Why do foreigners invest in real estate in Georgia?

Introduction to the real estate market in Georgia

Foreign investors have long been actively participating in the Georgian real estate market. They are not limited to purchasing only apartments and private houses, but also acquire townhouses and commercial properties, such as hotels and various business premises.

Legal restrictions for foreign citizens

Currently, the only category of real estate that is unavailable to foreign citizens is agricultural land, and this is due to national legislation in Georgia. According to the rules, individuals who are not citizens of Georgia cannot acquire it, which also applies to foreign companies.

Increase in real estate transactions

In the last ten years, there has been a noticeable increase in real estate transactions in Georgia. This growth has become particularly evident since 2017, when there has been significant interest from foreign buyers. The decline in interest in purchases in 2020 can be attributed to temporary difficulties due to the COVID-19 pandemic, during which the registration of transactions was temporarily suspended.

Goals of real estate acquisition by foreigners

According to statistics from Georgia, foreigners purchase real estate for several main reasons:

• Investments.Georgia has attracted the attention of foreign investors due to significant successes in the development of its tourism sector.
• Short-term rental.This influx of tourists has become the main factor that foreign investors have focused on, expecting profits from short-term rentals.

Dynamics of rental income

Previously, the rental yield from such properties ranged from 10-15% per year. However, under the current circumstances, the yield level, especially compared to the past, has slightly decreased. Nevertheless, forecasts indicate that as the flow of tourists recovers, the yield may return to its previous levels, and opportunities for more profitable deals may open up for buyers, as demand is currently temporarily reduced.

Long-term lease

As for long-term rentals, the impact of the pandemic has been less noticeable here. The current yield on real estate in Tbilisi is about 7% per year, while in 2018-2019 it was at 8-9%. Nevertheless, the average yield from long-term rentals shows stable figures.

Trends in real estate prices

It's interesting that rental rates for residential properties have not yet returned to pre-crisis levels, however, property purchase prices are gradually starting to rise. As of October 2021, the average price of housing in Tbilisi increased by 5% compared to the same period last year. Additionally, the price dynamics in dollars indicate a growing interest in the Georgian real estate market.

Comparative analysis with neighboring countries

It is also noteworthy that Georgian real estate continues to be more affordable compared to neighboring countries such as Armenia, Azerbaijan, and Russia. In major cities, including Tbilisi and Batumi, the price of most properties ranges from $500 to $1500 per square meter. Real estate prices depend on a variety of factors, such as:

• location
• quality of construction
• window view

Therefore, it is crucial for foreign investors to carefully analyze the market and conditions in order to find the most advantageous offers.

Some apartments and mansions can cost over $2,500 per square meter or more. One of the reasons many choose to buy property in Georgia is the desire for a vacation. Many foreign tourists who have visited this country realize that it is much more advantageous to have their own accommodation than to constantly stay in hotels.

Georgia attracts travelers not only during the summer seasons and not just because of the sea. It has a variety of resorts: wellness, mountain, culinary, and others. During the Soviet Union, these resorts were well-developed, and now there is an active restoration of these places. Today, accommodation prices in such regions remain quite affordable.

Immigration to Georgia

In recent years, Georgia has become a notable destination for immigration. Government authorities are actively working to make the country more attractive to foreign citizens. Comfortable conditions for business have been created here, tax rates have been reduced, and processes related to company registration and real estate transactions have been simplified. In the international Doing Business ranking, Georgia holds a high position, ranking seventh in the world, between countries like the USA and the UK.

Buying real estate as a way to immigrate

Purchasing real estate is one of the ways to immigrate to Georgia. Foreigners who acquire properties worth from100 thousand dollarsThey are given the opportunity to obtain a short-term residence permit. Usually, this document is valid for one year and can be extended. After ten years of living in the country, as well as successfully passing an exam in the Georgian language, history, and fundamentals of law, one can apply for a permanent residence permit or even citizenship.

The immigration program does not limit the number of properties that can be purchased; buyers can invest in new or secondary real estate markets anywhere in the country. Renting out their property is also allowed.

Investment residence permit

In addition, there is an option for foreigners to obtain an investment residence permit, which can be validup to five yearsThis offer is available to investors and their families if they have invested an amount starting from300 thousand dollarsIn real estate. After this five-year period, there is also the possibility to obtain permanent residency.

