Turkish builders ask government to establish a fund to take over housing stock

Serious problems in Turkey’s construction sector could be resolved if a planned government fund takes over companies’ unsold housing stock, Mithat Yenigün, the head of the Turkish Contractors Association, said on Thursday.

Yenigün said in an interview with the state-run Anadolu news agency that the industry had between 800,000 and 1 million units in new developments that remain unsold.

According to the businessman, Turkey requires an annual supply of 900,000 houses, but the sales have declined as consumers avoid expenses in an environment of uncertainty.

Yenigün said a fund established by the Turkish government could solve the sector's current difficulties.

“If the fund purchases the houses, then the problem will be solved,” Anadolu quoted Yenigün as saying. The contractor suggested that state-run Emlak Bank, a specialist real estate bank which was reopened in March, could establish such a fund.

“If such purchases take place, I believe the fund will make huge profits in two or three years. People will start buying flats and as (business) activity starts, it will also help ease unemployment. The housing stock should pass to the fund,” Yenigün said.

Turkish contractors are finding it more difficult to sell partly built or vacant houses since the lira slid considerably against the dollar last year. The currency has fallen almost 10 percent this year, pressuring economic activity and inflation, after dropping 28 percent in 2018. Interest rates have surged, and imported goods and materials have become more expensive.

According to the latest data published by the Turkish Statistical Institute on Wednesday, house sales in Turkey fell by nearly half in June compared to the same period last year, the sharpest drop since the start of 2019. House sales fell to 505,796 properties in the first half of 2019, down 21.7 percent on a yearly basis.

Reuters reported on Wednesday that there has been no progress in government plans to establish a fund to deal with the bad loans of the construction industry, whose non-performing loans total 15 billion liras ($2.63 billion) as of May, according to the official figures. Industry specialists say that amount could be closer to $10 billion.

Citing several sources in the industry, Reuters said that one key reason for the lack of progress in restructuring the construction sector’s bad debt was sharp disagreement over the value of properties, which left banks and companies unwilling to buy or sell assets.