Deep in a provincial region of northwestern Turkey, it looks like a mirage -- hundreds of luxury houses built in neat rows, their pointed towers somewhere between French chateau and Disney castle. The ambitious development has been hit by regional turmoil as well as the slump in the Turkish construction
Unsold ‘chateaus’ for Arabs underscore Turkish construction woes
Unsold “chateaus” in the Bolu region of north western Turkey, earmarked for Arab clients, reflect deepening problems for the country’s construction industry, Agence France Presse reported.
Hundreds of the luxury houses, all in rows, each resembling a cross between a French chateau and a Disney castle, are standing empty in the forested, mountainous area
Like many other Turkish construction firms, Sarot Group, which is trying to sell the 732 dwellings valued at between $400,000 and $500,000, has filed for bankruptcy protection. It claims Arab clients have pulled out of purchase agreements for the $200 million project, which also includes a shopping centre.
Turkey’s building industry is immersed in a painful slump after a currency crisis last year wiped almost a third of the value off the lira. Building costs have surged as inflation accelerated to a 15-year high. Interest rates on mortgages have jumped.
While a drop in oil prices has hurt its Gulf customers, Sarot Group was also hit by "the negative impact of the economic fluctuations on construction costs" in Turkey, deputy chairman Mezher Yerdelen said, according to AFP.
Under the terms of the company’s application for bankruptcy protection, Yerdelen said it can continue making sales and that he hoped the project, which began in 2014, would be inaugurated in October 2019.
Turkey’s construction industry was once the driver of economic growth under President Recep Tayyip Erdoğan as the government ended an IMF programme in 2008 and pursued expansion-driven economic policies fuelled by cheap foreign loans, which have now become more expensive to repay as the lira crashed.
Three out of four firms applying for protection status or for bankruptcy are construction companies, said Alper Duman, associate professor at Izmir University of Economics.
Despite economic contraction and a slide in investor sentiment towards Turkey, Erdoğan has said that his government will not sign a new IMF accord, claiming that the construction industry and the wider economy will emerge stronger from the recent turmoil.