Page 95 - TURKRptJun19

Turkey’s Emlak Bank reopened partly to form “trench” against speculators and ‘interest rate lobby’: Minister. Emlak Bank financed real estate projects in Turkey’s crisis-hit 1990s. Turkey was forced to close the bank, which built up massive losses, in 2001 as part of an arrangement with the International Monetary Fund. The construction sector is set to get a state bailout and Emlak has been reopened to play a key role in it.
The Turkish taxpayer seems certain to ultimately pick up losses incurred by Turkey’s construction sector amid the country’s economic crisis, Mustafa Sonmez, an economist and writer, argues in an article published by Al-Monitor on May 6. Turkey’s public lenders have been recapitalised with an injection of €3.7bn by the Treasury, gearing them up for new rescue operations. The first such operation aims to salvage the debt-ridden construction sector by clearing bad assets.
Turkey’s Capital Markets Board announced on April 18 that it had approved the creation of a Brand Real Estate Investment Fund by Ziraat Portfoy, a subsidiary of state lender Ziraat Bank. Pro-government daily Sabah said on April 29 that the fund would have a capital of Turkish lira (TRY) 5bn ($813mn) and take over unsold residential and commercial properties in the hands of companies from the Association of Housing Developers and Investors, which produce so-called brand projects.
The Turkish construction sector was for many years buoyant on credit- fuelled domestic demand and external financing, but the success model began to lose steam as far back as 2013 and housing demand has plummeted, leaving companies with a large amount of unsold housing stocks.
The country’s apartment stock is estimated to have increased by more than 1mn units in the past six years alone. The number of occupancy permits issued for new apartments from January 2013 to December 2018 stood at around 4.7mn, which could be read also as the number of apartments offered for sale, noted Sonmez. “In the same period, only 3.6 million new apartments were sold, with the difference indicating the swelling stocks,” he observed.
The bailout operation via Ziraat will cover mostly “brand projects” or residential and commercial real estate developed by big companies such as Agaoglu, Sur Yapi, DAP, Sinpas, Kuzu, Nef and Torunlar, which have collaborated with the public housing agency TOKI and its subsidiary Emlak Konut. Construction companies top the list of loan defaulters and many of them are closely linked to the ruling AKP party. The beneficiary companies, organised under the roof of the Association of Housing Developers and Investors, will hand over their stocks to the Ziraat Portfoy fund. “Appraisement firms approved by the Capital Markets Board will determine the total value of the properties, which include shopping malls, office towers, hospitals and schools along with residential buildings,” wrote Sonmez, adding: “Following the handover, the loan debts of the companies will be subtracted from their receivables from the fund. Banks, meanwhile, will receive shares from the fund for their loan dues. Thus, debts and shares will be swapped, reducing the bad-loan ratios of banks and clearing the clogs that indebted builders have placed in the way of lending channels. The companies, for their part, will get rid of the pressure of banks, offload their stocks, even if on discounted prices, and fix their balance sheets to become eligible for loans again.” As for the “sponge” fund, it faces the task of selling the assets and providing earnings. But amid Turkey’s currency crisis and recession, home prices as well as returns from real estate investment partnerships have gone through the floor, so the fund’s prospects are pretty dismal.
“In the current economic climate,” concluded Sonmez, “the fund appears destined to go into the red. In other words, it is the public Ziraat Bank that will incur losses. The Treasury might still help it out with capital injection,
95 TURKEY Country Report June 2019 www.intellinews.com