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Georgia



Overview

Region's advantages:
  • Developing growing economy
  • Well known resorts of the former USSR
  • Low price per square meter
  • Low salaries of the citizens, growing
  • Strategic investments from the USA and Western Europe

Investment forecast from Tj.Realty
Although it is a risky investment, it is still capable of bringing serious returns in the next 1-2 years, based on the strong interest in new real estate from the locals and a good potential for stabilization of the political risks.


Country overview

Georgia is a country in the Caucasus at the east coast of the Black Sea. It is bordered on the north by Russia, on the south by Turkey and Armenia, and on the east by Azerbaijan. It is a transcontinental country, located at the juncture of Eastern Europe and Western Asia.

 


Current population of Georgia is 4,661,473 (2006 est.).
Landscape and climate of Georgia is different in the Eastern and Western part of the country. Western Georgia's landscape ranges from low-land marsh-forests, swamps, and temperate rain forests to eternal snows and glaciers, while the eastern part of the country even contains a small segment of semi-arid plains characteristic of Central Asia. The Greater Caucasus Mountain Range protects the country from the penetration of colder air masses from the north; the Lesser Caucasus Mountains partially protect the region from the influence of dry and hot air masses from the south as well.

 

Major cities population

City  Population (est 2006) 
Tbilisi 1 095 100
Kugaisi 190 100 
Batumi 122 100 
Ruslavi  118 200 
 

Tourism industry

Given its abundant and beautiful natural resources and ideal location on the Black Sea coastline between Europe and Asia, it is understandable why Georgia is counting on tourism for increased economic development. Georgia boasts natural, historical, archeological, and architectural highlights as part of its strong cultural heritage. In addition, its culture, folklore, art, lifestyle, and hospitality are all huge potential draws for increased numbers of prospective tourists. In fact, visits by foreigners to Georgia in the first three quarters of 2005 totaled 400,000 of which 200,000 were from non CIS countries. The number of visitors in 2004 grew by 17.5% compared to 2003, and by 18% in Q1 2005 over Q1 2004.

 

Politics and Economics


Georgia is a representative democracy, organized as a unitary, semi-presidential republic. Georgia is currently a member of the United Nations, the Council of Europe, the Commonwealth of Independent States, the World Trade Organization and the Organization of the Black Sea Economic Cooperation, and seeks integration with the European Union and NATO.

Georgia maintains good relations with its direct neighbours Armenia, Azerbaijan and Turkey.

Since early 2000s visible positive developments have been observed in the economy of Georgia. In 2006 Georgia's real GDP growth rate reached 8.8%, making Georgia one of the fastest growing economies in Eastern Europe. The World Bank dubbed Georgia "the number one economic reformer in the world" because it has in one year improved from rank 112th to 37th in terms of ease of doing business.
2006 estimates place Georgia's GDP (adjusted for purchasing power parity) at US$17.79 billion. Georgia's economy is becoming more dependent on services (now representing 54.8% of GDP), moving away from agricultural sector (17.7%).

Georgia is becoming more integrated into the global trading network: its 2006 imports and exports account for 10% and 18% of GDP respectively. Georgia's main imports are natural gas, oil products, machinery and parts, and transport equipment.

In October 2, 1995 Georgian national Currency "Lari" was introduced into circulation and was declared the only legal means of payment on the whole territory of Georgia.  (1.78 GEL/USD in 2006 average)

 

2006 figures

GDP - real growth rate: 8.8 %(2006 est.)
GDP - per capita (PPP): 1,760 USD (2006 est.)
Unemployment rate: 12.6 %(2006 est.)

 

Banking sector

Georgia has a two-tier banking system; one comprised of the Georgian National Bank and the other, commercial banks. Bank assets comprise 17 percent of GDP (943 million USD), liabilities comprise 14 percent (736 million USD) and share capital comprises 4 percent (207 million USD).

General Trends:

• High rate of total assets growth (2006 - 66%, 2005 - 50%);
• Credit portfolios grew by 56% in 2006;
• Decrease of the share of bad loans from 7.1% (2005) to 6.7 (2006);
• Doubling of the number of branches of commercial banks;
• The net profit of commercial banks increased by 1.5% in 2006;
• In 2006 ROA in the banking sector was 2.8% and ROE - 3.1%;
• The share of private companies in the total credit portfolio grew in 2006, reaching 98%;
• EBRD, IFC, DEG, KfW, Commertz Bank, Procredit Holding, Austrian Creditanshtaldt, Societe Generale, Vneshtorgbank and others have invested in the Georgian Banking sector.


The main direction of banking sector development is the creation of stable and increasingly capitalized banks with a wide range of services, diversified investment portfolios, and adequate risk management systems. Georgian banks are steadily gaining a high degree of confidence among the population and institutional investors. Commercial banks of Georgia have expanded their branch networks and diversified services offered to the clients. They introduced customer services based on modern banking technologies and provide internal settlement in real time.

 

 

Foreign Direct Investments (FDI)


Foreign investments in the country are not large reaching USD 500 million in 2004 and USD 340 million in 2003. Foreign investments from 2000-2004 totaled USD 1.25 billion with the largest investors are USA (24%), UK (12%), Russia (11%), Azerbaijan (8%), and Turkey (7%).

FDIs in 2005 amounted to 449.8 ml. USD (499 ml. USD in 2004). The decline from the previous year was caused by the completion of Baku-Tbilisi-Ceyhan oil pipeline construction project, however non-pipeline investment increased by 44 ml. USD from 139 ml. USD in 2004 to 183 ml. USD. FDIs in 2006 amounted to 1,190 ml. USD (increased by 740.2 mln USD in comparison to 2006). FDIs In January-March 2007 amounted 285.3 ml. USD (increased by 139.3 mln USD in comparison to I quarter 2006).

