EurasiaNet Business & Economics - In Tbilisi, It's = Boom Time for Building

BUSINESS &=20 ECONOMICS=20

IN TBILISI, = IT=92S BOOM=20 TIME FOR BUILDING
Text by=20 Diana Petriashvili; Photos by = Alexander=20 Klimchuk
6/15/07

The cranes hanging over the steel = frame of=20 the once shoddy Hotel Iveria in downtown = Tbilisi=20 say it all. With limited attention to=20 regulations and earthquake risks, = Georgia=92s=20 capital city is rebuilding itself, and = city=20 officials say that the construction boom = has=20 only started.=20

Hotel deals have grabbed the = headlines. Aside=20 from the $100 million Radisson Hotel = project=20 which will open in 2008 in the shell of = the=20 Iveria, an ex-Intourist Hotel that = doubled for=20 years as a refugee shelter, work has = also=20 started on a $200 million Park Hyatt = project,=20 due for completion in 2009. The = Kempinsky and=20 Intercontinental chains have also = announced=20 plans for hotels, and the central = government has=20 reportedly held talks with Hilton Hotels = as=20 well.=20

The government puts it down to = growing=20 international interest in Georgia given = its=20 rapid pace of reform and steady rate of = economic=20 growth. A recent International Monetary = Fund=20 mission estimated Georgia=92s 2006 = growth at well=20 over 9 percent and estimated that 2007 = could see=20 minimum growth rates of 10 percent.=20

Within the city government, officials = say=20 that they see no end in sight for the = Georgian=20 capital=92s construction boom, and = concede that=20 the building frenzy could well change = the city=92s=20 look. Outdated zoning laws mean that = little=20 legal basis exists for managing the = building=20 frenzy, though city government = representatives=20 contend that they are in fact = controlling the=20 process.=20

Papuna Dzidziguri, a city urban = planning=20 expert who is working on Tbilisi=92s = general=20 construction development plan, believes = that the=20 concentration of construction work in = the city=20 center is likely to cause serious = problems in=20 the near future.

"The center is not capable of = handling the=20 burden of too much construction," = Dzidziguri=20 said in an April interview with = EurasiaNet.=20 Traffic congestion and changes to the = capital=92s=20 historical buildings are among the = concerns, he=20 said. "It=92s now very important to find = a new=20 space for all the construction that is = expected=20 in Tbilisi. Otherwise, the new buildings = will=20 completely change the unique look of the = old=20 central parts of the city."=20

Zoning laws, introduced in 1970, = expired in=20 2000, Dzidziguri said, although the city = continues to use them. Work is = continuing on new=20 regulations, he said, citing one that = puts a=20 three-storey cap on new buildings in = certain=20 parts of old Tbilisi.=20

An overall construction development = plan for=20 the city is expected to come into force = by the=20 end of 2007. But how to balance investor = demand=20 with preservation concerns is a topic no = official has mastered yet.=20

Alexander Jobava, head of city = planning for=20 Tbilisi, states that the municipal = government=20 would like to encourage investors to = build new=20 apartment buildings 10 to 15 kilometers = outside=20 of town rather than in the city center, = where=20 space is relatively tight. Achieving = this goal=20 will be difficult, though, he added, in = the face=20 of "serious demand" for apartments near = the=20 center.=20

According to economic development = ministry=20 officials, Arab businessmen plan to = invest as=20 much as $200 million in construction of = elite=20 residential complexes in Tabakhmela and=20 Tsavkisi, two areas located close to the = Tbilisi=20 center. Next to the Arab project, = Israeli=20 investors plan to spend some $100 = million on the=20 construction of a dozen luxury town = houses, said=20 a source in the Tbilisi city government, = who=20 asked not to be named. Another = significant=20 investment is expected by Korean = investors on=20 Elia Mountain, a less populated area = within=20 walking distance of Tbilisi=92s historic = center,=20 the source said.

The city government states that there = are=20 some 30 construction companies now = operating in=20 Tbilisi, a city of about some 1.5 = million=20 people.=20

"The number of companies continues to = grow as=20 construction is a very profitable = business in=20 Georgia," city urban planner Dzidziguri = said.=20 "There are certain companies that change = their=20 profile and switch to construction."=20

According to the Georgian state = department of=20 statistics, the country=92s construction = sector=20 brought in 1.61 billion lari (about = $961.481=20 million) in turnover in 2006, while in = 2001 it=20 was only 243 million lari (about $145 = million).=20

Meanwhile, prices for the new = apartment=20 buildings built by these companies = continue to=20 soar. Prices for under-construction = apartments=20 range from $400 per square meter for an=20 apartment in the outskirts to $2000 per = square=20 meter for an apartment in the center of = town. By=20 comparison, Georgia=92s per capita gross = national=20 income in 2005 was estimated at $1,320,=20 according to the World Bank.

One former architect believes that = the prices=20 reflect the fact that demand is limited = to the=20 richest Georgians, who have far fewer = restraints=20 on their budgets than most ordinary = citizens.=20

"Georgian society is comprised of two = major=20 groups: very rich people and very poor = people.=20 The construction market is oriented = toward those=20 who are rich, and who are paying [for=20 apartments] today," said Zviad Zarandia, = an=20 independent expert.=20

The city government has presented the = work=20 done on updating Tbilisi =96 including a = controversial plan to tax residents of = historic=20 districts to fund infrastructure = reconstruction=20 projects =96 as intended to inspire = Tbilisi=92s=20 residents to take pride in their city = once=20 again.

While pride is taken in some of the = parks for=20 children, street lighting, road = improvements and=20 painting, not all residents, though, are = upbeat=20 about the transformations.

Mariam Papunashvili, a resident of = one=20 Tbilisi district where large-scale = construction=20 is going on, claims that vibrations from = heavy=20 trucks passing on the road outside her = house all=20 day have undermined her building=92s = structure.=20 The district=92s new buildings are = surrounded by=20 houses badly damaged from a 2002 = earthquake.=20 Homeowners have given their land to = builders in=20 exchange for new apartments.=20

"I was told that they will not = complete these=20 buildings under construction until 2009. = I will=20 simply lose my house by then," = Papunashvili=20 worried.=20

One woman in the central neighborhood = of=20 Mtatsminda takes a different approach.=20

"They can build all they want to," = she said,=20 pointing to the skeleton of a = hotel-apartment=20 complex wedged between a church and a = hotel on a=20 ridge overlooking Tbilisi=92s downtown. = "But they=20 need to understand that what goes up in = this=20 town can most definitely come down."

Editor=92s Note: Diana Petriashvili = is a=20 freelance journalist based in Tbilisi. = Elizabeth=20 Owen, EurasiaNet=92s Caucasus News = Editor in=20 Tbilisi, added reporting to this story.=20

Editor=92s Note: Diana = Petriashvili is a=20 freelance business and political = reporter in=20 Tbilisi. Alexander Klimchuk is a = freelance=20 photographer also based in=20 = Tbilisi.