Turkish Construction Sector Analysis

The Turkish Contractors Association Has Released Its April 2021 Construction Sector Analysis

Turkey Property


The Turkish Contractors Association has released its April 2021 Construction Sector Analysis. Noting that input costs in the construction sector are increasing, the report said: "Serious financial and operational problems are occurring in the construction sector. These problems continue to cause significant cash flow problems in the short term, increasing the need for cash throughout the economy as part of the sector's relationship with a large number of sub-sectors."

The Turkish Contractors Association (TMB), one of the most established non-governmental organizations in Turkey, published the April 2021 Construction Sector Analysis Report, which was followed with interest by economic circles and the sector.

In the analysis titled ”Common concern economy in epidemic", data on global and national economy and construction sector were comprehensively evaluated.

The report stated that the high increases in input costs in the sector along with the rise in commodity prices and exchange rates continue to be a serious problem, noting that the TurkStat Construction Cost Index increased by 27.8 percent in January and 27.6 percent in February on an annual basis.

“These problems continue to cause significant cash flow problems in the short term, increasing the need for cash throughout the economy within the scope of the sector's relationship with many sub-sectors,” the report said.


In the current table, in order to meet increases in the cost of public projects companies pay the price difference or contingent, non-termination, which includes the need for recognition of the right of an arrangement kept increasing, it was emphasized that, “and, in the end, while waiting for progress on easing the financial burden on the sector and has increased the pressure on companies withholding tax withholding tax increases in the VAT rate.

In this context, reducing the tax burden on the sector is of great importance. In parallel with these problems, the increase in indebtedness rates in the sector, which remains in a shortage of financing/cash flow, also continues.

In a process that began in October 2019 and involved restructuring the loan debts of large companies to banks, the configuration reached a size of 25 billion rubles in 2020.

The current table shows that the construction sector leads in problematic loans. According to the banking regulation and Supervision Agency data, as of January 2021, the total amount of cash loans used in the construction sector increased by more than 20 percent in a year to 300 billion rubles, and the rate of overdue loans collected in the same period was recorded as 9 percent,” the statement said.


The report highlighted that the increase in house prices last year continued in parallel with the growth tracked in construction costs.

The House Price Index calculated by the central bank to monitor price changes free of quality effects, increased 1.8 percent month-on-month and 30.4 percent nominally year-on-year in January, the recalled report said.:

“The index data set announced since the beginning of 2011 thus experienced the fastest annual rise. In real terms, KFE increased by 13.5 percent in January and finally by 13.1 percent in February. According to the global House Price Index, Turkey ranked first among 56 countries in nominal annual house price growth. In the new House Price Index, also known as ”branded housing", house prices recorded a 0.2 percent monthly increase and a 6.2 percent annual increase in February.”

In the report, which evaluated the first quarter of 2021 of the Turkish Contractors Association, the following definitions were included in a summary of the general economy and sector:

It is important to organize loan campaigns for housing: data for March in home sales showed a partial increase on an annual basis (2.4 percent increase with 111,241 homes), as well as a monthly increase.

However, the first quarter of the year saw a 22.9 percent decline in sales compared to the same period last year. Turkey home sales to foreigners increased to 4 thousand 248 in March 2021.

The share of first-hand home sales from the total fell to the 30-31 percent band, and the mortgage sales rate, which is approaching 60 percent in the summer of 2020, also fell to the 15-20 percent range. In this context, it is noted that the implementation of low-interest consumer credit campaigns, especially for first-hand home sales, is important in terms of supporting the sector.

As a longer term, it is proposed to develop alternative real estate financing models and to make the application of housing accounts effective, especially for low income people, taking into account the refreshing effect of the revival in the Turkish housing segment in many sectors. Turkey land prices, which are high in front of the affordable housing supply, are also considered to be an obstacle.

January-March 2021, according to the Turkey Ministry of Commerce data, the sector undertook 52 projects abroad amounting to US $ 3.1 billion.

Thus, the amount of projects undertaken so far in foreign contracting services has increased to us $ 424.5 billion and the number of projects has increased to 10,725. It was also noted that Turkish contractors, who undertook 50 projects worth US $ 2 billion in the same period of 2020, started this year with higher added value jobs.

The average cost of projects increased from US $ 41.7 million in the first three months last year to us $ 59.7 million in the same period this year.

Cooperation for financing: TMB cooperates closely with Turkish bank, the banking sector, international institutions and organizations in order to provide financing within the scope of the growing need in the global market.

Also the African Development Bank, the European bank for reconstruction and Development, Asian Development Bank and the Islamic Development Bank to develop relationships with export credit agencies and multilateral development banks such as we are working.

In order to cooperate in third countries, contacts are also maintained, especially with companies in Japan and South Korea.

New projects are on the radar of Turkish contractors: within the scope of foreign contracting services, on the one hand, traditional markets active in Eurasia and the Middle East, and on the other hand, African, Far East and Latin American countries, especially Sub-Saharan Africa, are closely monitored.

The prospect of implementing a new project of US $ 5.4 trillion in the Middle East and Africa in the coming period has made the sensitive and proactive approaches to be followed in this geography, where the sector is strong, even more important.

Work has been started to increase the Turkish labor force abroad: increasing the number of Turkish labor forces employed in foreign projects of the sector to about 100 thousand after the outbreak, the number of which is expressed as about 35 thousand, has been determined as one of the priority targets. In order to encourage the employment of the Turkish labor force, work has been initiated within the framework of the TMB and the Revenue Administration under the proposal to exclude the wage income obtained by Turkish citizens employed in foreign contracting projects from tax. A legal regulation is also needed to address the problems of employee-employer disputes.