Popular regions for living

When it comes to choosing places to live, Tbilisi is the most popular destination among our clients. It is the capital of the country and the largest city, home to about 1.5 million people, with a well-developed infrastructure. Tbilisi also attracts tourists. The city has an international airport, which often becomes the first point of entry for visitors to Georgia.

For those considering a move or planning to rent out their properties for the long term, I recommend paying attention to the following areas:

• Kruzhanisi
• Fox
• Saburtalo
• Wake

These areas feature excellent residential complexes with good landscaping and a high level of comfort. Georgia is becoming increasingly attractive for living and investment, opening up many new opportunities for foreigners.

Sololaki and Abanotubani: Historical Attraction

The Sololaki and Abanotubani districts in Tbilisi attract not only tourists looking to enjoy a vibrant and rich lifestyle but also people interested in renting accommodation for travelers. These historic neighborhoods, full of unique charm, are designed for those who want to immerse themselves in Georgian culture and traditions.

In these areas, you can find residential buildings that are 100 to 150 years old, preserving their authentic style. Every morning, you can choose narrow, picturesque streets, getting to know the new and ancient face of the city. This atmosphere is perfect for travelers looking to experience the spirit of art and history. However, long-term living in these neighborhoods can be exhausting due to outdated infrastructure.

Available Housing Options

If you're looking for more affordable housing options, I recommend checking out the neighborhoods of Gldani, Isani, and Samgori. These areas offer lower prices and can be a good choice for living as well as a profitable investment.

You can find options in various price categories in Didube and Sanzo. For those planning to purchase private villas, it's worth paying attention to the Didi Digomi and Tskneti areas, which offer interesting buying opportunities.

The popularity of Batumi

When it comes to resort areas, one cannot help but mention Batumi, which is the most famous seaside resort in Georgia, attracting over 2 million tourists every year before the pandemic, especially during the summer.

The city is actively being developed, and there are many real estate offers available at reasonable prices. If you see an advertisement for an apartment for sale in Batumi for $15,000, don't rush to conclusions about the seller's reliability. Such apartments are often still under construction, and the completion of the work can take several years.

Typically, the area of such properties is around 20 square meters.

Reduction of fraud cases in the real estate market

Over the past ten years, there has been a significant decrease in cases of fraud in the real estate market, and reputable companies are starting to dominate this segment. However, it is important not to relax and to remember the necessity of thoroughly checking the information about developers.

Issues with delays and quality of work

There are often issues with delays in project implementation, which can take from one to two years, as well as cases where the actual quality of the work performed does not meet the stated standards. Additionally, issues related to dense construction lead to numerous disputes.

Analysis of the developer to minimize risks

To minimize potential risks for investors, our team always conducts a thorough analysis (due diligence) of the developer. We:

• We are exploring all organizational and legal structures related to the project;
• Let's find out who owns and directs the company.
• We are studying her charter capital;
• We are analyzing her history for any scandals or unfinished projects.

Verification of developers in Georgia

In the Georgian market, various developers are active, among which you can find both trustworthy ones and those that have created problems for their clients. Therefore, it is important to check:

• Building permits;
• All certificates;
• The authenticity of the franchises they operate under.

Analysis of sales contracts

Developers often report that their properties will operate under a specific brand, which is expected to contribute to high occupancy rates. We carefully analyze the sales contract provided by the developer and make adjustments as necessary to better protect our clients' interests. Additionally, we inform our investment partners about the company's reputation based on our experience and client feedback.

Refusal of a transaction in the primary market

Unfortunately, even after all the checks have been conducted, there are times when buyers decide to back out of a deal. However, with a thoughtful approach to the preliminary analysis of the situation in the primary market, it is possible to find quite advantageous opportunities. Typically, prices at the initial stages of construction are lower than market prices, especially for those buyers who are willing to invest in several properties at once. Additionally, clients have the opportunity to customize layouts and finishes according to their preferences.

Secondary real estate market

When it comes to the secondary market, foreign buyers most often focus on new developments, as developers actively promote their projects. However, according to data from the National Registry of Georgia, only 18% of all real estate transactions occur in the primary market, while 82% consist of secondary housing. Therefore, it is crucial not to exclude this significant segment from the list of possible options, as interesting offers can also be found there.

