THE RIGHT kind of growth
With two-thirds of residential units in Turkey not up to earthquake code, there is significant room for growth in sustainable housing across the country.
How has the reduction of the minimum real estate investment for citizenship impacted your sales?
Following the reduction of the minimum real estate investment for citizenship to USD250,000, there was a 40% increase in sales to foreigners. Reducing the requirement was a correction to the standard in the global market, as most countries giving residency permits use similar values. Compared to the local market, foreign sales account for about 10% of sales. It is not a big market for Turkey, though the change in regulation has helped.
“We have a network of sub agents, similar to a franchise system, and have organic balance in many countries.”
How do you seek to grow the number of sales to foreigners within Turkey?
We are a real estate network with around 50 offices. In Turkey, we started selling real estate to European markets in tourist areas and began selling in Istanbul four or five years later. We have almost 10 years of experience in the European market and have an operation in the US as well. We see significant growth from the Iranian, Iraqi, Afghani, and Pakistani markets. We do local business through our branches and system and the international business in our headquarters as a separate team. We have a network of sub agents, similar to a franchise system, and have organic balance in many countries.
Considering the depreciation of the lira, how have your customers been impacted?
The depreciation of the lira and the reduced real estate investment for citizenship combined have increased foreign sales by 40%; however, there is still room to grow. Domestically, the impact comes down to financing. As a developing country, customers do not live on cash and need mortgages. If the rates are high, they have to wait. TRY400,000 is a psychological limit for people to purchase; no one can take out all the cash to purchase when the interest rates are so high. However, this has happened before and will happen again. The real estate market is cyclical. The demographics of the market will result in future growth. Turkey has a young population that demands real estate. There are 21 million housing units in Turkey, and 14 million of them were not built up to code according to the earthquake law. There is a great deal of room to grow, and foreigner movement is just a small piece of the journey.
What elements of technology have you incorporated into your business?
We have a conventional agency system and are also extremely strong in digital. We are doing most of our operations digitally now and have a software company with sales office CRMs, applications for real estate dealers, and online payment systems for property management stuff. We are also doing software products for marketing. ✖
many firms were formed in the country to undertake the task of building the new roads, bridges, and schools key to the country’s development. This expansion was accelerated as a result of the availability of cheap credit lines, a highly skilled workforce, and access to European expertise.
When the construction boom showed signs of slowing down, many firms decided to take their skills elsewhere, including infrastructure projects abroad. Venturing into Africa seemed a viable option, as a few Turkish firms had already had some successful early experiences in North Africa in the 1970s.
Throughout the 2010s, Turkish contractors expanded their operations across the Middle East and North Africa region (MENA) as well as sub-Saharan Africa, winning a notable number of tenders. They did so often in a tough competition with Chinese companies, active on the continent for well over a decade.
At one point—between 2012 and 2013—Turkish companies were entrusted with over USD30 billion worth of contracts across the MENA region. Though business declined due to unrest in Libya, Iraq, and Syria in 2014-2015, work is once again gathering momentum.
With a good understanding of the region and its culture, such contractors have made a name across Africa, especially in the construction of public buildings, airports, and hospitals. The Tripoli Convention Center in Libya, Blaise Diagne Airport in Senegal, and the Kigali Convention Center in Rwanda, host to the 2016 African Union Summit, are just a few major projects in Africa built by Turkish construction companies.
Turkish contractors have also contributed to projects in over 120 countries over the last half a century, including 81 projects completed in Africa in the year 2017 alone, according to data released by the Turkish Contractors Association (TMB). It is estimated that these enterprises have generated over USD380 billion since the early 1970s.
DURING TURKEY’S CONSTRUCTION BOOM OF THE 2000s,
Ankara is supporting those companies active overseas, not least thanks to its well-established diplomatic ties with countries across the MENA region. By 2015, Ankara had finalized some 39 trade and economic cooperation agreements with African states—almost doubling the number from 2003.
The Republic of Turkey currently has FTAs with Egypt, Morocco, Tunisia, and Mauritius, while more agreements are currently under negotiation to facilitate the operation of construction firms on the continent.
After competing against Turkish contractors, Chinese companies are now keen to team up with the Turks, especially in North Africa, where Turks have a better grasp of the region’s political dynamics and business practices. The Chinese, meanwhile, can help by providing financing for projects, as they have across Africa already. Cooperation between Turkish construction companies and Chinese-financed infrastructure projects in Africa could boost Beijing’s One Belt, One Road initiative, which seeks to build, literally, a global supply chain that ferries raw materials to China and products for export out of China.
Emre Aykar, senior vice-president of the Confederation of International Contractors Association, believes Turkish contractors can go farther, perhaps as far as South America, when the volume of their contracts in Africa begins to slow down.
Mithat Yenigün, chairman of TMB, believes the ASEAN region, India, and Latin America could be the next markets where Turkish contractors can find success.
Even if Africa sees a slowdown, that will not be a large threat to Turkey’s overseas construction sector, as the current USD500-billion international market is still predicted to grow to USD750 billion in the 2030s. Turkish firms will continue to maintain their solid reputation in this sector and can increase their market share—whether or not they choose to partner with Chinese counterparts. ✖