks announced the opening of stores in Ukraine. Without further ado, smaller retailers also started to follow. - What is the positive aspect of the EEA Forum and Project Awards for the Ukrainian market and for the participating countries? Getting new information, a lively exchange of opinions are vital for the development of both the professionals and the companies they represent. The forum just gives this opportunity. All countries of the region are in similar conditions, but at different stages of development. Discussion of problems and achievements of these or other countries makes it possible for the rest to avoid common mistakes, find solutions to difficult situations or new business development options.

There is a big probability that we will soon see more joint venture and real estate M&A deals on the market To support the positive tendency on the market, the government and parliament continue working on improvement of conditions for business within the country and development of real estate market. Recently, a number of positive initiatives in construction regulation sphere, anti-raider measures and reform of title registration system were implemented. High expectations are laid on judicial reform launched in June 2016, as well as number of anti-corruption measures and establishment of independent anti-corruption bodies. Though most of investors consider projects in Kyiv and western Ukraine, this year we noticed a tendency of renewing interest to the projects in eastern regions. Many investors note the deficit of vacant sites for development in Kyiv. The most desirable sites for retail and office development were already acquired or leased by local market players before 2013 and because of recent crisis events were “frozen” and left until the best times. Now, when the investment climate improved, such projects are resumed, but, due to lack of funds and deficit of debt capital within the country the local players are looking for foreign partners and buyers. For this reason, there is a big probability that we will soon see more joint venture and real estate M&A deals on the market. Such M&A deals will require the investors to carefully check the assets, sites allocation history and business history of asset holding companies. Recently, this task become easier, at least for the lawyers, thanks to reform of Ukrainian real estate title registration system, making state land cadaster publicly available, establishment of digital real estate registers with online access available for any third party, allowing to check existing arrests, encumbrances, third parties rights and court disputes with respect to real property on a predeal phase. In this perspective, as a legal consultants, we consider EE Awards 2017 to be a good opportunity to contribute to development of Ukrainian real estate market by raising investor’s awareness of the positive developments and reforms in Ukraine as well as share best practices. We also believe that such events help business people to find each other, talk on potential mutual project, share their success stories and demonstrate that Ukraine has a big potential.

Retail Market Shifting From Outdated Buildings to Modern Shopping Centers - Despite the uncertainties in the markets of CIS countries investors are interested in the value retention in the long-term. For commercial real estate sector in CIS countries, the volatility of the exchange rate remains the key risk factor. Recently, investors seem particularly interested in the retail sector. In Q1-Q3 2017, retail assets amounted to 37% of the total investment value in the Russian real estate market. Three retail centers are announced to open in Q4 2017 in Kiev, Ukraine. Environment is more attractive and safe in the CEE. Although Poland and Czech Republic remain the leaders, capital flow is directed to secondary cities rather than the capital cities. Sentiment towards Hungary, Romania and Slovakia is also favorable. - What does it mean for Colliers International Georgia, and for you personally, to participate at the EEA Real Estate Forum for the second time? - Colliers International Georgia regularly participates in the influential real estate forums, conferences and exhibitions such as: MIPIM, MAPIC, ExpoReal, EEA Forum. Joining such a large real estate business forum is extremely important for us in terms of networking opportunities with investors and potential business partners. The EEA Real Estate Forum is a platform where real estate professionals and decision makers have the possibility to gain valuable contacts and discuss ongoing projects and trends on local markets. - What was your experience from the last year’s forum? Did Georgian real estate market attract attention from foreign investors and started negotiations to invest in Georgia? - We had a good chance to exchange contacts with some foreign investors from different countries. We still have ongoing negotiations with some of them. - What are your expectations this year? And how will Georgia be represented on the event? - Traditionally, I have an honor to be invited as an expert jury member for Eastern European Real Estate Forum and Awards organized by Ukrainian Real Estate Club. In addition, this year Colliers International Georgia took a challenge to participate in the Awards as a nominee for “Consulting Company of the Year”.


