TBC Group Chief Economist Otar Nadaraia believes that the rapid growth of developer-provided installment plans in Georgia’s real estate market warrants closer attention and discussion. According to Nadaraia, the concerns raised by the International Monetary Fund (IMF) are justified, as quasi-mortgage loans issued directly by developers have expanded significantly in recent years and now represent an increasingly important segment of the housing market. He emphasizes that the issue is not about banning such financing mechanisms but about carefully assessing the risks they may pose.
One of the key concerns highlighted by Nadaraia is the lack of thorough creditworthiness checks on buyers. Unlike banks, developers often do not have complete information about a customer's existing financial obligations before approving an installment plan. As a result, some buyers may take on additional debt despite already carrying significant financial liabilities. Nadaraia argues that, at a minimum, developers should have access to relevant credit information to better assess a buyer’s ability to meet repayment obligations.
A second major risk involves foreign currency exposure. Nadaraia notes that most developer installment plans are denominated in foreign currencies such as U.S. dollars or Euros, while many buyers earn their income in Georgian lari. This creates currency risk, as exchange-rate fluctuations can significantly increase repayment costs for consumers. In his view, this undermines the purpose of lending regulations introduced in recent years to protect borrowers from the dangers associated with foreign-currency debt.
Nadaraia believes the issue should be addressed through cooperation among regulators, financial institutions, and the real estate sector. He suggests reviewing the existing mortgage lending framework to determine whether current regulations are excessively restrictive and unintentionally pushing demand toward less-regulated financing channels. At the same time, he argues that developers offering installment plans should be subject to certain requirements, including assessing borrowers’ repayment capacity and using credit bureau data to reduce financial risks for both consumers and the broader market.
