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Master of Science Thesis No 313

Real Estate Development Process in Turkey

Meric Tuhral

Kurt Psilander
Stockholm, December 2005

Master of Science Thesis


Real Estate Development Process in Turkey with some

differences from Sweden.


Meric Tuhral


Department of Infrastructure, Division of Building and Real

Estate Economics, Royal Institute of Technology, Stockholm

Report Reference:

Master of Science Thesis Number


Kurt Psilander

Key words:

Real estate, development, Turkey, Istanbul, process,


In the last three decades Turkish economy has suffered from revolutions, war and terrorism,
and many economic crises. These incidents have been active getting weaker economically.
The poverty in rural areas has led the immigration to urban areas. Especially Istanbul began
attracting immigrants 30-35 years ago. With this high scaled migration, illegal and unsecure
real estate development started to come up. Today unsystematic development has been a
problem in most of the big cities of the country.
In the earthquake of 1999 in the region of Marmara, it was seen that many apartment
buildings had been built without strickt inspections. This was another result of unsystematic
Today there is a more positive picture of the country. With the elections in 2003 one party
regime has been appointed to establish the government after many years. In 2004 Turkey was
promised to start the meetings of EU entry in October 2005. These changes and the economic
performance of the country are expected to attract foreign investments. By coming mortgage
system the market will be well-formed.
In order to get rid of these untidy images of metropolitan cities in Turkey, many different
development companies have been getting in the urbanisation process with different projects.
The purpose of this thesis is to analyze widely used development procedures of main
developers of the country.

This master thesis has been carried out for the Department of Infrastructure at the Royal
Institute of Technology in Stockholm, Sweden.
First of all, I would like to thank my supervisor, Professor Kurt Psilander at the department of
Building and Real Estate Economics, for his guidance, discussions and comments in different
I would also like to thank Husnu Diken from Diken Construction Company, Zafer Eguven
from Yapi Kredi GYO and Mahmut Demir from Alarko GYO, for sharing their precious
experiences and information.
Finally thanks go to my wife and my parents for their lovely support during my stay in
Stockholm, September 2005
Meric Tuhral


1.1 Background
1.2 Problem Formulation and Purpose
1.3 The Method and Scope of the Study
1.4 Objectives
1.5 Limitations
1.6 Disposition



2.1 The Team Members of Real Estate Development11
2.1.1 Architect
2.1.2 Engineers
2.1.3 Surveyors
2.1.4 Land Planner
2.1.5 Landscape Architect
2.1.6 Contractors
2.1.7 Environmental Consultant
2.1.8 Transportation Consultant
2.1.9 Parking Consultant
2.1.10 Appraiser
2.1.11 Attorneys and Accountants
2.1.12 Real Estate Brokers and Leasing Agents....14
2.1.13 Property Manager
2.1.14 Market Researcher
2.1.15 Regulators
2.1.16 Final Users
2.2 Financial Players
2.2.1 Construction Lenders
2.2.2 Permanent Lenders
2.2.3 Long Term Equity Investors
2.2.4 Joint Venture Partners
2.3 The Real Estate Developer
3.1 Inception of an Idea
3.2 Refinement of the Idea
3.3 Feasibility
3.3.1 Market Study
3.3.2 Design
3.3.3 Cost Estimate



3.4 The Contract Negotiation and Formal Commitment26

3.4.1 Negotiating the Construction Contract..26
3.4.2 Negotiating for Obtaining Finance.27
3.4.3 Negotiating for Design
3.5 Construction and Formal Opening
4.1 Land
4.2 Capital
4.3 Knowledge
4.4 Tenant




5.1 Overall Economy

5.2 Real Estate in Turkey
5.3 Overview of Istanbul
5.4 Residential Market in Istanbul
5.4.1 Demand
5.4.2 Suppply
5.4.3 Forecast




6.1 TOKI (Toplu Konut Idaresi)

6.1.1 Procedure in TOKI
6.2 KIPTAS: Example of Municipalities
6.2.1 Procedure in KIPTAS
6.3 REICs (GYOs) in Turkey
6.3.1 Procedure in GYOs
6.4 Cooperatives in Turkey: Example of Batikent Project..51
6.4.1 Procedure in Cooperatives
6.5 Construction Companies
6.5.1 Procedure in Construction Companies.......55
6.6 Gecekondu: Illegal Housing Development in Turkey57
6.7 Urban Transformation Projects


7.1 Yeni Umut Evleri Project

7.2 Dort Mevsim Evleri Project
7.3 Istanbul-Istanbul Project








1.1 Background
Turkey is a country which is geographically divided into two parts one of which is included in
Europe and the other in Asia. With the population of 65 million people the country is accepted
having a great economical potential.
Over the past five years, the financial markets in Turkey have been subject to two major
crises. The country experienced an enormous earthquake catastrophe in 1999. Dynamics on
both the international and domestic levels have contributed to a significant contraction in the
construction and real estate sectors. In addition to the share of the construction sector in GNP
having fallen from six to three percent, retrenchment in that sector has affected some 240 subsectors, resulting in such problems as unemployment, which has had an impact on tens of
thousands of Turks.
On the other hand, the insufficiency of institutionalization in the real estate development
sector, the fact that only 62 percent of housing being constructed has building licenses, and
only 35 percent of completed houses have received housing permits all point to the disarray in
which the sector finds itself.
Commitment to abiding by the 2003 IMF Stabilization Program and the presence of political
stability have contributed to an important degree of success in the areas of interest, inflation
and exchange rates. This success has had a positive impact on housing loans both in terms
of amounts and interest rates.
However, the interest rates are not low enough for applying a mortgage system. But
considering the positive economic figures of the last three years with one party government
regime it is expected to initiate the mortgage system. Even the speculations about coming
mortgage system have doubled the prices by increasing demand before the system comes.
One other reason of increasing demand is the new legislation allowing many foreign country
citizens to purchase real estate in Turkey. This new legislation has especially affected the
holiday resorts which are on the coast of the Mediterranean and the Aegean.
By joining EU in 10-15 years time these figures of Turkey are expected to increase further.

1.2 Problem Formulation and Purpose

The purpose of this thesis is mainly giving an idea about real estate development procedure
and some different developers who dominate the market in Turkey. Istanbul as the
metropolitan city of the country has been mostly inspected in the study since the city is the
major market in Turkey. Mostly the residential real estate development is researhed in order
to narrow this research. Therefore other markets such as office or retail market has not been
studied deeply.

1.3 The Method and Scope of the Study

The method used in this study is a research among different models applied in Turkey. How
the process in Turkey correspond with the theory which means how it should be.
The main sources of information were the general literature for the first part of the thesis
defining the general aspects of real estate development process. Journals are magazine articles
were also used in this part. In the second part of the thesis the mostly used information is from
internet sources of especially large institutions of Turkey which are active in the market, and
some interviews with the authorised managers of different scaled companies. Finally in the
last part, internet recourses and articles were generally used for brief information of Sweden

1.4 Objectives
The objectives of this thesis are as follows:

Describe the general real estate development process

Describe the types of developers in Turkey
Describe the processes applied in Turkey
Conclusions and future expectations

1.5 Limitations
It was not the intention of this study to include all information of development processes from
Turkey. Although the development in Turkey is mainly studied, the lack of literature about
the sector has limited the thesis. The undeveloped internet sources about Turkish economy
finance and all other sectors was also a limiting factor. Another difficulty in Turkey is that
there is limited possibility of reaching the experts in the sector for related interviews.

1.6 Disposition
The thesis work is divided into nine parts
Chapter 1: Introduction- definition of the purpose of research, its background, the method
and scope of the study, objectives and limitations.
Chapter 2: Real estate development process- definition of general process and the elements
of development process.
Chapter 3: Stages of Real Estate Development- defines the eight stage model of real estate
development in theory
Chapter 4: Beginning Developers- defines the needs of developers who are getting in the
Chapter 5: Market in Turkey- presents Turkey, the economic performance of the country,
residential market and the city of Istanbul, demand supply and price figures.

Chapter 6: Players of the Sector in Turkey- presents the types of players and institutions
that are active in the market.
Chapter 7: Case Studies- defines some case studies from Turkey (all the studies are from
Istanbul) presenting the procedure of the subject development projects.
Chapter 8: Results and Analysis- Analysed results from the study about the situation of the
market in Turkey and comparison of Swedish and Turkish markets in brief.
Chapter 9: Summary and Conclusions- results from the study and suggestions.


According to the literature Real Estate Development is defined as the continual
reconfiguration of built environment to meet society needs1. Structures such as roads, sewer
systems, houses, office buildings, and urban entertainment centers must be constructed and
developed by someone or some institutions. Someone must motivate and manage the creation,
maintenance, and eventual re-creation of the spaces in which we live, work, and play.
The need for development is constant; because technology, population, tastes never stop
changing. New generations and revolving immigrant groups, technological
evolution/revolution, drive economic changes in consumer tastes and individual preferences.
Real estate development is a multifaceted business, encompassing activities that range from
the renovation and re-lease of existing buildings to the purchase of raw land and the sale of
improved parcels to others.
There may be various institutional procedures, in which the developer follows the same steps
in order to form the Product. Beginning developers must control at least one of four assets
land, knowledge, tenants, or capital.
The real estate development process starts with the inception of an idea and ends by
completion and the formal opening of the subject property. Then it shifts to property, asset
and portfolio management phase.
The development business includes a great deal of uncertainty. The supply and demand
moves up and down. It is a complex business thus; it requires attention to all the different
aspects of creating the built environment some of which are, politics, economics, physics,
sociology and so on.
Timing with respect to the real estate cycle is highly crucial especially for beginning
developers. Success in financing the project depends on the timing in regard to the general
economic climate and the real estate cycle.
Real Estate development process changes from the concepts of Build-Sale to Sale/ReleaseBuild. Finance, market focused approach and professional project management have a great
importance in these models.
Up to the Build-Sale model (Figure 2.1), the developer makes a commitment from the end
product to the landowner for the purchase of the land, finances the development, with an
acceptable level of risk, leases or sells the property either during the construction or after the
completion of the construction.

