Turkey’s development boom, fueled by foreign debt, is grinding to a halt as credit dries up amid out-of-control inflation at a declining lira.
Construction sites across the country are sitting idle and 2 million new apartments remain unsold, the New York Times reported.
President Recep Tayyip Erdogan has made urban transformation a cornerstone of his 16-year administration, paving the way for entire sections of Istanbul and other cities to be torn down to make way for new office buildings and homes.
But Turkey’s economy is in a slide, and the country is saddled with private-sector debt.
Turkish banks have borrowed $186 billion. Much of that debt is denominated in American dollars, and as the Turkish lira slides it becomes harder to pay back. Over the next 12 months, about $77 billion of that debt will need to be refinanced, according to Moody’s Investors Service.
Mahir Sasmaz, former head of a development firm that is working on a stalled 300-home project in Istanbul’s Fikirtepe district, said rising costs and slow sales have hampered the project.
“Costs increased, and the number of flats sold did not reach to the expected numbers,” he told the Times in a telephone interview. “If sales remain at those levels, none of the contractors there will make a profit.” [NYT] – Rich Bockmann