Review of construction sector in Azerbaijan (January-March 2016)

As of the first quarter of 2016, a meeting of the Azerbaijani Cabinet of Ministers dedicated to the socio-economic development and the further tasks was held. The implementation of infrastructure projects through the state line was considered at the meeting. In particular, these projects include gasification, electricity supply, water supply, construction of rural roads. Some 250 million manat are envisaged in the state budget for the implementation of more than 40 projects of rural roads.

It was also stressed that there are many buildings in bad condition in Baku. Such buildings must be demolished. The people living there must be provided with good housing by public or private sector.

In particular, the Azerbaijani Cabinet of Ministers signed a corresponding decision. According to this decision, the houses which are in bad condition in Khatai, Surakhani, Nizami, Nasimi, Narimanov, Yasamal, Sabail, Pirallahi and Khazar districts of Baku will be demolished and new houses will be built. The living conditions of the residents will be improved.

Real estate market

According to the Azerbaijani State Statistics Committee, some 65,200 square meters of housing were put into operation in Azerbaijan in March 2016 compared to 151,660 square meters, commissioned in the same month of 2015.

More than 334,700 square meters of housing have been put into operation in Azerbaijan since early 2016, which is 19.3 percent less than in the same period of 2015.

Some 68.7 percent of the total volume of construction work accounted for primary construction, reconstruction and expansion, 12.1 percent - overhaul, 2.5 percent - current repair and 16.7 percent - other construction work.

Some 88.4 percent of the total volume of construction work was carried out by non-state construction companies.

According to MBA Group consulting company, the prices on Baku's real estate market have increased by 40.3 percent in manat since early 2016 (in dollars - dropped by 23.35 percent). People prefer buying apartments in new buildings.

Despite the rise in prices since early 2016, the average cost of real estate dropped on a monthly basis. This occurred mainly due to the market of commercial facilities. The prices in manat decreased by 1.96 percent on Baku's real estate market (in US dollars - 0.31 percent) compared to February.

The maximum decrease for the month was fixed on the market of commercial facilities. The prices in manat on the market reduced by 8.55 percent, while in dollars - by 6.23 percent in March compared to February.

If we compare with early 2016, on the contrary, the significant growth was observed on the market of commercial facilities. The prices in manat have increased by 36.87 percent, while in dollars - decreased by 7.28 percent since January.

The prices on the primary housing market for the month increased by 1.41 percent (in US dollars - 3.98 percent) and the cost of housing in manat increased by 3.84 percent on the secondary market (in US dollars - 3.43 percent). The price in manat on both markets increased by 20.65 percent and 0.3 percent since early 2016, respectively, but the price in dollars decreased by 18.27 percent and 30.24 percent respectively.

A slight decline in prices in manat was observed on the land market - by 1.54 percent for the month and 1.34 percent since early 2016. The cost of land has decreased by 30.31 percent in dollars since early 2016.

The consumers are interested in new buildings. According to AS Group Investment company, operating on the real estate market for more than 10 years, people are interested in the market of new buildings under construction.

To attract customers the building companies offer a variety of mortgage products and installment, conditions and rates for their customers.

Mortgage products, short- and medium-term installment offered by building companies on the primary market of Baku today, increase the availability of such housing. This has a positive impact on demand, but in the end - on the cost of one square meter in new buildings (under construction and constructed buildings).

Almost all companies offer a standard mortgage for 20 years with an initial payment of 10 percent and an annual rate of eight percent. In an advertisement many companies indicate an annual rate of 4.5 percent.

Construction material market

The companies engaged in building material production in Azerbaijan, produced goods worth 63.3 million manat in January-March 2016, or 32.6 percent less than in January-March 2015.

During this period, Azerbaijan produced 391,900 tons of cement (a 37.3-percent decrease compared to January-March 2015), 37,900 tons of gypsum plaster (a 23.4-percent decrease), the report said.

Azerbaijan also produced 100,400 tons of ready-mixed concrete (a 64.1 percent decrease), 11,300 cubic meters of precast concrete building structures (a 2.9 percent growth), 346.8 tons of processed marble, travertine, alabaster and items made of them (an 86.6 percent decrease).