BERENS Gayle, Mike E. Miles and Marc A. Weiss; 2001. Real Estate Development: Principles and
process. Third Edition. Washington, D.C.

E le c t r ic s
Land O w ner
C o n s t r u c t io n
M anagem ent

S tru c tu re

A r c h it e c t

S a le s

C o n t r a c t o r / F in a n c e
M e c h a n ic s

Figure 2.1. Build-Sale Development Model (HASOL E.)

Up to the Sell/Lease-Build model (Figure 2.2), the developer exists with his idea, finance and
land. A project manager, an architect, construction management staff, appraisers are involved
in the process where real estate project is planned, marketing is performed, property
management firm is involved and relationship with regulators are developed. The project
manager undertakes a central role in the process and coordinates the efforts of whole
disciplines. Many disciplines such as landscape architect, traffic, and security may be
involved in the process. It is possible to add many various disciplines to the process that
continues till the stage of property management.
Within the structure, optimization of cost, quality and cost should be taken into account.
Providing proper expenditure of money and time within the process is crucial for the desired

Land Owner






M anager

M arketing

Managem ent







Managem ent



Environm ent


Figure 2.2. Sale/Lease Build Development Model (HASOL E.)



Managem ent

2.1 The Team Members of Real Estate Development

Stakeholders of development are individuals and organizations who are actively involved in
the project, or whose interests may be positively or negatively affected as a result of project
execution or successful project completion. Many different skills are needed to develop the
kind of space society needs and wants and developers can not provide all the expertise. Their
task is to select, motivate, and manage the team to get a job done. They also must be aware of
the fact that, feasibility of the subject property and feasibility of participants are crucial for the
project. Conflicting goals among stakeholders can be a problem that must be considered for
the whole development project.
The stakeholders that are involved in a real estate development project are;
Land planner
Landscape architect
Construction contractor
Environmental consultant
Transportation consultant
Parking consultant
Attorney and accountant
Real estate broker and leasing agent
Property manager
Market researcher
Final users

2.1.1 Architect
Drawing the developers or his own ideas, producing a set of obtaining construction bids,
guiding the construction process are some of the main activities ,that the architect of a
development project mostly perform. The responsibilities of architect to the project are,
mainly based on the subjects of, aesthetics, physical safety, political and market risk.
Architects can also help developers in securing planning and zoning approvals, working with
community groups to understand their needs and preferences for proposed projects,
performing related site studies in selecting a site for a specified use or develop alternative
concepts for a site and head the land use team to bring a concept to fruition.
In Turkey, architectural projects are reviewed by municipalities for all privately owned
construction projects and by the Turkish government contracting agency for all publicly
owned projects.


2.1.2 Engineers
Structural, mechanical, electrical, civil engineers have a vital role in the development process
of a project. They are required to ensure that the design can accommodate the required
physical systems.
Effective project coordination relies on upfront communication and should be coordinated
early in the process. Experienced developers generally facilitate a series of meetings with all
architectural and engineering project personnel to define scope and communication channels
and to discuss each disciplines goals and objectives in depth2.
In Turkey engineers play a crucial role in both preparing the development project and on the
site. A whole construction development process is coordinated by either an architect or a
construction engineer. Mechanical and electrical engineer are only needed in related sections
of the whole process. Project manager who has the whole responsibility of a project is
generally an architect or an engineer with also an economical background. Most developers
have construction engineering education in Turkey.

2.1.3 Surveyors
Surveyors determine a propertys physical and legal characteristics- existing easements, right
of-way, and dedications on the site-and prepare a site map plotting these characteristics. This
critical information reveals how much of the site can be built on and the allowable square
Developers commonly use two types of surveys: a boundary survey, which determines the
boundaries of the site (easements and other legal requirements affect ownership of the
property being plotted on a map); and a construction survey, which plots the location of
relevant infrastructure- water, sewers, electricity, gas lines, and roads-to assist in planning
connections to utility services2.
They are involved at each stage of the development of property and land, from initial planning
to completion. They advise their clients on planning issues, obtain planning permission from
local authorities and prepare reports.

2.1.4 Land Planner

A land planner is responsible for deciding the suitability of the land for a proposed
development, working with input from engineers, marketing consultants, architects, and some
other team members. He is needed in the phase of devoloping the master plan, which locates
objects on the site according to their physical properties. The land planner works with the
developer to emphasize the important elements of the site.

PEISER B. Richard and Anne B. FREJ; 2003. Professional Real Estate Development: The ULI
Guide to the Business. Second Edition. Washington, D.C.


2.1.5 Landscape Architect

Today, most communities and potential buyers or tenants are very concerned with the
elements of the landscape that help define the character of the development. Especially in
residential and mixed-use development projects, where the landscape design can help unite
and define areas for the various uses.
However the major role of the landscape architects is, to help create places that capture the
imagination of the public, they can also provide consulting services for wastewater
management, wetlands, mitigation, the preservation of wildlife habitats, ecosystem
management, irrigation, sustainable site design, and land reclamation.

2.1.6 Contractors
Contractors are builders and managers of builders who turn ideas on paper into enduring
physical forms3.
Construction contractors take the responsibility of the physical construction of a development
project and its elements. Each contractor is required to complete the proposed service to a
development project on time and within the budged which are explained in detail in the
Jonathan Rose, principle of Jonathan Rose and Companies, suggests keeping in mind three
points when choosing contractors,

Find someone who is experienced in the product type being considered for the project.
A specialist in assisted living facilities will likely not be an appropriate choice for
multifamily housing.
Be certain that your project amounts to no more than one-third of the contracting
firms total workload, a good benchmark for organizational and financial stability.
That is, if you have a $20 million project, look for a contractor with at least $60
million in total business at the time the contract is signed.
Ask for and check references to understand how the contractor has performed for past

2.1.7 Environmental Consultant

Depending on the complexity of environmental regulations, a developer might need help of
environmental consultants who are responsible for environmental site reviews in the process
of deciding to build. Deciding whether a development is worthwhile or nor, or whether
purchasing a land for development is too costly is crucial before initiating a project.
The role of the Environmental consultants is, to help developers identify the regulatory
approvals needed for a proposed project and also, they can prepare environmental impact
statements or reports often required up to the regulations of countries.

BERENS Gayle, Mike E. Miles and Marc A. Weiss; 2001. Real Estate Development: Principles and
process. Third Edition. Washington, D.C.


2.1.8 Transportation Consultant

Transportation consultants can also be included in the process, by providing needed expertise
and estimating important figures of traffic, such as how many cars and trucks will enter and
leave the site at specific times of a day, what the capacity is of existing roads, highways, and
intersections and how the existing streets will accommodate new levels of traffic.
Most cities in the world require traffic impact studies for development over a certain size.
Communities now actively assess whether or not the potential increase in traffic is worth the
jobs that may be created.

2.1.9 Parking Consultant

Parking is sometimes a limiting factor for development projects. Especially in urbanizing
areas, Increasing land values and restrictive parking ordinances require a well-plotted parking
The parking consultant -if needed in a development project, should be included early in the
design process so that the architect can incorporate parking recommendations in the overall

2.1.10 Appraiser
Appraiser is the member who is responsible for estimating the value of a project. He may be
needed in every stage of the development process-before, during and after project completion.
Appraisers can also evaluate a project as input to market studies, marketability studies, and
feasibility studies.
Appraisal is especially needed when the ownership of a development project is transferred to
another developer. When developer seeks financing and credit, has problems with tax matters,
and in the situation of compensation in condemnation proceedings, an appraisal is needed.

2.1.11 Attorneys and Accountants

In every stage of the development process there may be need for consultancy for legal
interactions. Buyers and sellers, lenders and borrowers, contractors and sub-contractors and
final users always have complex legal interactions. Lawyers and accountants get into the
process in these conditions.

2.1.12 Real estate brokers and leasing agents

Real estate brokers and leasing agents are needed for leasing or selling a project to tenants and
buyers. An experienced salesperson can serve developers by selling or leasing their projects
more quickly than the developer himself.
Developer decides whether to sign an agreement with a real estate broker or to place an agent
on the payroll. This decision usually depends on the type and magnitude of the project.


The use of in-house agents is appropriate for larger projects and large development firms that
can carry the cost. The benefit of an in-house staff is that the developer hires the staff during
initial planning and the agents become very familiar with the project, providing input design
and merchandising.
Small development firms may find it useful to retain outside brokers who are knowledgeable
about the local market and who have lower carrying costs.
The working relationship between developer and broker is defined in a contract referred to as
a listing agreement. Under an open listing agreement, the developer may recruit several
brokers and is responsible for paying a commision only to the one who sells or leases the
property. In addition, if the developer completes a transaction without the brokers assistance,
no commision is necessary4.

2.1.13 Property manager

After finishing the construction two most important goals of developer are, maintaining real
rental rates and high occupancy rates.
Most large developers manage their own properties through dedicated in-house staff or a
wholly owned subsidiary. Smaller and/or beginning developers generally choose to use an
outside source4.

2.1.14 Market researcher

A major part of the development process which affects the decision of realising a project
market study. Developer can get help from market researchers for deciding whether sufficient
demand for the project exists in the market.

2.1.15 Regulators
Local zoning requirements and subdivision regulations are also limiting factors for
development projects. Developers must comply with these regulations and should obtain
approvals locally for site plans and special use permits before the project is initiated.

2.1.16 Final users

Final users are the consumers of a finished project. From the beginnig of a project developer
mostly considers the needs of final users. The final users determine the success of a project by
accepting or rejecting the finished product as it is delivered to the market place5.

PEISER B. Richard and Anne B. FREJ; 2003. Professional Real Estate Development: The ULI
Guide to the Business. Second Edition. Washington, D.C.

BERENS Gayle, Mike E. Miles and Marc A. Weiss; 2001. Real Estate Development: Principles and
process. Third Edition. Washington, D.C.


