Interview: Ahmet Haluk Karabel
How many housing units will Turkey have to produce to meet economic and population growth?
AHMET HALUK KARABEL: It is estimated that there are currently 20m houses in Turkey. Roughly 500,000-600,000 more homes need to be built to accommodate annual population growth, though it should be noted that Turkey’s population growth rate is gradually decreasing.
Over the past decade, the share of private sector housing development increased to between 81% and 87%, up significantly from a share of 70-76% in the 1990s. By the year 2023, TOK‹, which currently accounts for some 5-10% of annual housing production, plans to construct an additional 500,000 units, as set by our prime minister. In addition, TOK‹ intends to work closely with industry stakeholders in the coming years to renovate 6.5m-7m buildings in Turkey that have been deemed structurally unsound. This problem is due to mismanagement of housing development projects in the decades prior to the 2000s.
Given Turkey’s relatively high volume of seismic activity, ensuring the adoption of international best practices in the sector is an imperative for policymakers, which is why regulatory changes were made in both 2000 and 2007 to create more stringent building requirements.
Of course, our industry is not only focused on the domestic market, as reflected by the fact that Turkey ranks second only to China in terms of having the highest number of the world’s largest construction firms. TOK‹, for example, has received requests from over 80 countries for project work and consulting services.
What risks does rapid real estate development pose to the environment and historical structures?
KARABEL: The impact of rapid construction growth on the environment and historical sites has received highly critical news coverage in Turkey; however, much of this coverage has been one-sided and politically motivated. The nation’s legal system offers many protections, especially under the Law on Renovating, Conserving and Actively Using Dilapidated Historical and Cultural Immoveable Assets. As TOK‹, we make long-term restoration loans available to proprietors every year, which has thus far allowed for the restoration of 280 registered buildings. Restoration of another 194 buildings is currently in progress. In addition, environmental impact assessments are a legal requirement for construction projects, and widely observed in practice.
Although construction growth needs to be managed carefully, we should not overlook the essential role that the sector plays in the economy. The housing industry, for example, typically accounts for 3.8-4.7% of Turkey’s GDP. If the sector’s indirect contribution is taken into account, this number may be as high as 30%. Furthermore, as a labour-intensive business, construction plays an important role in job creation.
How can policymakers maintain affordability while ensuring the creditworthiness of borrowers?
KARABEL: The Turkish government puts a special emphasis on ensuring that all segments of society have access to affordable housing. This is clear when you consider the fact that 85% of the 570,000 homes developed by TOK‹ over the past 10 years have been social housing units, which often accommodate lower-income groups. In the wake of the 2006-07 subprime mortgage crisis that affected the US, local authorities need to work hard to craft smarter policies. This is also true for the banking sector, which has to work closely with borrowers to ensure the viability of long-term loan repayment agreements.
Given the strength and stability of Turkey’s banking sector, as well as the fact that our financial system does not provide high-risk instruments like mortgage-backed securities, it is highly unlikely that Turkey will experience the same problems faced by the US.
In fact, the strong capital adequacy ratios in the Turkish banking sector are supporting an increase in the provision of long-term home loans. This results from the strength and stability of the Turkish economy.
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