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Property Development – Georgia’s Most Rapidly Growing Sector merab janiashvili

Development Sector Real Growth Hit 16.4% in 1H17 Georgia’s property development sector is growing at high paces over the past years. In 2008-2009 financial crisis broke out in the world, which inflicted serious damage to the development sector. We should note that over the past 9 years this field has overcome many obstacles and at this stage, it continues growing. At the same time, several directors of development companies have committed suicide because of unfinished projects. During the crisis period, commercial banks attracted considerable assistance packages from the Government, however, they raised interest rates on approved credit lines to the developers, anyway. Meanwhile, public trust towards them declined. Though, Georgian development sector makes advancements anyway. According to Geostat, national statistics service of Georgia, in the second quarter of 2017 the GDP in current prices constituted 9 066.1mln GEL. The year on year real GDP growth marked 4.7%, while the deflater rose by 5.9%. According to the 1H17 indicators, the growth was recorded in the following fields: development (16.4%), hotels and restaurants (12.9%), mining industry (7.4%), real estate operations, leasing and consumer services (7.2%), transport (7%), financing (6.4%), communications (4.8%), governance (4.5%). Reduction was recorded in agriculture sector (-2.4%) and production and distribution of electricity, gas and water (-0.9%). As to GDP’s sectoral structure, the major ratio is recorded in industry (16.7%) and trading (15.2%). Agriculture and fishing sectors are third with 9.9%, transport and communication is fourth with 89.8%, development sector is fifth with 9.4%, governance is sixth with 8.5%, real estate operations, leasing and consumer services – 6.6%, healthcare and social assistance – 5.8%.

It should be noted that, according to the 2007-2017 economic growth indicators, the development sector was suffering from problems in 20082011 years. For example, the year of 2007 recorded a 14% upturn in the development sector, while reduction was recorded in the next three years.

It is worth noting that the development sector finished the year of 2016 with an impressive upturn. Last year the growth was recorded in the following sectors: hotels and restaurants (12.9%), property development (10%$), financing (9.7%), mining industry (9.5%), real state operations, leasing and consumer services (5.9%), production and distribution of electricity, gas and water (4.9%). Reduction was recorded in transport sector (-3%) and communications (-3.1%). It should be noted that in 2007-2016 foreign direct investments in Georgia made up 12.9bln USD. The major part of 3.155bln USD (24% of total FDI) went to transport and communications sector and the smallest amount was directed to agriculture sector – 134mln USD (1% of FDI). As to development sector, FDI inflows marked 1.035bln USD over the past years. The highest inflow was recorded in 2014 – 316.5mln USD, while the lowest marked in 2010 (4.7mln USD). As to the two quarters of the current year, in January-June of 2017 the development business attracted 125mln USD investments (55mln USD in the first quarter and 70mln USD in the second quarter), which is 20.2% of total FDI. It should be noted that FDI inflows to the development business are lower of only the transport and communications field (271mln USD in the second quarter). It should be noted that, according to the 2007-2017 economic growth indicators, the development sector was suffering from problems in 2008-2011 years. For example, the year of 2007 recorded a 14% upturn in the development sector, while reduction was recorded in the next three years. As to the averaged indicator over the past 10 years, in 2007-2016 the development sector was growing by 4.8% on average. Since, property development is one of the key employer sectors and its advancement brings success to other fields too, it is important that this sector is gaining momentum and this tendency will definitely drive positive changes in the Georgian economy.


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Investors sentiment towards Georgia’s property market remains promising and buyer appetite trends are growing Lika Kardava - Founder and the Managing Partner of the #1 Georgian Property Guide Portal www.propertygeorgia.ge - Lika, tell us about Property Georgia, when did you came up with creating real estate portal and what was the initial aim of it? www.propertygeorgia.ge - brandnew digital platform’s launch was announced on June, 2016. Demand for property in Georgia has reached all-time highs over the last years and as Real estate professional I have decided to bring together all leading players of Georgian real estate market and create a unique platform for new developments to showcase what makes their properties particularly attractive to local / international buyers or foreign investors. I’ve looked at what was happening in the Georgian property market for years, and what the market needed most – where was a gap, then thought about how I could leverage capabilities to build a valuable solution which benefits from one side property developers, real estate brokers and on other hand individual buyers and corporate investors interested with Georgian real estate sector. - What is Property Georgia all about and how did you established yourself on the market? Thanks to our leading real estate partners who has supported the idea from the very beginning like Colliers Georgia , Redix, Lisi Development, King David, Alliance Group, SEU Development and many others, we have positioned on the market as a leading #1 property guide portal embracing most trendy insights and showcasing reliable real estate market players/ their projects with one window principle. We help partner organizations to grow and promote their business, to showcase their projects and increase awareness of their business activities and enhance their brand. On other side we guide local / international buyers including Georgian diaspora abroad and investors to find right company, right property, right partner and guarantee intelligent purchase decisions. On Top of this as a founder of portal www.propertygeorgia.ge I was invited to host Real Estate TV section on one of the influential business Televisions. Property Georgia also runs blog on property market insights, trends, developers and investors video blog. - What are the tendencies and latest trends on Georgian real estate market? In 2017 Investors sentiment towards Georgia’s property market remains promising and buyer appetite trends growing, Tbilisi, Black sea coast and winter ski resort properties are in radar for local and international investors from CIS and Middle East Countries.