2.2 Financial players

2.2.1 Construction Lenders
Construction lenders (mostly commercial banks) are lenders financing a development project
construction costs. They also need to make sure that the project that they finance is
constructed depending on the time schedule and within the budget which should be presented
before initiating the subject project.
They face the risk that costs will exceed the loan that they provide. The developer of the
project is required to cover the difference. If the developer is unable or unwilling to cover the
difference, construction lenders usually either foreclose on the property or extend the size of
the loan.

2.2.2 Permanent Lenders

Permanent lenders, like construction lenders, try to initiate safe loans for the maximum
possible return. However permanent lenders, have no takeout commitment with developers,
unlike construction lenders.
The projects value is a function of the expected cash flow, investors required rates of return,
and the projects expected economic life6.

2.2.3 Long-term equity investors

Long-term equity investors are the investors who may get involved in the project. They might
purchase the proposed property before the construction is initiated, during the construction
period or after the project is completed. Long-term equity investors are often passive investors
during the development period or do not share development risks.

2.2.4 Joint Venture Partners

Joint venture partners are simply the needed partners to a development or a construction
project in the phase seekin credit for construction costs. They are needed especially in large
scaled projects for financing these projects. In some cases, especially in developing countries,
it is a must to establish a partnership with an international bank or fund for getting the credit

2.3 The Real Estate Developer

Finally the developer is the most important player in the process. According to Richard B.
PEISER, no generally accepted definition exists to determine who is a developer and who is
not, but a developer can be defined as the person or firm that is actively involved in the
development process and takes the risks and receives the rewards of development.

BERENS Gayle, Mike E. Miles and Marc A. Weiss; 2001. Real Estate Development: Principles and
process. Third Edition. Washington, D.C.


Developers are the coordinators of those activities, converting ideas on paper into real
property. They create, imagine, fund, control, and orchestrate the process of development
from the beginning to the end. Developers take the greatest risks in the creation or renovation
of real estate and receive the greatest rewards7.
The developer should have the ability to give proper investment decisions in an environment
of uncertainty and, should be flexible enough to give respond to the continuous changing
conditions of market.
Developers must have a clear vision of what they want to do; they must also provide strong
leadership along with that clear vision. Developers by nature have strong egos and opinions,
but they must be good listeners. They depend on many other people; they cant possibly be
authorities on all the many different fields of expertise involved in a project.
Like most good business people, developers seek the maximum possible return with minimum
commitment of time and money and, the return may consist of several components such as;

Profits on any sale to long-term investors

A long-term equity position
Personal and professional satisfaction in advancing a new concept or improving the
urban environment
Enhanced reputation, which creates future opportunities for development

PEISER B. Richard and Anne B. FREJ; 2003. Professional Real Estate Development: The ULI
Guide to the Business. Second Edition. Washington, D.C.



Development process follows a sequence of steps from the beginning of the process to the
time that physical construction is completed and ongoing asset management initiates. By the
end of development process, the property management initiates involving new project
Real estate development process is an interactive process involving many activities and
disciplines related to each other. Stages, relations between stages, timing activities can vary
with regard to the preferences of each project.
The development process includes two main steps, predevelopment and construction8.
Predevelopment covers the period from the first identification of the development site to the
start of construction. The primary purpose of the predevelopment is to give the developer the
necessary confidence to move forward.
The Eight Stage Model, formed by Mike E. Miles, Gayle Berens and, Marc A. Weiss, will be
used in the study to guide an understanding of development by freezing the discrete steps of
development process that is hardly straightforward.
The steps and the sequence of steps can change frequently in development process. Each step
in the process depends on the quality of previous steps. Badly negotiated or written
agreements with lenders, contractors, tenants, or professionals will come back to haunt the
Feasibility study has a major role in the decision making process. The developer uses the
feasibility study in the process of contract negotiation to pursue financial players for
allocating a loan. That is why the developer should examine the study from the perspective of
financial players and, decide on whether the project worth making an investment or not.

PEISER B. Richard and Anne B. FREJ; 2003. Professional Real Estate Development: The ULI
Guide to the Business. Second Edition. Washington, D.C.


Figure 3.1 Eight Stage Model of Real Estate Development Process

(BERENS G., 2001,Real Estate Development:Principles and process, Third Edition, Washington, D.C.)

Developer with extensive background knowledge

and a great deal of current market data looks for
needs to fill, sees possibilities, has a dozen ideas,
does quick feasibility tests in his head
Developer finds a specific site for the idea; looks
for physical feasibility; talks with perspective
tenants, owners, lenders partners, professionals;
settles on a tentative design, options the land if
the idea looks good
Developer conducts or commissions formal
market study to estimate market absorption and
capture rates, conducts or commissions feasibility
study comparing estimated value of project with
cost, processes plans through government
agencies, demonstrates legal, physical, and
financial feasibility for all participants
Developer decides on final design based on what
market study says users want and will pay for.
Contracts are negotiated. Developer gets loan
commitment in writing, decides on general
contractor, and determines general rent or sales,
requirements, obtains permits from local
Contracts, often contingent on each other, are
signed. Developer may have all contracts signed
at once: Joint venture agreement, construction
loan agreement and permanent loan commitment,
construction contract, exercise of land purchase
option, purchase of insurance and prelease
Developer switches to formal accounting system,
seeking to keep all costs within budget.
Developer approves changes suggested by
marketing professionals and development team,
resolves construction disputes, signs checks,
keeps work on schedule, brings in operating stuff
as needed.
Developer brings in full time operating stuff,
increases advertising. City approves occupancy.
Utilities are connected tenants move in.
Construction loan is paid off, and permanent loan
is closed.
Owned (either developer or new owner) oversees
property management, reconfiguring, remodeling
and remarketing space as necessary to extend
economic life and enhance performance of asset;
corporate management of fixed assets and
considerations regarding investors portfolios.

One: Inception of an Idea

Not feasible
Two: Refinement of the idea
Not feasible
Three: Feasibility
Not feasible

Four: Contract Negotiation

Cannot reach binding contracts
Can reach binding contracts

Five: Formal commitment

Six: Construction

Seven: Completion and

Formal Opening

Eight: Property, Asset, and

Portfolio Management


Marketing through out the whole development process and market research is one of the
major tasks of whole marketing effort. More information results in more accurate modeling
figure. Figure 3.2 represents the cost and value of market information to the overall
development process.
Figure 3.2 Cost and Value of Market Research [TOKOL T.]

Cost and Value of




Net Value

Max. Value of

Duration of Research

Projects go through several stages of risk. The risk money is typically limited to what is spent
on feasibility studies, analyses of soils, and the market design.
Developers need to be able to live and work in risky environments. According to Gayle
BERENS, successful developers price all risks and accept only when costs justify it. He
defines six basic ways to reduce risk;

Avoid risk by stopping in stage one, two, or three before much money is committed
Increase the research and know more about the possibilities by completing a more
substantial feasibility study in stage three
Engage in some form of loss prevention the most obvious of which is a competent
development team assembled in stages four and five
Transfer a potential loss to other players through the contracts negotiated in stage four
Combine and diversify to reduce the pain of large losses by buying insurance for
stages six through eight
Assume risks. Even after adopting these five strategies, the developer must assume
some amount of residual risk

3.1 Inception of an idea

Generating ideas for projects should be the most creative part of the real estate development
process. The excitement of identifying human needs and creating a solution for these needs
are crucial for the motivation of whole process.


Developers need to have a background to create good ideas. Although generating

development ideas might often be thought of as unpredictable, a portion of generating ideas is
methodical and calculated.
Market research, experience and general knowledge of urbanism, construction, finance and
real estate law are the inputs for generating the development idea. Some tools and techniques
are used to get the development idea which is the output of this stage. These are strategic
planning, construction cost modeling and some techniques like brainstorming, environmental
scanning and surveys. In order to reach a successfull devlopment idea, developers generally
use one or more of these techniques.
Idea for development needs one or more of the following;
1. A site looking for a use.
2. A use looking for a site.
3. Capital, looking for a development.
In all three cases, the developer who has experience and familarity with the latest changes in
the industry, can generate a succesful idea. Curiosity, interest, and observation are the main
characteristics which a successful developer need to have.
Although developers unconsciously perform market research, the regional economy and local
population growth, employment figures, zoning provisions, traffic counts, occupancy rates,
and consumer surveys are analysed for a structured market research.
Market research has an important role in providing background for brainstorming. Developer
needs market research for generating successful development ides and determining a
technique to generate this idea.
At this stage, developer cannot justify the expenditure of a great deal of money to analyze
each ideas preliminary feasibility9.
A rough estimate of income per square meter and operating expenses per square meter are
used for decision making. The projects leasable square meter is then multiplied by the
estimated revenue per square meter and that gives estimated revenue for whole project. The
developer then subtracts the projected operating expenses and multiplies by ten in order to
find a rough estimate of value.
This value is then compared with a rough estimate of cost which at this point consists of the
cost of land, site development cost and construction costs. Construction costs are generally
calculated using m based cost model which gives an approximate idea without any
calculation cost. If the rough estimate of value is higher than the rough estimate of cost, the
idea is applicable.

3.2 Refinement of the idea

The objective of this stage is to acquire a site and make initial determination of legal and
physical feasibility. It must be decided that the idea generated in the first stage will evolve

BERENS Gayle, Mike E. Miles and Marc A. Weiss; 2001. Real Estate Development: Principles and
process. Third Edition. Washington, D.C.


into a particular project. Otherwise it should be abandoned before extensive resources are
committed to the concept9.
At this stage identifying the right use of the right site is crucial and many activities that are
carried out simultaneously are involved. The inputs that will be used are the development idea
that is generated at stage one, market research and general knowledge of construction,
urbanism, real estate law and finance. Strategic planning, construction cost modeling,
concepts of site selection and specific market research for refining the idea are the tools and
techniques, that are used to produce refined idea which is object to feasibility and preliminary
project design.
In stage two, developers must acquire land, make contracts with general contractor, subcontractors and other members of the development team, and undertake initial project design.
They also bear uncertainty and risk as they try to bring the subject idea to physical reality.
At this stage financial feasibility of the idea and search for the strategy in order to capture the
greatest market share should also be refined. Following activities are involved in stage two.
Market Research
Scanning the environment; public policy environment, macro environment and
competitive environment
Analyzing local market; demographic, economic and sociocultural
Analyzing competition; companies, comparable projects, potential competing sites
Site Selection
Establishing site selection criteria; market, physical, legal and political,
Evaluating alternative sites
Negotiating contract for site
Negotiation with players
Public sector
Architects and Engineers
Project Specifications
Preliminary project design
Determining feasibility; go, revise or dont go
Market search is the core activity of this stage. There are three major activities of market
research, those are;
Scanning the environment
Scanning the environment is the activity of searching possible competitors, government
jurisdictions, and political power base. Developers need to have strong relationships with
city officials, politicians, and the general public.


