Donald Trump turned his eyes on the Georgian real estate market

28.09.2010 12:57
Reported that the American construction magnate Donald Trump intends to do construction in Tbilisi, Georgia inspired many residents hope that the problem with foreign investment into the country over.

September 22 Trump signed a letter of intent with the Georgians-based multinational company-builder Silk Road Group on the construction of a residential building in Tbilisi.

In a telephone interview EurasiaNet.org adviser Michael Cohen, Trump declined to reveal the amount of investment, the financing and the size of the projected building. However, he wished to "congratulate" President Mikheil Saakashvili and company to The Silk Road Group for the fact that they chose Trampe as a business partner. "If Michael Jackson - is the king of pop, then Donald Trump - king of the world`s property" - said Michael Cohen, Executive Vice-President of the Trump Organization.

At first glance, Tbilisi - a city with a population of 1.1 million people - might seem an unexpected choice for the "king of real estate" compared to New York and Las Vegas. Boom, which was observed in the real estate in recent years, has gone sour, and per capita income in Georgia, amounting to 4,400 dollars a year - the lowest in the Caucasus - not much inferior to the typical income customers by Donald Trump.

Cohen, however, argues that "in Georgia, as in any other democratic country, there are people who realize that status is more important." This conclusion was forced to come interviews with individuals and special investigations, he added. This enterprise will become Trump`s first experience in the former Soviet Union, known for its fierce competition, complicated tax laws and weak legal protection of the owner.

Saakashvili has made active efforts to make this transaction took place. Twice during the preparatory stage, he attended the Trump in his New York headquarters. The president`s actions is understandable, given recent events in Georgia. Over the past two years, foreign direct investment into the country is seriously declined: in 2009 this indicator dropped by nearly 58 percent, and this year the total amount of foreign investment - 272 million - 6 percent lower than last year. This fact is associated with the global financial crisis erupted in late 2008, and with disastrous 2008 war with Russia.

Georgia is generally praised for their attempts to separate itself from other post-Soviet states in which Tbilisi has taken several steps to create a favorable climate for foreign investors. For example, a World Bank report on doing business Doing Business, Georgia ranked 11 th among the countries of the world for its business climate. This is the highest among all former Soviet republics.

Feeling a deep sense of satisfaction from the deal with Trump, the Georgian authorities to develop their initiative aimed at encouraging investment in the tourism sector. In particular, the government offers developers 27 sites on 11.3 acres of undeveloped public land along the Black Sea coast at a cost of $ 1 per lot. The program, coordinated by the Autonomous Republic of Adjara, investors wishing to invest a minimum of two million lari (about 1,1 million dollars) in the coastal area hotels will be able to qualify for a range of benefits, including free utilities and exemption from sales tax and profits for 15 years.

To obtain a similar exemption from taxes, hotel construction, which should not exceed seven storeys to be completed by August 1, 2011.

In announcing on Sept. 11 about the program, President Saakashvili has promised investors an opportunity to "double and treble their money."

"In the banks, and under the pillow money does not grow, -" Saakashvili said during a televised visit to the city Kobuleti - promising hotel zone in Adjara. According to the electronic guide to real estate Makler.ge, the market value for similar properties ranging from 60 to 300 dollars per sq m.

According to a senior official of the Ministry of Economy and Finance of Adjara Tengiz Doidze, the government is ready to stop receiving sales tax in the hope of attracting investors who will create new jobs. "In the long run it will bring a lot of investment and tax revenues" - he predicts.

The territory is located in a pine forest a few meters from the Black Sea about 25 kilometers from Batumi - Center Saakashvili planned development project Black Sea coast. During construction, you can not cut down trees, but this requirement is clearly upset with interested investors.

According to the head of the Investment Agency of Georgia Irakli Matkavy announced by the Government plans to have caused a lot of noise. In the address of his office has already received 10 applications: nine from Georgian investors and one from the Armenian investors from Yerevan.

Kobuleti - a small town with a population of 18,566,000 inhabitants, situated on the route Tbilisi-Batumi is a traditional place of attraction for local residents, and large investors are more inclined to Batumi. On the coast, stretching for a mile close family hotels and cafes, and a two-month holiday period road clogged with cars.

At the sight thereof, Tbilisi independent consultant on issues of investment, location Kobuleti can add appeal conceived project because it provides investors a chance to participate in the Batumi boom in real estate and at the same time, avoiding associated with market penetration of obstacles in the form of property prices and taxes. "In Batumi receives so much investment, it develops into a real metropolis as Georgia Atlantic City," - said Stephanie Komsa.

Stephanie Komsa, who studied hotel and tourism sector of Georgia while working in a private investment fund, warns that government support to the project in Kobuleti in itself does not ensure success. Opening 27 new hotels in such a small territory, with the tourist season lasts only two months of the year, subject to certain risks. "Well, this government initiative, so let`s implement it." I would not say so. To do this to conduct the same analysis, like any other investment real estate projects, "she said.
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Content tags: Overseas property
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