Georgian development companies proactively expand geography of their marketing and sales activities to increase exposure and showcase advantages of the country’s real estate sector, projects they run, the introduce new practices of tourism and real estate collaboration. All this actions position Georgia as one of the best touristic and real estate investment destination. Our digital portal www.propertygeorgia.ge empowers the sector and it’s players to increase property market exposure inside and outside country. Among core factors attracting foreign investors are affordability of real estate prices, high occupancy rates and competitive yields (as number of tourists visiting Georgia is increasing dramatically), property appreciation potential, transparent and easy taxation, simplicity of registering property and permanent residence possibility. Based on our partner company Colliers International Georgia’s research in the first half of 2017, at around 12,353 transaction units were recorded in Tbilisi on residential real estate market. As compared to the same time-frame of 2016, the figure increased by 22%. It also should be noted, that share of newly-built flats in total transactions amounted to 52%. The average selling price of newly-built flats in Tbilisi stands at USD 603 p/sqm. In comparison with the same data of 2016, the figure dropped by 3%. The average selling price of secondary (old) flats is around USD 556 p/sqm, reflecting insignificant (1%) decrease as compared to H1 2016. Residential market is one of the most active sectors of real estate market. On average, 75% of total transactions represent the residential sector. Retail market is shifting from outdated buildings to modern shopping centers. Since 2012, 11 new modern shopping centers have opened and few more are under the construction. The Hospitality market in Georgia is fueled by a consistent growth of tourism sector. - What are the largest real estate projects in Georgia and how real estate market has evolved during these years? Today we have several completed and ongoing brand-new development projects shaping future of our capital city and other regions. Among them are well-thought residential, mixeduse, commercial, office, retail projects that introduce new standards of urban development and construction. During last 10 years Georgian real estate market, it’s players and buyers have evolved significantly, but still we face a lot of challenges, like low quality construction projects damaging urban

outlook and future of the city. There is a big question mark about space zoning and urban development of capital city and other regions.. What kind of new developments we need to introduce for making our cities livable, improve quality of life for population, business environment, tourists experience? How authenticity of architectural-historical buildings can be preserved? how can we give them new life to fit in modern standards of tomorrows cities? The main answer to this question hopefully will be covered by longterm general land use plan, that will guide all players of real estate sector.. - Property Georgia is a partner of EEA Real Estate forum, which

takes place in Kiev, what are your expectations from this event and how it will affect the Georgian real estate market? Propertygeorgia.ge as s strategic partner of 3rd EE Real Estate Forum and Awards 2017 . For the second year, we support the event as a strategic partners as we believe the Awards is one of the most important platform for the real estate players. We have helped organizers to facilitate and submit up to 15 Georgian development projects for nomination. The ballot of nominees for the EE Project Awards is judged by a panel of about 50 top real estate executives leaders in the fields of construction, design, engineering, investments, development and related areas. The

methodological partner of the EE Project Awards is EY. Colliers International Georgia’s CEO Irakli Kilauridze is invited as an expert jury member for the Forum and Awards organized by Ukrainian Real Estate Club. Taking part in this forum provides a great opportunity for Georgian Real Estate companies to present specific Georgian projects to potential investors and developers, as well as to discuss recent trends. The forum is attended by representatives from companies that know the region very well, meaning that they are aware of the political and economic risks. Hope this year will bring win to win outcomes for all real estate forum participants .


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Whether Demand for Suburban Life in Tbilisi Grows A certain part of our citizens prefers to move to suburban areas for living because of traffic jams, polluted air and ecological problems in the city center. According to real estate agencies, over the past 4-5 years, number of citizens seeking houses and land plots in Tbilisi outskirts has considerably increased. Tskhvarichamia, Tskneti, Kiketi, Tsavkisi, Saguramo and other settlements are among popular locations. According to World Health Organization indicators, every 9 persons out of 10 ones in the world live in the environment with a high level of air pollution. Air pollution is a problem in Georgia too, especially in the capital city. As a result, number of diseases catastrophically grows every year. Therefore, ecologists assert that it is better to live in suburban areas than in Tbilisi. Because of a growing number of transport and glass structures, the city lacks for ecologically clean environment. Experts explain that suburban life tendency has been long established in various European countries and it will be established in Georgia too. According to statements by environmentalists, there are several locations near Tbilisi in terms of ecologically clean residencies, including Kiketi, Tskhvarichamia, Natakhtari, Tserovani, Tsavkisi, Tskneti and so on. Rusudan Simonidze, co-chairperson of Georgian Greens Movement, says that living in the capital city has become unbearable in terms of ecology and it is better to live in Tbilisi surroundings. According to Nikoloz Kevkhishvili, head of Valuation and Research department at Colliers International Georgia, Land sales transactions for single family housing developments1 in Tbilisi occurred mainly in the following districts: Village Dighomi, Dighomi 7, 8, 9, Kodjori, Tabakhmela, Tsavkisi, and Tskneti. The mentioned districts are spread over the three municipalities of Georgia – Tbilisi, Mtskheta and Gardabani. The total