Analyzing the local market

Analyzing the local market is the activity of searching an area within the market that
might offer an appropriate site.
Analyzing competition
Analyzing competition is the activity of scanning competing development companies and
competing projects and, refining the subject development to maximize its competitive
Using the collected information, the developer establishes the site selection criteria that have
four different variables;
Market criteria
The selected site should be capable of generating the assumed income, and the aimed
tenant should be wiling to pay the rent assumed, for the project in the selected site.
Physical criteria
Size, build-able size, soil conditions/load bearing capacity, hazardous wastes, utilities
(Such as sewage, water, and electricity.), topography and hydrology are the variables that
developers should consider.
Legal criteria
Current zoning, permitted intensity of use, the surrounding parcels, the flexibility of
current zoning and the possibility of major changes are legal criteria for the site selection.
Political criteria
The way developers work with the city within the existing rules or to change those rules
and the way developers of competing sites influence the legal/political process are
important considerations10.
Establishing the site selection criteria, the developer should acquire the site that best satisfies
the criteria by negotiating for the alternative sites. Figure 3.3 shows major factors to consider
in site selection.


BERENS Gayle, Mike E. Miles and Marc A. Weiss; 2001. Real Estate Development: Principles and
process. Third Edition. Washington, D.C.


Figure3.3 Factors in Site Selection [BLAIR P. J.]

F a c to rs In S ite S e le c tio n
Z o n in g

L e g a l u s e o f th e s ite
R e s tiric tio n s o n d e n s ity a n d la y o u t
C o n tig u o s la n d u s e s
L ik e lih o o d o f o b ta in in g v a ria n c e s

E n v iro m e n ta l Im p a c t
- A d v e rs e im p a c ts o n a ir, w a te r, a n d n o is e le v e ls
- A m o u n t a n d ty p e o f w a s te p ro je c t w ill g e n e ra te
- O th e r a re a s o f c o n c e rn , in c lu d in g h is to ric d is tric ts , p a rk s ,
o p e n s p a c e , tre e s , w ild life h a b ita ts
G o v e rn m e n t S e rv ic e s

P h y s ic a l F e a tu re s

S iz e
S o ils
T o p o g ra p h y
H y d ro lo g y (flo o d p la in s , s u b s u rfa c e w a te r)

L o c a l A ttitu d e s

U tilitie s
- Sew age
- W a te r
- C o m p u te r lin e s , fib e r o p tic s , c a b le te le v is io n , te le p h o n e
g a s , o il, e le c tric ity
T ra n s p o rta tio n

T ra n s p o rta tio n lin k a g e s

T ra ffic
A v a lia b ility o f p u b lic tra n s p o rta tio n
E s p e c ia lly im p o rta n t in d e te rm in in g a c c e s s a n d in e v a lu a tin g
in g re s s , e g re s s , a n d v is ib ility o f a lte rn a tiv e s ite s

- D e fe n s iv e ( H o w p o w e rfu l a re a n tid e v e lo p m e n t fo rc e s ? )
- N e u tra l ( W h a t s o c ia l c o s ts d o e s th e p ro je c t im p o s e ?
w h a t a re th e b e n e fits to th e lo c a lity ? Is th e p ro je c t in
th e p u b lic in te re s t? )
- O ffe n s iv e ( W h a t a re lo c a l a ttitu d e s to w a rd g ro w th
a n d h o w c a n th e y b e u s e d to h e lp s h a p e , re fin e , a n d
s p e c ify th e p ro je c t to b e b u ilt? )
P ric e o f th e la n d
- C o s t o f la n d , in c lu d in g a c q u is itio n a n d s ite d e v e lo p m e n t
D e m a n d a n d s u p p ly

P a rk in g
- U s u a lly n e e d e d o n s ite , th e re fo re , c o m p e te s w ith th e
b u ild in g fo r la n d
- If s ite c o s t p e r s q u a re m e te r is le s s th a n c o s t o f s tru c tu re d
p a rk in g , s u rfa c e p a rk in g is w a rra n te d ( a n d v ic e v e rs a )

P o lic e a n d fire s e rv ic e
G a rb a g e c o lle c tio n
S c h o o ls , h e a lth fa c ilitie s , a n d o th e r g o v e rn m e n t s e rv ic e s
Im p a c t fe e s , p ro p e rty ta x e s , a n d p e rm it fe e s

P o p u la tio n g ro w th , tre n d s , a n d p ro je c tio n

E m p lo y m e n t
In c o m e d is trib u tio n a n d p ro b a b le c h a n g e
E x is tin g a n d p la n n e d s u p p ly
C o m p e titiv e e n v iro n m e n t

If the specific site seems feasible, the developer should negotiate for the acquisition of the
site. It is also possible to include the landowner in the development process.
In stage two, the developer also should answer some questions. For example will the tenants
be interested in the project or not, will the lenders want to invest on the project or not and will
the developer be able to find the general contractor who can construct the project or not.
The developer should also introduce the project to others players of the process for deciding
whether the idea is worth taking to stage three or not.
If the refined idea still seems feasible, the developer takes it to stage three. Outputs of this
stage are,
Idea linked to a specific site
Preliminary design
Startup capital

3.3 The Feasibility

At this stage developers need to perform more detailed analyses along for the viability of the
idea. Developer can still give up the idea at the end of this stage but obviously with a higher
cost than stage two11.
Refined idea which is the output of stage two, market research, acquired site and conceptual
design are the inputs of this stage. The formal feasibility study and preliminary project design

BERENS Gayle, Mike E. Miles and Marc A. Weiss; 2001. Real Estate Development: Principles and
process. Third Edition. Washington, D.C.


are the possible outputs of this stage using market analysis, construction cost modeling,
discounted cash flow, sensitivity analysis, and value management as the tools and techniques.
Following are three basic inputs essential for the viability of feasibility study;
Market Study
Cost Estimates

3.3.1 Market Study

The market study consists of three basic steps to follow. The first step is an examination of
national economic conditions and long-term trends in the characteristics of the region,
locality, neighborhood, and site. Market analysts project operating numbers for a specific site
and they must consider that a project has at least two to five year time horizons for planning,
sales and leasing which increase the importance of forecasting12.
Second step is that the developer specifies the key features of the subject development project
up to the knowledge of the value.
Third, the market study should segment the market by defining the features, the functions and
the benefits of comparable projects. How many units at what price over what time period will
the target market be likely to absorb? Then it is possible for the developer to predict the
overall absorption rate for the market segment. The developer can then estimate the projects
capture rate and expected rents.
The result of the market study is an estimated schedule of leasing or sales for the proposed

3.3.2 Design
If the developer decided to go on the project after stage two he has to spent more money to get
the final design plans that the formal feasibility study requires. The developer must then
decide on the quality, quantity, and timing of design talent.

3.3.3 Cost Estimate

The cost of a development project includes marketing, financing, taxes, insurance, and other
administrative costs as well as physical costs which are cost of land, needed infrastructure,
improvements to the land, and hard costs of construction. The developer may acquire the cost
working with a consultant firm of cost estimate, negotiating with a general contactor or via an
in-house staff.
Stage three also includes forming the feasibility study and, negotiating financial options with
lenders and investors. By using sensitivity analysis, the developer should examine every
major decision and every significant feature, function, and benefit of the subject project and a
feasibility study becomes a dynamic planning tool.


BERENS Gayle, Mike E. Miles and Marc A. Weiss; 2001. Real Estate Development: Principles and
process. Third Edition. Washington, D.C.


The feasibility study is the formal demonstration that a proposed project is viable or not. a
typical feasibility study includes executive summary, maps, pictures, and resumes, a market
study, preliminary drawings, cost estimates, information about terms, sources of financing,
government considerations, time line and the estimate of value.
The major output of the phase is the feasibility study, which is an important management tool
providing multiple forms of risk control over several subsequent stages of the development
process. The formal feasibility study is both a sales tool and also an organization tool.
The preliminary project design is also an important output of the phase and demonstrates the
physical structure. Up to the result of feasibility study, the developer decides to continue with
the task, revise it or to stop it.

3.4 The Contract Negotiation and Formal Commitment

The feasibility analysis from stage three serve as a sales and negotiating tool and a
coordinating device in stage four of the development process, contract negotiation. During
stage four, contracts are arranged to implement the decision to proceed with the project and,
during stage five, contracts negotiated in stage four are executed.
The feasibility study and preliminary design which are the outputs of stage three are the inputs
that are used in stage four. Finance, detailed design, environmental impact study, construction
contract, budget and construction schedule are the outputs that the developer need to get at the
end of this stage. Stage four and five are the last opportunity to give up the idea of the
development project before major construction costs are incurred.
In this stage the developer initiates negotiating binding contracts to ensure that all the
different aspects of the project are covered by the collection of individual contracts and that
the various relationships among players are clearly defined. It is important for the contracts to
be properly drawn and consistent with one another, reducing the risk of the development

3.4.1 Negotiating the Construction Contract

If the developer doesnt have the relevant staff and equipment to construct the
development project which is the usual condition, he must search and find a proper
general contractor. The developer and the general contractor reach agreement on a
construction contract. Arrangements between the developer and the general contractor
can be price based or cost based.
A fixed price contract may seem to cost less to developers. However it may be more
accurate for a developer to negotiate with only one general contractor who the
developer knows well and to obtain a not-to-exceed price, based on the contractors
estimate of cost plus a reasonable profit margin.
If the cost of the work plus the reasonable profit margin comes in below the not-toexceed price, then the developer and contractor can share any such savings. In such


situations, developers who have established long-term relationships with quality

contractors might find it preferable to negotiate directly with one contractor13.

