Real Estate

Real Estate

The property and tourism sector has been an important source of economic growth for the country in recent years. The European Bank for Reconstruction and Development has financed quality resort projects as well as residential and hotel facilities on Lake Issyk-Kul and high end hotels and residential facilities in Bishkek. There is increasing interest in retail, commercial and residential real estate, especially offices in the capital and tourist accommodation.

Much of the Kyrgyz Republic's real estate was built during the Soviet times and has seen little improvement, especially in rural areas. Also, the cost of building plots is generally cheaper than in Kazakhstan. The openness of the Kyrgyz market, competitive prices on construction zoned lands, and investor friendly regulatory system and tax regime creates opportunities for investing in the construction sector. This environment offers significant competitive advantages to investors with international construction experience, as they can present a buyer with unique products that combine competitive prices with modern technology, which can help capture a significant market share.

Even though the prices for real estate have increased more than four times since 2003, demand yet continues to exceed existing supply across all sectors.

Residential

Over the past few years demand for quality residence has been continuously outstripping supply. The financial turmoil has slowed the tempo and prices have been stable since the summer of 2008. The continuous increase in demand has been influenced by high growth of income levels in Kyrgyzstan and Kazakhstan, remittances from Russia and Kazakhstan, the availability and the affordability of mortgage facilities.

High-End Residence in Bishkek				Middle Income Residence
Bishkek Districts	$ Price per m2	Y-on-Y % increase	$ value increase	$ Price per m2	Y-on-Y % increase	$ value increase
1	1,092	6%	58	925	5%	53
2	1,269	5%	66	1,151	3%	41
3	815	5%	41	801	8%	58
4	656	1%	9	703	0%	1
5	896	6%	49	774	4%	32
6	958	7%	73	960	2%	20
7	1,052	1%	13	786	3%	27
8	1,056	3%	35	1103	1%	3
9	857	4%	33	890	1%	6

Confidence in real estate as a stable investment, the increased attractiveness of the country’s investment environment has attracted large number of local and international developers. Despite record losses in real estate value in the US, Kazakhstan and many other developed countries, prices have remained stable, as shown by the graph below.

Office Premise

Expanding business for local and international companies results in higher demand for offices in Bishkek, the capital, and Osh, the second “capital”. Just in the past year FDI inflows that came to a total tune of $400m, need offices in the capital to house them. The current stock of offices belongs to a medium category. World class companies require state-of-the-art offices. The market is still virgin world class offices equipped with spacious conference rooms, hi-speed internet access, office furniture, phones, and housekeeping as well as guard services. Over the past three years Bishkek and Osh experienced 20% year on year increase in office rental prices, reflecting demand glut.

Retail Market

The retail sector of the real estate market is seeing major switches from old soviet-style open markets and bazaars to modern shopping centers. Already, Kyrgyzstan is home to the largest open-air market in Central Asia as a transit point for Chinese goods to Kazakhstan, Uzbekistan and even Russia’s Siberia. Besides, the major market there are several other major ones in the South. All this will over time need to make the transformation to a modern shopping center like the Harrods in London or KDW in Berlin.

Demand for retail real estate is driven by the high growth rate of retail turnover in Bishkek. From 2005 to 2008 retail turnover in Bishkek grew thrice. Growth of GDP per capita in Kyrgyzstan and the region as well as the level of disposable income will accentuate the need for retail real estate.
Modern shopping centers represent attractive investment opportunities for Kyrgyz and foreign developers as the retail real estate is one of the most expensive property categories- pricier then office space. Currently, A-class shopping centers charge circa $60 per month per m². Rental rates in B-class shopping centers are about $30 per month per m².

Hotel Market

Since president set tourism as the number one priority for the country the country has seen dramatic increase in the number of foreign tourists. The Issyk-Kul Lake alone saw 1.2 million guests. Tour operators agree that Kyrgyzstan saw a 30% per cent increase in the number of tourists compared to2009, the highest figure compared to all other years. International tourist arrivals reached an all-time record of 1.29 million in 2008 and are expected to exceed 1.4 million in 2009.

Warehouse

Despite Kyrgyzstan favourable location, the warehousing sector still remains the least developed part of the real estate sector. Many warehouses have hardly seen renovation since their erection during the Soviet days. Automated warehouses are foreign. There is no presence of international professional warehouse operators that can introduce the system of automated conveyors, automated storage and retrieval machines programmable by logic controllers. Such simple features for an international company will put them far ahead of competition.

Kyrgyzstan is located along the ancient Silk Road, which still is one of the main transportation corridors connecting Central Asia to China, as Hong Kong was for China. The buoyant trade corridor will require efficient and cheap warehouse facilities.

Casino

Kyrgyzstan has become a hub for casinos in Central Asia after Uzbekistan and Kazakhstan have banned them in 2007. Prior to that Kyrgyzstan already served guests from China. As of 2008 the country had 31 casino’s, 22 of them in Bishkek. Kyrgyzstan has many highly professional, multilingual (Russian, Chinese and Kazakh) and happy staff to extending warm hospitality to all guests.