The decision to prioritize projects within the framework of the public sector investment program preparations for 2024 may also be supported by the liquidation right.
The Turkish Contractors Association (TCA), representing the leading organizations of the construction sector, published the October 2023 issue of the Construction Sector Analysis Report, which is followed with interest by economic circles and the sector. The analysis, titled "Agenda; Economic Problems as we enter the Second Century of the Republic", evaluated data on the global and national economy and the construction sector.
Public contractors in crisis
In the October 2023 issue of the Construction Sector Analysis Report, although the importance of the fact that the construction sector grew by 4.5% and 6.2% in the first two quarters of the year, respectively, due to the increased reconstruction activities in the earthquake zone, is noted; "The current outlook in the construction sector, whose share of national income was over 9% in 2016, is far behind the previous years. There is no growth in non-residential construction activities across the country, and the fact that no new projects will be included in the Investment Program next year, except in mandatory cases within the scope of public austerity measures, has created a major bottleneck for the sector going forward."
Price difference, liquidation and time extension regulations are needed
In the report, which drew attention to the problems experienced by the sector such as large increases in input costs, insufficient allocations in public investments, delays in progress payment collections, restrictions in access to credit and the lack of qualified labor force in the sector, it was emphasized that the need for regulation on price difference, liquidation and time extension issues has increased considerably due to the increase in costs of contracting companies undertaking public projects, "It is evaluated that the decision to prioritize projects within the framework of the investment program preparations for 2024 in the public sector can also be supported by the right to liquidation."
Problem of access to finance increased
"The problem of access to financing increased due to the increase in interest rates with the recently adopted policy change and the low lending appetite of banks. However, according to the July 2023 data of the Banking Regulation and Supervision Agency (BRSA); the total cash loan volume of the sector increased by 40% compared to the same period of the previous year and reached 752.1 billion TL and the non-performing loan ratio in the sector was 3.3%. The increase in the loans utilized by the sector was around 60% in the July 2021-2022 period. Within the framework of rapid interest rate increases, the problem of resource supply for the sector will increase in the coming period."
Housing prices are not expected to stabilize in the short term
The report noted that macroeconomic developments do not support the expectation that housing prices will stabilize in the near future, and that the government is preparing to take measures in this regard. "In the statement made by the Minister of Environment, Urbanization and Climate Change Mehmet Özhaseki on September 11, 2023, it was stated that Treasury lands will be opened for development in order to increase housing supply, facilitate citizens' access to housing and reduce rents. While this step is positive, its effects may not be realized today and tomorrow, but in the medium term. With the upcoming local elections, there is also an expectation of a housing campaign to support first-hand sales. On the other hand, the BRSA has imposed a limit on the rate of credit utilization for second home purchases."
Alternative solution to transformation cost should be developed
Emphasizing that it is of great importance that reconstruction works in the earthquake zone are carried out in a planned and supervised manner, the report reads as follows "The need for earthquake-resistant transformation of buildings across the country is also great. The renewal of old housing stock, especially in city centers, offers an opportunity for the sector. While it is positive that the 2/3 approval of the land share owners to be reduced to 51% in order for the buildings to be transformed is signaled in terms of accelerating the process, it is important to develop alternative solutions in order not to burden the entire cost of transformation on the backs of the citizens in an inflationary environment."
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