3.4.2 Negotiating for obtaining finance

Most lenders look at the feasibility study, and then adjust it to the market. Permanent
lenders maintain an extensive database on the markets in which they lend money.
They finance the cost of the proposed project investigating the demand for the project
based on community needs. The fever uncertainties mean less risk to the lender lower
interest rates for the financing to the developer. Negotiations end when the developer
and construction lender agree on their contract.

3.4.3 Negotiating for Design

The developer need to get final design of the subject project at the end of this stage.
After stage three in which the preliminary drawings of the project are prepared, the
developer needs to make final arrangements with the architects, engineers and other
design professionals of the development.
To complete the financial arrangements, the permanent loan commitment must be signed and
the fee paid; similarly, the construction loan agreement must be signed and that origination
fee paid. Following the arrangement of finance, the contract with the general contractor is
signed, while the general contractor signs a series of contracts with the subcontractors13.
The developer also needs the development equity which is the difference between project
costs and the supplied finance. There are three alternatives to provide the needed equity13;

To provide the necessary equity from the own funds of the firm,
To bring in an outside equity investor for the development,
To establish a joint venture with the lender

When developers are financially strong enough it is usually more profitable to construct the
development project using own funds. Lacking the resources for equity, developer might
prefer either some outside investors or establishing joint venture partnerships with the lenders
of the project.

3.5 Construction and Formal Opening

During stage six which is the construction phase the physical structure of the project is
constructed. Developer coordinates most of the players of the process in this stage.
Once the construction phase is initiated it is very costly to give up the project to make major
modifications. Even if the developer tries selling the project to another developer, he will
probably incur serious financial consequences.


BERENS Gayle, Mike E. Miles and Marc A. Weiss; 2001. Real Estate Development: Principles and
process. Third Edition. Washington, D.C.


The feasibility study, detailed design, budget, construction contract, supervision agreement,
financial arrangement, sales or leasing arrangement are the inputs of stage six and seven. The
objectives of these stages are building the physical structure of the subject property formal
opening of subject property with property management plan using some tools and techniques
like construction method, cost control techniques, time management, and feasibility study.
Stage seven, completion and formal opening requires public sector, tenants, operations
personnel, and financing to long term investors. This stage is actively the last phase of the
development process and sets the stage eight which is asset and property management of the
In stage six once the construction initiates, the developer must concentrate on the construction
management. He must control the time, the quality, and the budget as the stage processes.
Controlling these items means that he must control that the players do their jobs on time with
the needed quality, considering and monitoring the costs of these jobs. Because the previous
stages have created binding obligations, it is hard and expensive in this phase to implement
changes to the project.
In the process of construction the developer needs to charge someone for controlling and
coordination of the construction. The architect who designed the project, an in-house project
manager who is an architect or a construction engineer, or a team from a consultant firm can
be appointed to that responsibility on the construction site.
During the construction so many players are involved making coordination and collaboration
on the focus of the process. On site supervision is one of the major tasks that the developer
must consider.
Scheduling the subcontractors work and maintaining that schedule are other major tasks for
which the general contractor is responsible. The general contractor must be able to force
subcontractors adjusting their schedules as necessary. He must manage the subcontractors
having the needed time and resources for the job. He must be flexible enough to hire an extra
subcontractor for the same job when it is needed.
While the general contractor manages the subcontractors, project manager manages the
general contractor representing the developers interests. He is the one who is responsible for
making changes and modifications. Periodic inspections are made by the project manager, to
pay the general contractor in the same periods. Lenders for construction may also need these
inspections about the construction work.
If the tenant space is not totally leased before the construction phase, it must be marketed
during construction. At the same construction is coordinated with marketing effort.
The construction phase needs also to be financially managed and that management involves
managing the budget, payment of the bills and ensuring that insurance coverage is exactly
what is required. The financial management should also estimate the cost of any changes in
the construction phase and determine whether the lender or the equity investor can be
convinced to cover the additional costs implemented in the project. Lenders generally provide
funds up to the progress of construction.


Similarly the developer pays the general contractor once the work is performed. Payment to
general contractor is based on periodic payments up to the work progress. The developer pays
the amount retained only upon satisfactory completion which must be accepted by the project
manager and the developer.
The financial management involves the management of construction costs, development
insurance, property taxes, interest on the construction loan, marketing costs and general
administrative overhead. Construction lender claims a total figure of all these costs.
Formal opening of the subject property constitutes the closing process of the construction
phase. Training the operations staff, connecting the utilities, beginning the on-site operations,
final marketing of the development, the grand opening, tenants moving in, and a transition in
financing from the construction loan to the permanent loan are involved in this part of the



The ideal job for entering the development field is to work as a project manager with full
responsibility for one project in a large company or to work for a small company that provides
the opportunity to see and do everything. Many developers start as homebuilders, beginning
with small apartments and gradually changing to non-residential development or by
constructing projects for other developers and then for their own clients.
To get started, the developer must control one of these;


4.1 Land
Buying land for development is just one integral part of the planning process; however it
tends to be the focus of most start-up developers.
Before starting the process of selecting and buying land for development, the developer need
to decide who or what legal entity is going to buy the land. For instance is it going to be in
your personal name, in you and your partner's names or a company name?
Answering that question is important because developer need to decide who or what entity is
going to borrow the money to purchase of the land, but also borrow the money for the total
Land capacity is important as it affects the land cost per unit. A developer must know the
capacity of the land for his subject development project. Local authorities decide that
capacity. For example if the developer buys land in order to put eight units for $100,000 and
the local authority says that he can only put four units, this doubles the developers land cost
per unit.
Landowners might be partners especially in a beginner developers early projects. They dont
only supply equity for the deal but also make it possible to tie up to obtain the necessary
approvals and financing. This type of partnership is common in small development projects
in Turkey. Developer promises to landowner a specific percentage of the outcome with
respect to land on which the subject development project is going to be built.
In Turkey provision of new settlement and public-use areas are carried out by municipalities.
Using regional plans, zoning plans are prepared and implemented for local urban
The rapid urbanisation, especially, requires readily built-up areas in suburban areas. Hence,
the provision of new sufficient lots, streets, roads, green areas, play gardens and parks are the
main objectives of local land planning authorities.
In Turkey when a landowner wishes to obtain a construction permit to build a house the basic
principle is to fix and define the limits of existing cadastral parcel boundaries according to the

rules of zoning plans. In regard to zoning requirements, the suitability of a cadastral parcel is
examined by the municipalities.
The public in Turkey supplies the development control with the subdivision control and
building permission and control. The subdivision control is to be limited the subdivisions that
cause to the irregular urbanization. The aim of the subdivision control in urban areas is to
supply the development of the plots in the types of land use proposed according to the
decisions of the local physical plans. The aim of subdivision control outside of urban areas is
to prevent the unplanned development and to protect the agricultural areas.
In Turkey, the subdivisions are carried out as voluntary or without the consent of owners. In
the voluntary subdivisions, these transactions are controlled whether the subdivisions are
carried out according to the decisions of the local physical plans and whether the size of plots
is suitable to the decisions of local physical plans or by-laws. Where is separated to areas as
road, square, park areas, car parks in the local physical plans, subdivisions are not accepted by
municipality or governor office. Then subdivisions have to be approved by the committee of
municipalities or province administrative committee.
The subdivisions without the consent of owners are carried out the land readjustment method.
Land readjustment in Turkey is directly linked with an adopted urban plan defined in Title
No.18 of Reconstruction Law (Law No. 3194) and its accompanying regulations14. The aim of
this method is to achieve a development or reorganization of built and un-built areas, produce
urban plots of suitable location, shape and size for building or for other utilizations within the
framework of the detailed local plans and to supply land for primary and secondary public
areas. This title authorizes implementation to be carried out by the municipality without the
consent of owners with the delimitation of project area determined by municipalities
depending on the detailed local plan.
In Turkey, the subdivisions are usually realized as voluntary. Especially, because of legal,
administrative, technical and financial problems in the implementation of the land
readjustment method, this method is not often used by municipalities. The subdivision control
in Turkey cannot be supplied sufficiently in squatter areas. In these areas, sub standard
commercial subdivisions have often emerged.

4.2 Capital
Even the smallest property development projects require a considerable amount especially for
beginner developers. A developer never should begin a project without at least twice as much
cash available as seems necessary to get the project to the point where other funding is
available. Most lenders require a developer to invest cash equity to cover 20 to 30 percent of
the total project costs.


The Use of Land Acquisition Methods in Turkish Urban Areas, Sevkiye Sence TURK, Turkey 2003


Developer might need financial assistance for;

Purchase of land
Site development costs
Design fees (architectural and engineering)
Hard construction costs (labour and material)
Permitting costs
Infrastructure and services
Capitalisation of interest
Conversion and refurbishment.
Marketing costs
Pre opening and operating costs
Accounting costs

Developers may prefer borrowing from banks or private companies that provide especially
development funding. Property finance in the form of mortgages, is a method of acquiring
financial assistance for land and buildings. Since land and buildings are tangible assets that
can be sold reasonably quickly, loans secured on them are fairly easy to arrange. However, it
is important to understand that there will be monthly mortgage payments for a long period of
time, which means that future cash flow calculations are very important. Mortgage interest
payments are tax-deductible expenses in many countries.
In order to borrow from a company or a bank it should be considered that the quality of the
project and management team employed is important. Lenders are normally comfortable
lending to experienced individuals and established companies.
In Turkey there isn't a developed mortgage system, which makes the business harder to enter.
For a development company a common method of finding capital and reducing risk for
especially large projects in Turkey is to establish partnerships with REITs (GYOs) of large
banks such as Is Bank, Yapi Kredi Bank or Garanti Bank Which are some of the largest banks
in Turkey.
For smaller projects it is a widely used method to construct co-operatives. Co-operatives find
members who pay monthly fees and sometimes higher amounts once or twice in a year to
finance their projects. But this requires marketing before or in the middle of the construction
phase. However in the last 20-30 years most households have suffered from this type of cooperative applications by not getting their homes on the promised time. This general condition
has created lack of confidence in the market.
When we think about public as a developer, finance is more easily financed for real estate
development projects. Traditionally the biggest finance source of municipalities is real estate
tax. It is very important for the land and property owners to pay their taxes. Tax revenues
supplies financial independence to the municipalities.
A research made in 1997 showed that only 50% of all real estate taxes is paid regularly due to
the unsufficient tax system used in Turkey. Since there is not a developed e-government
system in Turkey, tax evasion exists in all areas making a huge hole in the tax system.


