The FINANCIAL — Three new apartment buildings are scheduled for construction by real estate company m2, the wholly-owned subsidiary of Bank of Georgia. “The average price per square metre for existing projects varies from USD 1,100 to USD 1,200, however, we plan to reduce prices for the new projects,” Irakli Burdiladze, Deputy CEO, Affordable Housing, told The FINANCIAL.
Burdiladze did not name a concrete sum for the future projects. The construction of the first two projects, on Plato Nutsubidze and Kazbegi Avenue, will start in the autumn of this year; the third is planned to begin in the spring of 2014. Each of the projects will be completed in two year time frames.
JSC m2 Real Estate, a wholly-owned subsidiary of JSC Bank of Georgia, is a real estate company focused on real estate development, property management, project management and brokerage services. To this date, m2 Real Estate has attracted equity and debt financing to the aggregate amount of USD 20 million. m2 Real Estate has successfully completed one housing project located in a central district of Tbilisi with a second similar project currently underway, planned to be finished in 2014.
“We are focused on making these apartments available to a wider audience. To this end we are offering restored buildings which will help customers save three times more on renovation expenses, and are offering smaller-sized, compact apartments, of around 60 square metres.
“Activities in the Georgian real estate sector have been booming from year to year. We are optimistic that this tendency will continue. Most of the residential buildings in Georgia were built in the 1960s, and the majority of these now need restoration,” said Burdiladze.
““High demand for better housing, particularly among consumers in the middle-income bracket, has gone largely unmet. The housing sector, after a period of rapid growth and rising confidence in the mid-2000’s has been badly affected by a combination of several factors, including the global financial crisis. Financing, which was at one time readily available for developers and purchasers, is now relatively in short supply. This has had the effect of limiting both supply and demand for residential units across the board and with greater effect in the affordable sector,” Thomas Lubeck, International Finance Corporation (IFC) Regional Manager for the South Caucasus, told.
IFC will provide m2 Real Estate with a revolving loan of up to USD 14 million, including up to USD 4 million from the IFC-Canada Climate Change Program. The financing will help the expansion of urban infrastructure in Georgia by building high-quality affordable housing in the form of resource efficient apartment buildings. The project will create jobs in the construction sector and increase the work of housing communities.
“This is IFC’s first investment in housing development in Georgia, increasing the supply of quality housing and improving standards of living for local families. Through this investment, we are also supporting the efficient use of resources, helping to create jobs, and increasing investor confidence in the sector,” said Lubeck.
“IFC is helping a local company develop an energy efficient, affordable, and quality housing project in Georgia. Our energy efficient system will help residents to save over 20% on utility expenses,” said Burdiladze.
“Having successfully worked with development finance institutions to finance our existing project, m2 Real Estate is committed to providing its customers in Georgia with affordable, quality, and modern housing,” said Giorgi Vakhtangashvili, Chief Executive Officer, m2 Real Estate.
The project envisages green buildings designed to increase the efficient use of energy, water, and materials, reducing any negative impact on the environment. The Government of Canada’s instrumental contribution will help make the financing package viable.
“We are committed to supporting private sector growth in Georgia. IFC sees great potential to leverage Georgia’s natural competitive advantage in renewable energy, particularly for the development of hydropower. We are helping Georgia reduce its dependence on carbon-based electricity generation and increase its energy self-sufficiency. IFC will continue supporting the development of Georgian hydropower and these projects are subject to the highest social and environmental practices,” said Lubeck.
Georgia became a member of IFC in 1995. Since then IFC has invested USD 607 million in 49 projects across various sectors and supported the development of regional projects in the country. IFC has also implemented a number of advisory projects focused on the development of the private sector.
During the last fiscal year, IFC committed about $93 million in Georgia and mobilized additional $25 million from other lenders. “We continued helping our partner banks – Bank of Georgia, TBC Bank, and Bank Republic – to finance the foreign trade transactions of local companies, boosting foreign trade. We also supported the leading Georgian wine producer and exporter, Tbilvino, creating employment opportunities in rural areas and benefitting small farmers. IFC advisory services projects continued to focus on reforming the tax system to benefit small businesses, raising food safety standards and strengthening the risk-management practices of banks,” Lubeck told The FINANCIAL.
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