The Georgian real estate development sector is facing a noticeable slowdown in lending, as commercial banks continue to tighten their approach to financing new construction projects. According to Levan Diasamidze, Director of IberCompany, this trend could pose serious challenges for the market if it continues.
“Today, the pace of corporate lending to the development sector is very slow. I wouldn’t say it has stopped altogether, but it’s significantly restrained,” Diasamidze told BMG. “While disbursements for previously approved loans are ongoing and construction is underway, banks are not actively discussing or financing new projects - except for large developers. For smaller and mid-sized players, the situation is very difficult.”
Diasamidze warns that the current environment could lead to project delays and even cancellations.
“Without financing, developers will have to rely solely on sales to fund construction. This not only slows the pace of development but also creates serious risks, especially if sales underperform. Some projects may have to be halted altogether,” he explained.
He adds that the lack of access to new financing creates a high-risk, unstable environment, which could disrupt overall market momentum.
In addition to reduced corporate lending, the sector is also grappling with rising mortgage interest rates, which have made housing less affordable for consumers.
“The current mortgage rate has reached 13%, which is up 1.5–2 percentage points over the past eight months. This is happening even though there haven’t been any significant increases in country risk factors,” Diasamidze said. “For buyers, this means higher monthly payments. For developers, it means slower sales.”
According to Diasamidze, these combined pressures are early signs that a slowdown in the real estate market may be on the horizon, unless corrective action is taken.
“If banks do not step in soon with more active lending policies, the development sector’s contribution to economic growth could shrink. It’s time for the banking sector to re-engage more constructively,” he concluded.