4.3 Knowledge
Development is a risky business investing the first money in a project taking the last money
out. At the low extreme developers may work for a fee managing the development process as
agents for other investors to incur a small degree of risk.
Beginning developers must accept greater risk than experienced developers do because
beginners lack a strong bargaining position to transfer risk to others.
As developers prefer partnerships with lender to get financed, lenders prefer experienced
developers to get into the business. The motivation behind partnerships in development
process is the multifaceted and multidisciplinary character of the business. Knowledge or
experience for land acquisition, market analysis, financial feasibility, design, finance (equity),
construction and management (sales) is needed for the period of a whole development.

4.4 Tenant
Tenant is the entity who tries to evaluate facility needs and to make responsible financial,
functional and aesthetic decisions that will serve the organization in which he is a tenant in
the future. A development process can begin with the decision to evaluate requirements for an
individual tenant. In such a development process, to meet the needs of the tenant is essential
for the developer.
Unless the entire tenant space remains un-leased before the initiation of the process marketing
must continue during the development process. If the developer can control the tenant factor
before the process, he can also create financial sources for the development by presenting
cash flow reports. On the contrary it is difficult to continue the process until all space is
The real estate development sector in Turkey is generally dependent on the people who
purchase property units but not the tenants who pay regular mothly fees. Developers prefer
selling the units because of higher profit margins.
Only the cooperative system and Public comanies such as TOKI or KIPTAS which are
studied in Chapter V let the tenants pay monthly fees. However when one partner of a
development project becomes the landowner, he may prefer leasing his units, because he is
not a professional in the profession and he will not need capital (since he is not a property
developer) for future development projects.
Due to the lack of a developed mortgage system in Turkey, purchasers of property mostly
suffer from being forced to pay the entire price to the developer without using a credit
opportunuty. Propety is mostly financed by the savings of households. Considerably higher
interest rates, higher inflation rates and uncertainties in the economy make it harder to use
financial tools. However, since the beginnig of the decrease process in interest rates, its been
planned to apply a mortgage system for the people who wants to buy their houses. But the
banking infrastructure of Turkey has not been sufficiant yet.


5.1 Overall Economy
Industry and commerce along with a traditional agriculture sector constitute a complex mix of
Turkey's dynamic economy. Although the government has a major role sectors such as
industry, banking, transportation and communication, the private sector has been growing
rapidly. Private sector runs almost entire textiles industry which has been the largest and most
important exporting industry in the last 20 years.
In recent years, the economic situation in Turkey has been pointed out by unstable economic
growth and crucial imbalances. Development in the GDP has exceeded 6% in many years, but
this strong expansion has been interrupted by sharp declines by economic crises in 1994, 1999
and 2001. After the last crises in 2001, however, Turkish economy took significant steps
towards a rapidly growing economic environment.
The table below lists some of the key economic indicators for Turkey between 2000 and
Real GDP Growth (%)
Nominal GDP (USD billion)
CPI (%)
Unemployment Rate (%)
Weighted Average Interest
Rate for 1-year Deposits (%)
Exports (USD billion)
Imports (USD billion)
Trade Balance (USD Billion)
















Table 5.1: Key Economic Indicators of Turkish Economy

Source: Colliers Resco

The reform process that is initiated by the IMF in the single party regime with the advances in
EU negotiations, led to a stable development procedure in the economy. The table above
shows that, Turkeys real GDP growth in 2002 and 2003 was 7.8% and 5.8%, respectively.
These growth numbers indicate that Turkey has outperformed most of the EU and Central and
Eastern European countries in this period. The growth in 2003 was mostly observed due to the
high performance achieved in industrial, trade, transportation, tourism and communication
The inflation rate in Turkey also decreased significantly from 56.4% in 2000 to 9.3% in 2004.
It is expected to continue to decrease to a single digit in 2005. From these numbers and the
positive environment, it is possible to say that Turkeys chronic high inflation trend has been
closing to an end and the numbers of inflation are closing to numbers of EU countries.
The table above shows that the tough fiscal policies of the government also lowered the
interest rates. The 1-year interest rate decreased from 62.5% to 18% between 2001 and 2004.
The real interest rates are still high compared to the EU countries, but policies of the single
party regime target further reductions in interest rates.


In addition to these developments, by dropping six zeros off the currency a redenomination
has been made for the Turkish Lira. This procedure started to take effect in January 2005 and
the transition period is supposed to be completed by the end of 2005. This redenomination is
also expected to have positive effects on the economic indicators. As of September 2005, the
Turkish currency exchange rate on the free monetary market was 1.33 Turkish Lira (YTL)/1
US Dollar (USD).
The Key Economic Indicators table also shows some important numbers of the foreign trade
in Turkey for the period between 2000 and 2003. According to these figures, Turkeys exports
growth rate accelerated at a significant pace after 2000, increasing from 27.8 billion USD in
2000 to 47.1 billion USD in 2003. Turkeys imports, on the other hand, declined by around
25% in the year 2001, as a result of the general economic crises. In the following years,
however, imports started to grow in line with the recovering economy.
More than 50% of Turkeys exports and imports are traded with EU countries which are the
most important trading partners. Especially in the last 4 years trading with the USA has also
been in an increasing trend. The other important regions for Turkeys exports are the CIS and
the Middle East countries. In terms of a share in Turkeys imports, the EU countries are
followed by the CIS countries, as a consequence of crude oil and natural gas imports from that
The inflation rate which was 9,3% in 2004 is expected to decrease further in the future year to
the averages in EU countries with the successful monetary policy that the central bank
applies, the appreciation of the Turkish currency and low increases in the prices of public
goods, agriculture ad energy sector. Single digit inflation has not been seen for three decades.
The GDP growth rate is expected to level off around 5% in 2005.
All of these macroeconomic figures and expectations show that Turkey is on the way to have
a stable and growing economic environment after efforts of many years. This economic
environment will provide favourable conditions for the foreign investment. Except for the
stable economy, Turkey had many of the advantages for attracting foreign investment, such as
dynamic, young and low cost labour and special geographical location before the specified

5.2 Real Estate in Turkey

Real estate sector in Turkey is a labour-concentrated sector and feeds about 200 sub-sectors.
The sector has a great role in the fight against unemployment and increasing the aggregate
production and income. Because of this great role, when the national economy comes into
crises and booms, real estate sector is one of the first sectors that are affected.
Since the fourth quarter of 2003 the general economy in Turkey is in a developing process.
Present economic activity and increasing income levels, make people claim higher quality
projects that can serve them a life style.
The decreases in the interest rates and the profits in other investment tools have made the real
estate sector more and more attractive recently. Increasing demand for real estate shows that
the sector is getting in a developing process.


According to the data from DPT (State Planning Organization) 1 unit of investment into real
estate sector comes back to the national economy as 2,5 units. This makes real estate sector as
a sub-sector of construction sector a great employment tool. Today %58 of construction
activity in Turkey consists of real estate investments.
When we look at the residential property market an excess of 2,6 million units exists in the
sector. On the other hand, according to the 8th 5-year development plan of DPT, 2 714 000
units are needed to be built by the end of the year 2005 (the plan has been made for the years
2001-2005). At the same time there is an excess in supply and a deficit in demand. It seems
like a paradox is coming out. The reason is that the most of the units of this excess are old,
insecure for living in or illegally constructed without needed permits from public. This
paradox shows that the main problem of the sector is not with the number of units, but it is
with the standards of housing.

5.3 Overview of Istanbul as the Metropolitan City of Turkey

Because investment opportunities into the real estate markets in developed regions are limited
due to the settling prices, international funds and investors are expected to be gearing towards
developing countries such as Turkey. The economical figures after the 2001 economic crisis
and the regulatory reforms in the banking sector enabled the improving Turkish economy to
get on a better level compared to last years. The decrease in the inflation rate and the increase
in the GNP growth rate are the most significant signs of the improvement in Turkish
Following these improvements in the economy, on December 17, 2004, the EU decided to
begin membership negotiations with Turkey and presented October 2005 as the start date.
This development has increased the foreign investment interest in Turkey. One of the
indicators of this increased interest is the new activity in the real estate sector.
When we inspect the Turkish real estate sector, we need to start with Istanbul, in which
approximately 40% of Turkish economy runs and 20% of all country`s population lives. As
the date for membership meetings is getting closer, a significant increase in the number and
amount of foreign investments can be observed.
Foreign investors have an increasing interest in the residential market because of the activities
aiming to initiate the mortgage system in Turkey. The current housing credit system in Turkey
addresses a very small high income group because the purchasing power in Turkey is
relatively insufficient. The examples of Greece and Spain show that the implementation of the
mortgage system increases the purchasing power because it is spread over a very long term
and causes a substantial increase in the prices of residential buildings.
For the mortgage system to be fully established, the interest rates need to decrease further.
The economic performance in recent years has showed that it is likely that the interest rates
will continue falling down. The interest rate levels required for an efficient mortgage system
is expected to be reached in a couple of years. Foreign investors want to take positions before
the interest rates drop further. In addition, the fact that in Turkey, a capital gain from a sale of
real estate, for a period of 4 years, is tax-exempt makes such an investment advantageous.
Most of the foreign institutional investors are currently adopting their strategies of investing
into fixed income properties in Turkey. They are seeking to purchase office, retail and


industrial buildings with long term rent leases by credible tenants. However, considering the
last 10 years, the average growth rate of Turkey has always exceeded the growth rate of the
construction sector. As a result, high quality office buildings are scarce and the existing
supply consists of older buildings. Financial weakness of local construction companies has
caused most of the current building stock to have low architectural and technical quality,
compared to the EU countries` standards. For these reasons, high quality office property
stock, hence investment alternatives for foreign investors are currently scarce.

