The FINANCIAL — From one 31 sq.m office located at the crossroads of two central districts of Tbilisi, construction company GeoCo plans to transform into a large holding which will unite seven companies.
The company, which first gained popularity on social networks by offering cheap and affordable wooden housing, now enjoys a good reputation among industry professionals. It has managed to change the minds of many people who were thinking of buying ugly residential flats.
GeoCo has added a new service to its list of offers. It has just started building residential complexes in specific areas. The company is currently building a complex in Digomi 7, next to Tbilisi Mall. USD 1,800,000 has been invested in this project so far. The cost of houses in the Digomi residential complex will be USD 1,200 per sq. m.
“In 25 years it will be a holding which will unite different companies, like Geo Construction (which is already running), Geo Complex (building residential complexes), Geo Contact (research and advertising company), Geo Communication (transport company), and Geo Court (planting company). The holding will be called Geo Corporation,” said Nikolava.
The idea behind establishing GeoCo was to offer cheap and affordable housing to Georgian customers, explains Nikolava. At that time, while other companies were selling houses for USD 650 per sq.m, GeoCo introduced a new price – USD 312 per sq.m, and brought about a price normalization process on the market as a result. “The companies were offering doubled prices and many of them could not meet their promises. That led to disappointment in the construction companies. They were damaging the investment environment of the construction sector in Georgia. Since GeoCo set a low price, brought in a high level of quality, and gained customers’ trust, other companies have reduced their prices as well. Now the average price on the market is USD 352 per sq.m. As for a reinforced concrete house, it costs USD 425 per sq.m. In this business the net profit is just 10-12 percent, which is not high but should not be higher than 12 percent,” said Nikolava.
80 percent of the materials which GeoCo uses in construction are imported from abroad, from Austria. Customers prefer to build houses on Nutsubidze slope, at Lisi Lake, in Bagebi and Kaklebi. Few people prefer to build their houses in the regions, said Nikolava. The average life expectancy of GeoCo’s houses is 70-80 years.
Vakhtang Nikolava is the only founder and owner of GeoCo. He founded the company in December 2010. “I started this business from scratch, I had no share capital. After building the first house, the company received more and more orders. But then because of political instability, the process of development slowed down. Nowadays the situation has more or less improved, but a better and more stable environment will be created for businesses after the second elections. If the current government stays in power, then there will be a feeling of stability. If not – nobody knows what will happen to the Georgian economy,” he said.
Q. You say that the process of the company’s development slowed down. Was the political instability the only challenge the company faced or were there were some others as well?
A. Three years ago the market was very much undeveloped in this direction. On top of that, the company was experiencing the very tense political situation in the country; the previous government was losing its power while the new one was not yet ruling the country completely. Our product, wooden housing, was innovative and accordingly was not so in demand. People no longer had confidence in construction companies. Many of them had lost money in the construction business. We needed to make people trust in our company. So we designed an unprecedented offer for them – we offered the possibility to build houses on the land of the customers and only after the construction finishes would we get monetary compensation. If the customer does not pay the housing construction cost, then in that case they will be fined according to the contract which is signed between the parties at the outset. The majority of our customers take out mortgage loans to build their house. Another very comfortable aspect of the offer for our customers is to be able to watch online how their house is being built. After the building process is finished the owner of the house can come and if there is something that they do not like, we must correct it. Otherwise, they do not have to pay the money. It is precisely such a policy that has won over people’s trust.
Another challenge was the lack of a qualified labour force. The majority of Georgian architects are lazy, ignorant and ambitious. Good joiners, electricians and builders are very hard to find in Georgia. The people who work at GeoCo are trained by Austrian professionals.
I have started a new programme which is all about employing ex-convicts. We are currently providing employment to a total of five ex-convicts. In general, craftsmen at GeoCo get a salary 25 percent higher than others in the market. This is because we have more strict requirements in terms of quality. If a customer does not like a house built by CeoCo and thinks that it is not of good quality, then the company loses USD 100,000. So we prefer to pay more to our employees and require more from them in return. I would encourage other businesses to do the same and employ ex-convicts. While GeoCo is a 1 million company, there are 100 million companies which can then employ exponentially more people than GeoCo does. On the one hand businesses can reduce unemployment in the country and on the other – they can reduce criminality by helping prevent ex-convicts from having the need to return to a life of crime.
Q. GeoCo concentrates on building wooden houses. Why?
A. Wooden houses are healthy, can be built quickly and cheaply. However, 80 percent of GeoCo houses are reinforced concrete houses. The problem is the mentality of the Georgian people. They think that such houses are better than wooden houses and last longer. Building wooden houses is almost unprofitable for GeoCo. That is why we have founded the Geo Complex, because it will bring money to the company. I hope that in four years’ time people’s attitude towards wooden houses will be different than it is now and they will see how preferable wooden houses are compared to their competitors – reinforced concrete houses.
A wooden house needs special care. It requires 100 sq.m of space. Once in four years the owner must treat it with a special antiseptic solution, which will cost USD 300.
The process of building a house starts when a customer first visits our office and asks us to build a house for them. Then the customer fills out a special form, has an interview with the architect, and then we do topography, draw a sketch, and if the customer is satisfied with the design – we start construction. This whole process takes almost 3 months for a 100 sq.m house.
I am building a new factory where modular houses will be made. People will have the choice of 15 different modular houses, each module will have different variants of designs and we can construct the same modulation as the customers wish. Research shows that 75 percent of the Georgian population has land where they do not have a house. People can pay USD 10-12 thousand and we will build a house for them in their specified location. But we will start this business after a few years. In the meantime, people should understand that wooden houses are not bad, but are actually better than any other residential house. They should also understand that it is better to live in your own house, with a beautiful yard and in a healthy living environment, than to live in a concrete block of flats.
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