Review of pace of construction in Georgia for the 1st half of 2019

It is no secret that buying real estate in Georgia is quite a lucrative investment. Many non-residents arrive here to purchase residential property for further leasing. Year after year, Georgia attracts more and more tourists; meanwhile, the geography of travelers is constantly expanding. If previously citizens of neighbor countries came here for vacation, now the number of tourists from Europe, Israel, Poland, and China had increased for just a few years. In 2018, Georgia was visited by 8,7 mln.  people, and it is expected that the number of visitors in 2019 will be at the same level.

Such a great number of tourists stipulates the demand for objects of real estate, including: apart-hotels, hostels, flats, houses, especially in resort areas. As result, prices for real estate are growing. For example, analysts of TBC Capital found that the average monthly cost of apartments in new-builts of Tbilisi for the 1^st half of 2019 had increased for 0,9% in USD and 4,5% in lari.

Pace of construction in Georgia for the 1^st half of 2019

Due to such a high demand for new-builts in Georgia, pace of construction is accelerating. According to the data of Saxstat, for the 1st half of 2019 1 236 objects were put into service in Georgia, which is 6,3% more than for the similar period of 2018. The total area of objects put into service made 1 370,6 thous. sq.m., which is 47,6% more if compared to the result of the 1^st half of last year.

The leader in number of objects put into service is still the capital of Georgia. Tbilisi corresponds to 36,4% of all buildings put into service around the country. The statistics on other regions is the following:

• Kaheti – 15%;
• Kvemo Kartli – 9,5%;
• Imereti – 8%;
• Mtsheta — 7%;
• Shida Kartli – 6,9%;
• Adzharia AR – 5,8%;
• Samegrelo – Zemo Svaneti – 4,2%;
• Samtshe – Dzhavaheti – 3,8%;
• Guriya – 1,8%
• Racha – Lechhumi and Kvemo Svaneti – 1,6%.

As noted by analysts, the sphere of construction, which at the beginning of the year demonstrated a negative dynamics, at the mid-year had significantly improved its indexes. This is explained by tightened rules of issuance of permissions and terms of mortgage crediting, which became valid on 1 January 2019, but Georgian developers managed to promptly adapt to new rules of play in the market. Already in the 1^st half year the number of issued permissions for construction made 4 991 (+1%), the total area of future objects of real estate – 3 520,9 thous. sq.m. (+17,5%).

The leader in the number of issues permissions for construction is still Tbilisi. The capital corresponds for 48,8% of all issued permissions. The situation in other regions is the following:

• Kvemo Kartli – 11,7%;
• Adzharia AR – 11,1%;
• Imereti – 5,8%;
• Mtsheta – 5,6%;
• Kaheti – 4,8%;
• Samegrelo – Zemo Svaneti – 4,3%;
• Samtshe – Dzhavaheti – 3,1%;
• Shida Kartli – 3,0%;
• Guriya – 1,2%
• Racha – Lechhumi and Kvemo Svaneti – 0,6%.

Why it is beneficial for non-residents to buy real estate in Georgia in 2019

Real estate in Georgia will be interesting for non-residents in aspects of leasing, as well as for personal short-term vacation. There are still many hotels in Georgia to cover the entire demand for property among non-residents. For instance, the number of hotels in the country, according to the data of Saxstat, at the beginning of 2019 made 1,6 thousands. Simultaneously, these hotels could accommodate 72,6 thousands people, while the total number of suits in hotels of Georgia made 33 186, of which:

• luxe – 3 491;
• single – 4 021 ;
• double – 18 795;
• triple and bigger – 6 879.

It is evident that considering the growing flow of tourists this will not be enough. In 2018, Georgian hotels hosted 2,6 mln. of foreign travelers, while the number of people who had visited Georgia made 8,7 mln. Among people staying in hotels most citizens were from:

• Russia – 20,7%;
• Turkey – 11,2%;
• Israel – 9,2%;
• Ukraine – 6,9%;
• Iran – 5,3%.

as well as Azerbaijan, Germany, Armenia, Poland, Saudi Arabia, and other countries.