5.4 Residential Market in Istanbul

During the financial crises period between 2001 and 2003 the demand for residential property
suffered significantly. The economy has been in a recovery process, accompanied by falling
interest rates and inflation. Even though the interest rates are still high for the mortgage
system, by considering the economic performance of the country, the government units
started to prepare the infrastructure needed for the system. This system is also expected to
provide many opportunities in the residential real estate market. There are comprehensive
studies that both the government and SPK (Sermaye Piyasasi Kurulu Capital Markets
Board) carry out.
The current residential loan usage for housing in Turkey is interesting. According to the
findings, only 3% of the population in Turkey uses residential loans whereas the ratio of total
residential loans to GNP is only 0.3% in Turkey. This rate is 0.5% in Romania, 40% in the
EU countries and 50% in the USA. There are some reasons behind this situation. First, the
longest term for the existing residential loans is 60 months for loans in Turkish Lira and 180
months for loans in foreign currencies, which makes it impossible to have loan instalments as
low as rent levels. Second, the application of variable interest loans are prohibited in the
consumer legislation and fixed interest rate loans impose all of the economic and the political
risks on the borrower. Third and most importantly, since 55% of the existing residential stock
in Turkey has no construction license, many low income people are able to attain unlicensed
housing without having to execute the legal transfer operations, which is an obligation in the
use of residential loans.
Potential use of mortgage credits is not very difficult to predict because of the facts that the
residential demand in the country is about 350,000 housing units per year and that 60% of
Turkeys population is under the age of 20. The mortgage system will allow people to
purchase houses on long term credits with maturities of 20, 30 or 40 years and with
instalments that are no higher than the rental rates of the houses.

5.4.1 Demand
There are four major factors that affect the demand for residential real estate in Istanbul:
closeness to transportation junctions, closeness to destinations where large holdings plan to
invest, closeness to existing or planned shopping malls and closeness to office and production
facilities that are supported with powerful sub-centers.
The demand for residential real estate in Istanbul was affected significantly by Marmara
earthquake of 1999. The fear for a future earthquake which is predicted to happen in the next
30 years, encouraged many residents of old buildings especially in the urban areas to search
for newer buildings which are constructed after the 1999 earthquake complying with the
earthquake safety regulations.

The earthquake also had an effect on the demand in suburban residential areas. Especially the
regions along the Marmara coast bear higher earthquake risk because of the earth structure of
these areas. Due to the better earth structure in the northern region the demand in these areas
increased significantly. Moreover, most of the suburban settlement models consist of 2-4
storey town house or villa type buildings, which are known to be more resistant to earthquake
Overall, Istanbul observed a shift towards suburban areas, because of the increasing prices
and higher earthquake risks in urban areas. Recently, however, the residential demand started
to shift back to urban residential areas once again.
The recent recovery of economic factors have had a positive affect on both suburban and
urban demand, but the demand in urban areas increased much more significantly. High living
costs of suburban areas and closeness to the CBD for the urban areas have constituted this

5.4.2 Supply
In suburban areas, some development projects have been initiated in recent years. These
projects are mostly villa type housing or 2-4 store building projects which were mentioned
above in demand part as the demand for these types of housing is higher in suburban areas.
Projects having good construction quality with creative architecture, located in technically
and socially well-developed areas, have been a successful investment model in these areas.
Some of the most successful projects in Istanbul suburban areas:



Istanbul Istanbul

Yapi Kredi Koray REIC

Town House + Apartment / 204


Soyak Construction

Apartment + Villa / 1550

My Country

Agaoglu Construction

Villa + Apartment - Duplex Flat / 271


Yapi Kredi Koray REIC - Garanti REIC Apartment / 450


Is Koray

Villa + Town house + Apartment / 750

Alkent 2000

Alarko REIC


Kemer Country
Kemer Construction and Tourism
Table 5.2: Major development sites in suburban of Istanbul
Source: Colliers Resco


The term of residence came into the Turkish residential market 10 years ago. Akmerkez
Residence, Metro City, Elit Residence, Polat Residence and the newly launched Elysium
Residence, Kanyon and Selenium Residence are examples of this concept in Istanbul. Most of
these urban projects have had successful sale numbers especially in the recovery years of the
national economy.


Some of the most successful projects in Istanbul urban areas:




Metrocity Milennium

Yuksel Construction

Apartment / 203

Maya Residence

Maya Construction

Apartment / 284

Kanyon Project

Is REIC - Eczabasi Construction

Apartment / 157

Atasehir Residence
Emlak REIC
Table 5.3: Major projects in Istanbul urban areas
Source: Colliers Resco

Apartment / 180

In 2004, the prices for new constructed suburban villa and townhouse projects in Istanbul
varied between 800 USD/m2 and 2,000 USD/m2. The new apartment projects in the city were
on sale for 1,000 USD/m2- 1,500 USD/m2 and the high-rise residential projects were on sale
for 2,000 USD/m2 - 3,000 USD/m2.
The table below summarizes the selling prices of different types of units for the major
suburban and urban projects in Istanbul:
Kasaba Phase II
My Town
Arkeon Evleri Phase I-II
Eston Ardicli Evleri

Apartment / Town House / Villa
Apartment / Villa
Town House

AREA (m2)
Metrocity Milennium
121 302
Maya Residence
169 400
Kanyon Project
82 212
Atasehir Residence
75 207
Table 5.4: Price range of projects in Istanbul
Source: Colliers Resco

114 -175,000 / 250 -347,000 / 200 -370,000
47 -200,000 / 200 - 357,670
72 - 243,000
40,650 - 226,000
134,000 - 302,000
215 - 295,000
325 - 735,000
490 - 900,000
250 - 760,000
80 - 215,000

5.4.3 Forecast
Its estimated that the population of the city of Istanbul is around 12-14 million. It is also
estimated that 92% of 2,550,607 households in Istanbul live in urban areas and that the city
population increases by approximately 700,000 immigrants each year. These figures also
identify the increasing residential real estate demand in Istanbul.
The planned mortgage system will also provide many opportunities in the residential real
estate market. The mortgage system, which has been in application in developed countries for
a long time, was also initiated in developing countries in recent years. These countries, have
exhibited significant progresses. It is expected that the efficient implementation of a
mortgage system will lead to considerable developments in the residential market of Turkey.


6.1 TOKI (Toplu Konut Idaresi)
TOKI (Toplu Konut Idaresi) can be translated to English as housing development
administrating office. It can be accepted as the biggest developer of Turkey working
dependent on Turkish government. TOKI manages the real estate development and urban
development projects of the government in seven different methods;
1. Real estate development on TOKIs own sites
One of the basic activities of TOKI is housing development on TOKIs own lands, which
means the lands of government. 43.145 housing units were developed between the years 1984
and 2003 by TOKI. From the beginning of 2003 till the end of 2004, projects of totally
100.000 housing units have initiated on the lands of TOKI in 75 cities of Turkey. TOKI works
getting the lands of the government, which are appropriate for housing development. These
housing units are specially built for poor citizens, widows, orphans, handicapped people, and
the citizens who work for the public sector with considerably low prices.
2. Transformation projects of illegal housing units in cooperation with municipalities
TOKI cooperates with municipalities of especially big cities like Istanbul, Ankara or Izmir to
prevent the illegal housing -which is one of the biggest problems of municipalities, and to
transport these units into legal and modern housing units. With this scope, 22.565 units have
been projected in 35 cities. The objective of this activity is to expand the project especially in
big cities.
3. Operations to meet the needs in the regions which are damaged from natural disasters
TOKI has some official rights to acquire sites from the government depending on the scope of
their projects as subsidies, for housing development without any fee and to supply credits to
the development projects in these regions, which are affected from disasters like earthquakes.
These units are sold to the citizens, which are affected from disasters being paid in 20 years
without any interest rates.
4. Source development projects
Projects of 100.000 housing units involve a serious financial source. In order to supply the
needed source for the projects, TOKI develops income-sharing projects on valuable lands in
especially big cities. The method of these projects is to build and sell the units on valuable
lands to create source and to use these sources to develop projects for the people with low
incomes. In the scope of source development projects it has been planned to build 42.000
housing units in 30 big cities in Turkey.
5. Implementations for villages and farming areas
The development of village architectures, providing villagers with housing, creating appealing
conditions for preventing the immigration to the big cities are objectives of TOKI in this


6. Credit applications
TOKI supports real estate developers by supplying credit. The time for credit applications, the
quantity of these credits and the minimum construction level needed for real estate developers
are decided and announced by the government.
TOKI coordinates with commercial banks supplying credits to real estate developers.
According to the protocols between TOKI and banks, banks serve as guarantors and in the
condition that developers delay payments of these credits banks pay the loan to TOKI and
claim that from the developer. Banks have the right to get the mortgaged development units in
the need.
The repayments of the loans initiate three months after the completion of construction of all
units. The repayment time period is between 5 and 10 years depending on the usable area of
the constructed units. If the developed units of a project is smaller than 100 m2 the repayment
time period of the credit is 10 years. For larger units this time period gets shorter. The interest
rate implemented in this period is the same with the average increase rate implemented to the
wages of officials working for the public sector.
7. Applications of Emlak GYO
Emlak GYO is another administrative office, which has a partnership structure with TOKI.
GYOs (REICs) will be inspected more detailed in the next section.
TOKIs revenues are;
Housing units, offices, lands and fields which are sold and leased by TOKI
Repayments of loans which are lent to other real estate developers by TOKI
Shares from land costs of housing and office units that are built on the lands of Treasury
Loans taken from foreign countries
Interest payments
Subsidies from government budget
In order to acquire the needed land for its projects, TOKI has the right to purchase or transfer
the land from official institutions. They can also sell these lands to another person or company
without building a development project.
The housing units that TOKI produced are sold in different methods;

Selling by drawing lots; if the demand for the units that will be sold is higher than the
supply in the subject project, selling process of these units is applied by drawing lots.
Buyers of these units pay between 10% and 25% of the price in advance and the rest
with monthly payments in 8 to 10 years. These monthly payments are increased
according to the increases in the officials wages
Open sale method; the units, which are not sold in the process of selling by drawing
lots are sold openly. The payments in this method are as in the preceding methodsome percentage paid in advance and the rest in monthly payments.


