TURKEY - Real Estate & Construction
President, TOKÄ°
Bio
For 25 years Ahmet Haluk Karabel worked as an architect, chief supervising engineer, site chief, project manager, and senior executive in the private sector. In 2003 he was appointed Vice-President of TOKÄ°, and in 2003 he was commissioned as Deputy General Director at Emlak Konut REIT. He held the Vice-President position until he was appointed as President in 2011.
Turkey is a rapidly urbanizing country. Turkey’s demographics are characterized by its population of about 73.7 million inhabitants at end-2010, with a median age of 29 years. Although the population growth rate has been abating in recent years, increasing urbanization has created housing pressure, primarily from low-income groups, and this has contributed to the establishment of slum areas in major cities. This has also put pressure on infrastructure such as water, sanitation, housing, and health care.
The provision of social housing in Turkey is a priority. Access to private funding through the banking system to buy a home remains limited due to income and savings levels that are inadequate to meet housing loan repayments.
Articles 56 and 57 of the Turkish Constitution declare that every Turkish citizen has the right to decent housing and that the state has a responsibility to help meet those needs and to promote mass-housing projects. Similar to the situation faced in almost all developing countries, making adequate shelter available and accessible to meet the housing requirements for the ever-increasing populations of urban settlements has always been, and remains a challenge for Turkey.
According to data produced by TurkStat and the State Planning Organization, the urgent housing need has been estimated at approximately 2-2.5 million units.
TOKÄ° intends to satisfy 5-10% of the urgent housing need in Turkey. In line with this target, TOKÄ° provided 500,000 housing units by the end of 2010. In the last eight years, TOKÄ° has mainly been focused on the target groups of low- and middle-income families, which are not able to own a housing unit within the existing market conditions in Turkey. TOKÄ° is trying to find real solutions to the country’s demand for housing and urban renewal.
One of TOKÄ°’s main application areas is the “Renovation of Squatter Areas/Urban Renewal Projects in Turkey”. In this context, since 2003 TOKÄ° has followed a comprehensive policy toward supporting modern urbanization in collaboration with local administrations. Between 2003 and 2010 a total of 500,000 housing units were constructed by TOKÄ°, with 60,000 of those units constructed within the context of urban renewal projects.
Income sharing projects create crucial capital for the financing of low- and middle-income housing projects. TOKÄ° has developed this innovative model to fill the gap between short-term capital outlays for construction and long-term receivables from housing sales. Large income sharing projects are currently being built in metropolitan areas of Istanbul and Ankara, and these projects are significant to fund TOKÄ°’s social initiatives.
As of the beginning of 2011, TOKÄ° undertook the construction of approximately 500,000 residential units, including social facilities and landscaping work. Further enhanced by TOKÄ°’s role as a catalyst for the construction industry, its domestic numbers are very impressive.
Determined to make a profound difference in the lives of its citizens, in January 2003 the newly elected 58th Parliament passed the Emergency Action Plan for Housing and Urban Development.
The Administration offered 3,000 tenders during this time, providing jobs to 600 contractors and 30 sectors related to the construction industry.
Over 800,000 individuals profited directly or indirectly from involvement in TOKÄ°’s projects. Using a process of open tenders the administration made competitive bidding a hallmark of its business practices.
The Mass Housing Law is the framework law defining the fundamental principles giving direction to the solution of the housing problem in Turkey. According to the tasks determined by this law, TOKÄ° defines the finance terms for housing projects according to the target groups’ income levels and saving patterns. The sales prices are determined by taking into account the construction costs with no commercial benefit aims—namely profit.
Especially for the poor and low-income groups, no down payments or low down payments are taken and long maturities of up to 240 months are provided for beneficiaries. Additionally, in some low-income projects, monthly payments begin only after construction finishes.
Also, the sales prices of the housing units produced for poor citizens—one of the categories of TOKÄ°’s housing program—do not include the cost of land.
These kind of financial implementations include government subventions in order to meet the needs of low-income target groups.
TOKÄ°’s balance sheet consists essentially of long-term receivables related to housing sales at 42% of total assets in 2009, construction in progress at 18%, and its land bank at 15%. The size of TOKÄ°’s land bank was 110 million square meters at the beginning of 2011, and the value of this land bank was approximately TL9 billion.
Carrying out its housing mandate through a dedication to fiscal responsibility, TOKÄ°’s long-term financial forecast is decidedly positive. Responding to the dire need for housing from Turkish citizens, TOKÄ° has initiated a very ambitious program, which has led to a narrowing liquidity position.
Observing TOKÄ°’s low debt-to-asset ratio, Moody’s notes that the administration is in an excellent position in terms of debt leveraging. Innovative financing and well-managed operational risk, along with the continued strong support of the Turkish government, are the major reasons behind this opinion. TOKÄ° will implement its large investment program without substantially increasing its level of debt leveraging.
With a Ba2 global scale rating from Moody’s International Sub-Sovereign and a BB+ rating from Fitch Ratings International Public Finance, TOKÄ° is seen as a stable potential investment.
Moody’s notes TOKÄ° offers a strong business model that encourages efficiency and careful management of any risk of exposure that comes its way. Fitch Ratings gives TOKÄ° a positive key rating based on several factors.
ADVERTISEMENT
ADVERTISEMENT