Apart from leasing, buying real estate in Georgia is reasonable for non-residents because of:

• moderate prices; the average price of 1 sq.m. in Batumi is 770 USD (one of the lowest prices among cities of the Black Sea), in Tbilisi — 736 USD. These two cities are the most popular among foreign investors who are interested in buying residential property. We should also mention the rising interest in real estate in ski resorts of Georgia: Gudauri and Bakuriani, especially among Russian citizens;
• presence of managing companies in new-builts, which undertake all obligations related to leasing, cleaning, payment of utility bills, and repair. Due to this, foreign investors can provide themselves a stable potential income even without constantly being in Georgia.

To receive periodical payments from property lease, we recommend to open a personal account in Bank of Georgia.

Non-residents are also interested in real estate in Georgia with the purpose of purchase:

• for personal living;
• for obtaining resident permit.

The first variant will be interesting for those who wish to start business in Georgia. People of business rarely want to stay in hotels, even for a short time. Many give preference to personal residence, where they may arrive at any time without prior booking.

The second variant is relevant for those who plan to buy property in Georgia with cost of more than 100 000 USD. A resident permit in Georgia will mainly be interesting for citizens of states that face difficulties when entering the countries of Schengen zone. When a Georgian passport is available, non-residents obtain a free access to the Schengen territory.

Process of purchasing real estate in Georgia by non-residents

The procedure of purchasing real estate in Georgia is very simple. Furthermore, this is verified by the published rating Doing Business, where the country had taken the 4^th place in simplicity of registration of ownership rights among 190 countries of the world.

To conclude the purchase and sale agreement from a buyer- non-resident, only an international passport may be necessary. Later, depending on real estate market, one of the following procedures is applied:

Buying a new-built on stage of construction

This variant is also advantageous because the cost of property not yet into operation is lower than of finished one. Meanwhile, an investor in his turn undertakes risks related to possible termination of construction or prolongation of terms of putting into service.

Purchasing an apartment in a house at one of construction stages is made in two steps. First, a draft agreement is concluded between a developer and a buyer, which provides obligation of the first to build a house in time and obligation of the second to fully pay the price of purchase. Usually, an agreement also provides:

• term of final delivery of an abject;
• apartment characteristics: availability of utilities, interior finishing, boiler, doors, etc.;
• apartment parameters: area, number of rooms, floor.

Upon fulfillment of obligations by the parties (a house is put into service and the price of apartment is fully paid), a future owner of property and a developer must conclude a general agreement. Then, a buyer must register it in the Register of property in the House of Justice. To do this, he must file an application in Georgian language and bring the following documents:

• international passport;
• purchase and sale agreement;
• construction permit;
• technical plan of real estate;
• document certifying payment of the initial contribution (if available);
• bill on payment of state fee (registration on day of request – 200 lari, the next day – 150 lari, in 4 working days – 50 lari).

Upon registration, a buyer together with purchase and sale agreement is given a statement from the register of registration of ownership rights for property.

Purchasing a finished property

This variant presumes registration of only one purchase and sale agreement and further registration of a deal in the House of Justice. The list of documents is quite the same as in the previous variant, but a buyer must also provide a document certifying putting of house into operation.

Attention!!! Before purchasing, to avoid troubles in future, an investor must always check if an object is encumbered. With this purpose, in the House of Justice you need to request a statement from the register of rights for real estate. Its price is 50 lari (can be issued on the day of request) or 15 lari (statement is given the next day).

If you are interested in investing capital in Georgian real estate with respective benefits, please contact us at: [email protected]. We have a wide experience in selection of property, preparation of purchase and sale agreements, and holding negotiations with developers. Our employees will help to make transaction with observation of all customer’s requests, even without his personal presence.