number of registered sales transactions in these districts during 2016 amounted to 924, a figure 9% higher than the same indicator for 2015. Registered sales transactions increased by 6-20% in all price segments. Number of registered sales units increased in Village Dighomi, Tabakhmela and Tsavkisi. The slight decrease in transactions was observed in Tskneti and Kojori. The highest selling prices were achieved in Dighomi 7, 8, 9 and Tskneti, accounting for USD 84 and USD 56, respectively. Average selling price decreased in Dighomi 7, 8, 9 and Tskneti. The figure increased in Village Dighomi and Kojori. In the first quarter of 2017 registered sales transactions of the lands for single family house development did not change significantly in Mtskheta, when compared to the same figure of 2016. At the same time Tbilisi and Gardabani municipalities showed around 20% increase. Tengiz Gadelia, head of Georgian Association of Realtors, says that Saguramo, Kiketi, Tskneti directions are most in-demand locations because of several factors: 1) vicinity to the capital city; 2) unlike previous years, infrastructure has been developed and 3) ecologically clean environment. Unlike previous years, the number of real estate transactions has increased in Tbilisi suburbs. Old residents of Tbilisi are bored with noise, a great number of vehicles and this category shows much interest in suburban real estate, Gadelia said. In most cases, people buy property

Therefore, ecologists assert that it is better to live in suburban areas than in Tbilisi. Because of a growing number of transport and glass structures, the city lacks for ecologically clean environment.

in Tbilisi outskirts for building cottages, he added. According to his forecast, the demand will further grow if development projects continue overloading Tbilisi central zones and the capital city is not freed from automobiles. Professor Rati Abuladze, doctor of economics, explains that vector of premium class’ demand and change in structure have made influence on shaping Tbilisi outskirts. All these factors have enlivened the capital city surroundings and intensified apartments market. «Suburban zone belongs to a resort zone and their importance are known historically. Consequently, current tendency comprises a revival of the process and certain demographic inversion», Rati Abuladze noted. Development of Tbilisi surroundings are inspired by such factors as: • High air pollution level (causing serious diseases for the center residents), level of noise; • shaping the city, deficit of space and high density; • lack of plants and green zones; • Urban details: social-space, economic and institutional aspects of the city; • social segregation process; • culture impact and tendencies; According to Abuladze, the new narrative drives «suburbanization of highincome segment» and modification of suburban settlements. The fact is that Tbilisi surroundings create an organic wholeness that is represented by: • Healthy climate of Suburban resort zones (Tskneti, Kojori, Kiketi, Betania); • Individualization, isolation and comfortable living conditions; • Social-space structure, low density and control over huge spaces (that reduces living difficulties). • Feeling of beauty of nature and landscape, revival of settlements and

perception of configuration of premium environment; According to Abuladze, in heterogeneous environment Tbilisi Government is obliged to: • prevent deepening inequality of dicotomy of Tbilisi and its surroundings and shaping segregated city. • Prevent social-economic isolation and division by classes; • Concentration of premium segment in Tbilisi surroundings is expected to shape business and viable environment. Irakli Rostomashvili, head of Association of Georgian Developers, explains that it is wrong assertion as if Tbilisi surroundings are developed. According to Rostomashvili, the development process is of unimportant scales. «Building process was intense in previous period, because similar zones did not exist in Tbilisi surroundings earlier. Tskneti, Mukhatskaro and Tsavskisi were undeveloped zones earlier and these locations were developed several years ago. No new settlement has been arranged. Development process is not large-scale. These zones were shaped earlier», Rostomashvili noted. Real estate agencies also prove that the demand for real estate has risen in Tbilisi surroundings. Tbilisi Central zones are overloaded in terms of development projects and automobiles and Tbilisi residents prefer to move to cozier environment, they assert. Several months ago Ilia Inashvili, director for Bonus real state agency, explained that the demand for real estate has risen in Tbilisi suburbs. «Land plots near Tbilisi were in much demand in new districts. Lack of communications was only problem, but after improvement of these aspects, the demand will grow further. As to real estate sales, over the past 4-5 years real estate sales grow on annual basis in Tbilisi outskirts”, Ilia Inashvili noted.


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