Georgia’s liberal policy towards foreign investments, free repatriation of profits, WTO membership, and stability of currency exchange and inflation rates in the past had positively affected the investment climate. However, a decisive factor for implementing the largest projects was Georgia’s strategic location for the transportation of Caspian oil towards the West. Extremely favorable natural conditions for the development of agriculture and tourism are also potential areas for investment. The major factors impeding foreign investment is a weak judicial system which fails to properly defend investors’ rights and property.

According to the Georgian legislation, foreign investors have the right to transfer investment-related funds or convert them into another currency. Foreign investors have the right to open foreign currency accounts in local banks. They also have the right to convert revenues received in local currency as a result of investments into foreign currency. There are no restrictions imposed on the repatriation of profit. The law does not require participation of local investors in an investment project.

Main Countries’ Share in the Stock of FDI in January – March 2007

Country  Volume (mln USD)  % of total 
 Total:  285.3  100
 Denmark  82.3  28.8
 Turkey  37.1  13.0
 Netherlands  32.8  11.5
 UK  28.3  9.9
 Virgin islands  25.9  9.1
 USA  14.9  5.2
 Russia  14.2  5.0
 Azerbaijan  12.8  4.5
 France  6.3  2.2
 Kazakhstan  6.2  2.2

 

Georgian Stock Exchange

The market infrastructure includes the JSC Georgian Stock Exchange (GSE), which was established in 1998 and is a member of the Federation of Euro-Asian Stock Exchanges, the JSC Central Depository, seven Securities Registrars and 81 licensed brokers (physical persons). According to March 2005 data, there are 17 brokerage companies admitted to GSE trading by the NSCG, but only 14 companies operate.

In 2003 the GSE conducted 913 trades with the total value of GEL 1.8 million (c. USD 0.84 million), which made up 0.02% of the GDP. In 2004 the GSE conducted 102 trades at which 1094 transactions with the total value of GEL 46.7 million (c. USD 24.4 million) were settled, comprising 0.5% of the GDP. This increase can be explained by the change of owners and enlivened interest of investors in 2004.

 

Georgian property market

Overview of the market

The recent boom in demand for residential and commercial space has made the construction sector one of the fastest growing sectors of the economy. The rapidly developing availability of mortgage financing is beginning to power the purchasing ability of customers and creating a much larger market than existed before. However, associated real estate services are not growing correspondingly. The most prominent feature of the real estate broker market is a very large number of small agencies, most of which provide identical listings.

In the last year, foreign investors have purchased two large local hotels, the Adjara and the Iveria, with plans already underway for their total refurbishment. In addition, a defunct Soviet era amusement park overlooking the capital has been purchased and when reopened will boast the largest roller coaster in the CIS. Another recent example of foreign investment in real estate is the 49-year lease awarded by the Ministry of Economic Development to Umbrella Consulting, an affiliate of Silk Road Group, to renovate, restore, and manage the famed Tsinandali estate, including its botanical garden, wine cellar, and guesthouses that serve as hotel, conference center, and presidential retreat.

The construction industry is one of the most rapidly growing industries of the Georgian economy. Construction in Georgia enjoyed high rates of output and employment growth over the past few years, with the strong upward trend expected to continue (see graph below). The construction business continues to attract increasing investment and banks are continuously increasing their lending to the sector. Construction companies operating in Georgia are working to meet a great deal of pent-up demand for new, more modern living accommodations and office and industrial spaces that meet high standards.

 

 

Construction volumes

 

Residential premises


Market overview
Residential building is one of the fastest growing businesses in the past few years. Several large construction and development companies operate on the Georgian market at present, and foreign capital has recently started entering.

 

Agricultural land


Market overview
In 2005, the law on privatization of agricultural land under the state ownership was put in force, which facilitated and supported beneficial use of land through privatization and development of agricultural sector.




Summary


About us
European Company TJ.Realty specializes in the real estate trade in the countries with high growth potential. Presently we offer real estate in the following countries: Bulgaria, Croatia, Georgia, Turkey, Cyprus, Thailand, Egypt, Panama and Latvia.

Georgia
Georgia is a country in the Caucasus at the east coast of the Black Sea. It is bordered on the north by Russia, on the south by Turkey and Armenia, and on the east by Azerbaijan. It is a transcontinental country, located at the juncture of Eastern Europe and Western Asia.

Egypt
Egypt officially called Arabian Republic of Egypt is the state situated in North-Eastern Africa and on Sinai Peninsula. It borders on Israel, National Autonomy of Palestine (Gaza Sector), Sudan and Libya. It is washed by waters of Mediterranean Sea in the north and the Red Sea – in the East.




Company News

Latvian newspaper “Chas” wrote an article about TJ.Realty
According to interview with co-owner of TJ.Realty, Roman Kondrashov, today Egypt is one of the most undervalued markets in the world. In comparison with Bulgaria and Turkey this market is young but has a growth potential which is rather high.
17/07/08


Property in Latvia
In the beginning of January 2008 company TJ.Realty signed agreements with Latvian construction companies, which offer property in prestigious districts of Riga and Jurmala.
14/07/08


Construction in Georgia
Company TJ.Realty participated in the analysis of Georgian property market, which has a great growth potential nowadays. The results of the analysis were published on the most popular Latvian news portal Delfi.
03/07/08


News archive


Contact us now!

United Kingdom
Phone: (+44) 208 144 4690

Latvia
Phones: +371 67 852 999,
mobile: +371 29 644 999
Fax: +371 67 852 997
Address: Brivibas iela, 151, Riga, LV-1012

Russia
Phones: (8) 499 940 4201, mobile: (8) 926 203 4273
Address: Akademika Chelomeya St., 2, Moscow

Email: sales@tjrealty.eu
Skype: TJRealty