Construction & Real Estate
From The Report: Mongolia 2014
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Although the construction sector faces a number of challenges, such as the lack of a well-trained local workforce and low levels of domestic materials production, the sector is expected to benefit from increasing government investment in housing and infrastructure. Mongolia has a severe lack of affordable housing, and addressing this shortage is expected to be a major driver of construction activity in the foreseeable future. In addition to housing projects, modernizing and expanding Mongolia’s transport links and utilities networks is a key area of focus at present.
Only Mongolian citizens are currently allowed to own land; however, foreigners can obtain usage rights to land and own buildings and other structures. While a number of challenges remain, most local players expect Mongolia’s real estate sector to continue to grow for the foreseeable future. New activity bodes well for the country’s long-term development prospects.
This chapter contains interviews with E. Bat-Üül, Governor of Capital City and Mayor of Ulaanbaatar; and E. Jargalan, CEO, Erel Group.

Articles from this Chapter

Overview

Adding capacity: Boosting domestic capabilities in preparation to take on a more central role
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The rapid expansion of Mongolia’s economy in recent years has had a knock-on effect on construction activity across the country. According to World Bank data, the construction industry grew by more than 25% over the course of 2012, primarily as a result of a handful of government-led infrastructure and housing investment programmes. While local construction firms have been a major presence in the industry since the mid2000s, the sheer scale of the work under way has the potential to put pressure…

Interview

OBG talks to Erdeniin Bat-Üül, Governor of Capital City and Mayor of Ulaanbaatar (UB)
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Interview:Erdeniin Bat-Üül How are you looking to raise the level of health and safety procedures for construction in UB? EREDENIIN BAT-ÜÜL: Despite the rapid growth in the construction sector, we still need to improve health and safety procedures in order to reduce risks in the work environment. In this regard, we can learn many things from foreign companies about international best practices, especially in terms of monitoring and supervising the correct implementation of such best practices.…

Overview

Rising high: Solid fundamentals and demand bode well for future growth
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The rapid expansion of Mongolia’s economy in recent years has fuelled rising per-capita incomes and, consequently, steadily increasing demand for high-quality real estate of all types. Supply in most segments, meanwhile, has remained fairly limited, which has contributed to demand-driven increases in rents and sales prices, particularly since early 2011. Despite a considerable amount of new construction activity – primarily at the higher end of the market – most local players expect demand…

Analysis

Buying in: As part of a new programme, potential homeowners are snapping up mortgages at concessionary rates
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In June 2013 the Bank of Mongolia (BoM), the country’s central bank, introduced a new mortgage scheme, which is widely expected to boost home ownership rates substantially in the coming years. Under the new framework interest rates on mortgages for qualifying buyers have been set at a fixed rate of 8%, plus or minus one point depending on inflation. This represents a decrease of more than 50% in some cases, from rates as high as 27% as of early 2013, according to the World Bank. A lack of affordable…

Analysis

Purchasing power: Driven by local demand for consumer goods, retail rents and new developments are on the rise
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In recent years Mongolia’s commercial real estate segment has seen rising rents and expanding levels of international participation, in line with steadily increasing per-capita incomes. In Ulaanbaatar a handful of new grade-A mixed-use buildings have been completed, including, perhaps most notably, Central Tower, which opened for business in 2010, and Blue Sky Tower, completed in 2011. Other than these two buildings, as of mid-2013 the great majority of the retail space on offer in the city was…

Interview

OBG talks to E. Jargalan, CEO, Erel Group
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Interview:E. Jargalan What can be done to address the current seasonality of Mongolia’s construction sector? JARGALAN: Mongolia’s construction sector must find ways to work throughout the year, even if ours is the coldest capital in the world. Utilising precast concrete can be part of the solution. This material was previously used in the Soviet period, however the market will need to adapt to its modern uses, as new techniques in dealing with it have developed since then. One advantage…