Yulia Prokhorova: ‘The market of Kyrgyzstan is not sufficiently developed, so there are almost no competitors’

Real estate market expert Yulia Prokhorova — about great opportunities for Russian businesses in the Central Asian country

After the loss of Western partners, Russian businesses are actively looking for new opportunities, and in this regard, our companies are attractive because of potentially large sales markets, developed industrial base, and favourable geographical location of a number of Central Asian republics. The recent International Industrial Exhibition Expo-Russia Kyrgyzstan, held in Bishkek, has also contributed to the expansion of trade and economic cooperation. Yulia Prokhorova, the managing partner of Perfect RED, writes about a great potential of this country for Russian companies in another column for Realnoe Vremya.

Review. Kyrgyz Republic

Kyrgyzstan (in Kyrgyz, Kyrgyzstan, officially — the Kyrgyz Republic) is a state located in Central Asia and bordering Kazakhstan in the north, Uzbekistan in the west, Tajikistan in the southwest, China in the east and southeast.

  • The state language is Kyrgyz, official languages are Kyrgyz, Russian.
  • Monetary unit is the Kyrgyz som.

Kyrgyzstan is a member of the UN, CIS, Eurasian Economic Union, Collective Security Treaty Organisation, Shanghai Cooperation Organisation, Organisation of Islamic Cooperation, Turksoy International Organisation of Turkic Culture.

The republic belongs to the category of agrarian-industrial countries. According to the Global Competitiveness Report 2020 study, the country ranks 96th in the world in terms of national competitiveness.

According to official statistics, the volume of GDP in 2021 amounted to 723 billion soms, an increase of 3,6% compared to the previous year. The largest share falls on the service industries (45,2%), the second in the GDP structure — share of industry (18,4%), followed by agriculture (14,7%). The share of construction in GDP is 8,3%.

Geographically, Kyrgyzstan has comparative advantages, such as comfortable climatic conditions and an ecologically clean environment. The republic has significant potential for the development of energy, mining, agro-industrial sector, tourism.

The country has a small market scale and therefore any successful implemented investment project becomes a significant contribution to the development of the entire economy and makes it possible to ensure a “quick effect” for the investor. The Kyrgyz market in many sectors of the economy has not yet been sufficiently developed by investors, so there are practically no competitors in it. For the investor, there is an opportunity to quickly increase production efficiency and reduce costs by replacing outdated technology that takes place in key areas of the economy.

The presence of large neighbouring countries allows investors to expand the market for their goods and services in the future. Cheap and skilled labour allows the state to provide good returns for investors.

The main goal of the new investment policy in the country is to create and maximise the use of the country's competitive advantages to ensure the active attraction of direct investment in the economy.

The amount of foreign investment in the country in 2021 amounted to 698 405,2 thousand US dollars, 33,6% of which went directly to the city of Bishkek. The largest investors are China, Russia and Turkey.

According to the Foreign Direct Investment Investment Attractiveness study conducted annually by the World Bank Group, Kyrgyzstan ranks 161st in the world.

Analysis of main socio-economic indicators

Bishkek is the capital of Kyrgyzstan and the largest city in the country. It is a special administrative unit. The city is located in the north of the Kyrgyz Republic, in the Chuy Valley.

  • The population of the city in 2021 is 1,074,100 people, according to official statistics.
  • The territory of the city is 127 square kilometres.

Kyrgyzstan has a relatively low unemployment rate — at the beginning of 2022, the indicator for the country was 2,9% with an economically active population of 2,595,400 people. In the city of Bishkek, the lowest level of the indicator in the country is equal to 1,2%.

The salary level in the capital of the republic is one of the highest in the country. In 2021, the indicator was 24,931 som.

Analysis of housing construction sector

Bishkek residents have observed a construction boom in the capital for a long time. The pace of construction in Bishkek, since 2006, according to this indicator began to rapidly outpace all other territories of the country. In 2017, a peak was reached in this sector: Bishkek accounted for 47% of all housing commissioned for the year across the country. That year, almost 700 thousand square metres of residential space were put into operation in the capital.

However, in subsequent years, there was a significant decrease in the volume of housing being commissioned.

Speaking about purchasing activity, it is worth noting that since the beginning of 2022, the real estate market has been active in Bishkek compared to the same period in 2021.

The number of purchase and sale transactions with residential buildings increased by 11,8%, with apartments — by 24,1%.

According to experts, the revival of the market was influenced by a reduction of interest rates of the state-owned mortgage company to 4% per annum. The demand for real estate immediately increased, and this was reflected in prices.

Price analysis. Housing construction

The calculation of the average cost was carried out on the basis of open data, market supply research, as well as the results of the Sputnik portal research for March 2022.

The dollar exchange rate in March 2022 was about 98 soms.

The secondary real estate market is represented in the city by standard houses of the 104th, 105th, 106th series, as well as khrushchevkas and individual type houses.

New buildings are mostly sold without finishing. Most of the real estate, including apartments, is sold in dollars.

The greatest demand is for real estate in the centre and southern neighbourhoods of the city due to the developed infrastructure.

Real estate near the capital's universities is also in demand. They often buy apartments for rent there.

There is a demand for the Vostok-5 district, Osh market district, Alamedin-1 and Tunguch.

Tunguch microdistrict is a less seismically active zone. People who are afraid of earthquakes buy apartments there.

Kyrgyzstanis who live in Kara-Balta, Belovodskoye, Kainda, buy housing closer to the Osh market. Because at the entrance to the capital they are met by this place and they do not want to go further, it is more familiar and convenient there.

The state of repair began to have a greater impact on the cost of apartments due to an increase in prices for building materials by 15-50%.

Yulia Prokhorova

The author's opinion may not coincide with the position of the editorial board of Realnoe Vremya.