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REAL ESTATE DEALS TO THE TUNE OF 700 MILLION LAST YEAR FUEL ECONOMIC GROWTH AS INTERNATIONAL INVESTORS SHOW GROWING INTEREST AND MACROECONOMIC INDICATORS STABILIZE
Construction boom boosts the economy

Real estate projects have mushroomed across Romania in recent years and many more are planned.

After passing through a long, often difficult transition period, Romania’s economy is now moving at a brisk pace. Estimates by the International Monetary Fund (IMF) show that GDP growth could reach 6.5-7 percent this year, and inflation is expected to stay at around 4.5-5.5 percent.

Furthermore, Romania’s accession to the European Union has sparked increasing interest from international investors, and the current political situation will not dampen their appetite, as foreign businesses take a long-term perspective, according to the IMF.

Romanian Minister of Economy and Commerce Varujan Vosganian also points to a decrease in the budget deficit, noting that it is in line to meet this year’s target of 2.8 percent of GDP.

The construction industry has played a major role in the country’s economic growth. The value of construction works rose 34.9 percent in the first four months of 2007 against the same period in 2006, according to the National Statistics Institute. All types of construction registered increases during this period, with residential buildings seeing a 46.6 percent jump, and non-residential buildings growing by 35.9 percent.

VARUJAN VOSGANIAN
VARUJAN VOSGANIAN Minister of Economy and Commerce

Overall, the construction market could reach some €10 billion ($13.2 billion) by the end of 2007, as more E.U. funds will pour into the country for infrastructure and public building works. Meanwhile, a host of real estate projects have mushroomed across Romania in recent years, and many more are in the pipeline.

A clutch of investment funds have recently entered the market, spawning a flurry of activity. In 2006, more than €700 million worth ($929 million) of real estate transactions was recorded. Analysts expect this figure to reach €1 billion ($1.3 billion) this year on account of large projects such as Sema Parc and Baneasa. Minister Vosganian also notes that legislation has recently been passed to allow mortgage-backed securities to be listed on the capital market.

The state is also involved in real estate development. Laszlo Borbely, Minister of Development, Public Works and Housing, points out that the state offers 3,000-3,500 flats per year, free of charge, to young families less than 35 years of age. “We are one of the few countries to finance the work from the state budget,” he says. In the first quarter of 2007, some 363 such apartments were built.

Public-private partnerships (PPPs) are catching on, a fact highlighted by the €1 billion mixed-use Esplanada project that will be built in the center of Bucharest.

Overall, more and more supply is coming to the market covering all real estate sectors, especially residential, which is much needed in light of continuously growing demand.