Pros and cons of buying secondary real estate

Sellers of secondary real estate often aim for a quick sale, which creates opportunities for significant discounts. However, it's important to keep in mind the potential pitfalls:

• There may be issues with ownership rights;
• Real estate can be encumbered by a mortgage or a lien;
• There are obligations, such as servitudes;
• Debts for utility payments and disputes with neighbors.

The total number of transactions in the secondary market significantly exceeds similar figures in the primary market, so we always check the seller using all available registries to eliminate any debts and other potential risks.

The beginning of the real estate purchasing process

We begin the journey to acquiring a home with a physical inspection of the property, where great attention is paid to the condition of the apartment or house. An important step is also talking to the neighbors, which allows us to gather valuable information about the area, its atmosphere, and amenities.

We also make sure to check for any outstanding utility debts to avoid unpleasant situations after the deal is completed. It is extremely important to conclude an informative and clear contract that will be properly registered, eliminating any ambiguities.

Payment for real estate in Georgia

When paying for real estate in Georgia, it's important to remember that all financial transactions must be conducted in the local currency, which is the lari. Payments can be made either from a bank account or in cash. While other currencies can be used for international transfers, such transactions may take some time to process.

It is important to note that in Georgia, property rights can only be registered after the funds from the buyer have been received. To avoid additional risks, it is sometimes advisable to useescrow accountalthough its application is not very common.

Opening a bank account

As for opening a current account in a Georgian bank, this procedure can be done remotely. You will need a power of attorney, the text of which we can provide, as well as a notarized copy of your passport. Both documents should be sent to us by mail.

Cryptocurrency in transactions

In recent years, there has been a growing interest in cryptocurrency transactions in Georgia, although under local law, it is considered not as a means of payment but as an asset. Nevertheless, cryptocurrency transfers are becoming increasingly common, with stablecoins being particularly popular, such asUSDTorUSDC.

Such exchanges can be carried out in the formatbarterFor example, you can transfer three bitcoins in exchange for housing, while the value of the transaction can be specified in lari, which is legal.

Mortgage loans

Getting a mortgage in Georgia is also gaining popularity among investors looking to increase the profitability of their investments. Foreigners without residence permits can apply for loans from developers, who often offer loans with no interest rate.

However, working with banks can be more complicated due to their caution regarding foreign borrowers. Nevertheless, we have successful examples where our clients have secured financing.

Property registration

Registering property rights in Georgia is another key aspect when acquiring real estate. This country ranks high in terms of property rights registration criteria and is in fifth place in the global ranking.Doing Business.

For those who want to speed up the registration process, it is possible to make an additional payment, which will allow for the ownership rights to be formalized on the same day, provided all necessary documents are available.

Remote transactions

Remote transactions are becoming increasingly popular. A foreigner just needs to send us a power of attorney, the text of which will be created by our team. We will help organize the entire process of remote real estate purchase in Georgia, simplifying and easing all stages for the client as much as possible.

Conclusion

In concluding our review of the growing interest of foreigners in the real estate market in Georgia, I would like to emphasize that this trend is not only a result of the improving economic situation in the country but also a testament to its attractiveness in the eyes of international investors.

Georgia is showing impressive results in the fields of tourism and business, and it is unlikely that the situation will change in the coming years.

Motives for purchasing real estate

The variety of motives that drive foreign citizens to purchase real estate includes:

• Investment goals
• The desire for rest
• Immigration

These factors create a positive backdrop for further growth in this market. It is particularly noteworthy that, despite the pandemic, the figures show that the demand for long-term rentals has hardly changed and remains at 7%, which means the market continues to be stable and attractive.

Attractiveness of Georgia

Moreover, it is worth considering that Georgia, with its mild climate, affordable real estate, and open government, creates conditions for a comfortable life and business operations. The availability of programs that allow obtaining residency through real estate purchases makes the country even more attractive for those who are considering not just investing, but also a potential relocation.

Result

In conclusion, I would like to say that Georgia, with its rich history and culture, offers unique opportunities for both short-term and long-term investments. The interest of foreign buyers in the real estate market will undoubtedly grow, which means that anyone making a decision to invest in real estate now is taking the right step towards a successful future. Many exciting changes lie ahead, and it is important to be prepared for them.