By public auction; this method is used in the selling process of income and prestige
projects to create source for the institution. The aim is to get the highest possible
Selling to the poor; specially produced housing units are sold to the poor in first
method selling by drawing lots. In this method 5% of the price is paid in advance and
the rest is paid as monthly payments in 15 to 20 years.

An example project of TOKI that is sold

Ankara-Eryaman 168 housing units;
The method of selling is open sale method. The selling price is paid as 35% in advance and
the rest in 72 months. The prices are between 103 200 YTL (560 000 SEK) and 125 000 YTL
(680 000 SEK). These units were constructed for officials with middle income working in
some different departments of the public sector. The area of every housing unit is standard
and 172,8 m2. The site was constructed in the suburbs of the capital city Ankara. The site of
the project is supplied from the government as a subsidy after demolishing the old illegal
property units on the same site.

Figure 5.1 Settlement plan of the project



Figure 5.2 Floor plan

Source: www.toki.gov.tr

6.1.1 Procedure in TOKI

As it is stated in chapter 2 uncertainty is one of the most important difficulties in the business.
Even if the demand is high in the general real estate market, a special demand for a project is
needed in order to reach the projected success. However when TOKI gets in the business with
a project this problem does generally not exist. Since the institution is considered as the most
reliable developer in the market, the possibility of low sales of their projects is not on a
considerable level. Especially the demand of housing from the poor is important for TOKI
and because of the high number of illegal housing units, this type of demand is very powerful
in the country. TOKI is also active in the rural areas of Turkey in order to obstruct- at least
reduce the migration to metropolitan cities which also causes illegal housing.
The four assets- land, knowledge, tenants and capital are not characteristic problems of TOKI.
Appropriate land for a project can be supplied mostly from the government. Knowledge and
experience of the institution have been increasing with every single project. Finding tenants or
customers for their projects is the easiest part of their job, because of the reasons stated above.
Finally there are ways of finding capital for the development projects of TOKI such as finding
credit easily or developing and selling luxurious housing units with high margins.

Inception of an idea: this part of the procedure is mostly related to the demand among
the poor for TOKI. Especially the projects for the poor and for special purposes are
not very different from each other. Because the aim of the development projects of
TOKI is not generally getting high profit margins, costs of projects are important in
this section.


Refinement of the idea: acquiring a site is one of the easiest parts of the activities of
TOKI. If a project is appropriate, needed land is acquired from the government or
bought by the institution. As it is stated in chapter 3 market search is the core activity
of this stage. In the phase of scanning the environment, searching possible competitors
especially for the projects in the rural area is an important activity that TOKI need to
do. TOKI is a very powerful institution on the political base.

Feasibility: market study, design and cost estimate are phases of this stage. Absorption
rate and capture rate are mostly analysed for the projects in the rural areas in the
market study phase. Design and cost estimate are related with each other in TOKI`s
projects as the land cost is not considerable (close to each other in different projects)
for the institution and costs changes generally with respect to design. Cost of a project
is estimated easily via previous cost data of other projects because many of
development projects of TOKI are almost similar to each other.

Contract negotiation and formal commitment: TOKI as a developer plays mostly a

role as a controller in the projects. Selecting the general contractor is the most
important phase in a project. To be a general contractor in a development project of
TOKI is accepted as a great experience among all contractors. In order to obtain
needed economy, TOKI has some rights and privileges (mentioned above) to get some
credit from either international sources or government budget in especially large
scaled projects. Finally in the phase of negotiating for design, in-house staff, which
will also control the next stage -construction, has the responsibility of negotiating with
the designers.

Construction and formal opening: general contractor and sub-contractors are

responsible for the construction of physical structure. For controlling and coordination
of the construction of a development project, architects and engineers of the institution
are charged. General contractor is paid periodically according to the work progress,
and he is responsible for the financial management of the construction phase. Formal
opening is initiated after TOKI accepts the construction as finished. By connecting the
utilities and tenants` moving in formal opening phase is finished.

Property management: in most cases property management is done by professionals

appointed by the tenants of a project. In small projects which do not require intensive
management activity, this activity can be managed by a tenant who is selected by the
other tenants in apartments.

6.2 KIPTAS: Example of Municipalities

KIPTAS is a participation of Istanbul Metropolitan Municipality. Istanbul as the biggest city
of Turkey is subject to migration of a dramatically size from rural areas of the country. The
city increases its population by about 200 000 250 000 per year. This is putting pressure on
the city to create new living areas. New immigrants contribute to speedy and premature
growth of the city by housing themselves in slums built over a few nights. These have been
the motives behind the concept developed by KIPTAS to build low cost- small size housing
units in order to avoid premature growth of the city and to provide secure and cosy places to
people with low income.


The lands, which in general are in the rural side surrounding the city or within the city, have
been turned into proper settlement areas and gained value in terms of economy, city planning,
social life and environment.
The housing units that are handed over to the people have a payment term of instalments for
48 months and as a result of this, people with low income (proportion of 60%) find the chance
of buying a house of their own. Between 1995 - 1999, 16 000 housing units were built and 11
000 housing units were handed over to the housing unit-owners and little combs of city alive
with all its functions have come out.
The main aim of KIPTAS is to make Istanbul a city where everyone lives more comfortably
by solving the settlement problems piled over because of the negligence since many years. It
is a principle to avoid any attempt that may damage the historical or natural structure of the
city, water resources, and forest and agriculture areas and stop the raid while setting the
The municipality of Istanbul allots a budget for the financing of the projects, which KIPTAS
develops. KIPTAS has also power to borrow foreign investors. Istanbul municipality is
planning to draw 25 billion USDs of foreign investment in the next 5 years17.
For the construction procedure, KIPTAS signs a contract with one or more construction
companies on a fixed amount. These construction companies handle the jobs in the control of
KIPTAS. However the marketing phase is totally made by KIPTAS. Because KIPTAS is a
participation of the metropolitan municipality it is very easy to settle a confidence
environment. In all of KIPTASs projects demand for constructed units exceeds the supply
and the management needs to draw lots.
As an example project, KIPTAS is selling out 135 m2 units which are located between the
center and the airport. The price for one unit is about 150 000 YTL (800 000 SEK)15 if it is
paid in advance. These units are constructed for acquiring more capital for future prjects and
selling to the people with middle and high income levels




Figure 6.3 Floor Plan example project

Source: www.kiptas.com.tr
As it is seen on the floor plan there are 4 units on one floor in 10 storey-buildings.

6.2.1 Procedure in Development Projects of KIPTAS

The procedure in the projects of KIPTAS is not very different from the procedure in TOKI
development projects. Since KIPTAS is a municipal development company, it has been
known as one of the most reliable developers in whole Istanbul city. Because the main goal is
to reduce illegal housing in the city, poor people and owners of demolished illegal houses
(mostly illegal houses are demolished by the municipality to produce land for new
development projects of KIPTAS or TOKI) have some priorities. As it is in TOKI projects
high profit margins are not the final goals of KIPTAS. However some projects are developed
and sold with higher profit in order to gain equity for other development projects. KIPTAS is
mostly active in urban transformation projects which will be inspected detailed in this chapter.
As in the projects of TOKI, the four assets- land, knowledge, tenants and capital are easily
handled problems for KIPTAS. Most of the projects are constructed on the land that is
produced by demolishing old illegal housing units. As a municipal corporation it has the
needed staffs for running the projects mostly as the general designers and controllers of the
projects. They have the needed experience and knowledge about the market, project
management and constructing development units. Finding customers is, as in TOKI the
easiest part of the job. As it is stated above drawing lots for selling houses is a widely used
method. Potential customers draw lots for getting the right to purchase a unit from projects of
KIPTAS. Capital comes mostly from the budget of whole municipality. But as it is stated
above some projects are developed for a special group of people with higher incomes and sold
with high margins to get capital for new projects.

Inception of an idea: General idea is getting rid of illegal housing gradually. Every
year many illegal housing units are demolished and new, legal units, which are strong
for earthquakes and healthy to live in, are constructed. Mostly apartment units are
included in their development ideas.

Refinement of the idea: The first phase of this stage is acquiring the needed land. If it
is suitable for new development, the lands that are supplied from previously
demolished sites are preferred. In some conditions, especially in the process of urban
transformation projects, the owners of demolished houses are promised to get newer
units from these projects. Another phase of this stage, that is crucial at that stage, is
selecting the general contractor. This phase is considered as the most important phase
of the stage, since the future of the project depends mostly on the general contractor.
Selecting an insufficient general contractor can cause a great damage for KIPTAS. In
this phase, in order to be selected as the general contractor for a KIPTAS development
project, it is an advantage for applying companies to be active in some previous
projects. Sub-contractors are mostly selected by the general contractor.

Feasibility: In the market study phase of this stage, national economic condition can
be a considerable factor, since the budgets of projects are supplied from the
municipality and the total budget is limited. Overall absorption rate is also estimated
in this stage depending on expected sale prices. Like in the projects of TOKI, in design
phase, designs of previous projects are used as example projects, which means that the
developed units in different projects of KIPTAS look like each other with some
differences. In the cost estimation phase the cost of land can be considered as a
subsidy from the municipality. Hard costs of construction constitute a great deal of
whole development costs.

The contract negotiation and formal commitment: Construction contract negotiation is

a phase that determines most of the hard costs of a development project. Generally
fixed price contracts are used in KIPTAS projects and additional duties which are
decided after the construction is initiated are negotiated and paid afterwards. There are
some cases that the general contractor gets the job from the developer and, leaves the
whole construction to a sub-contractor and only controls how the construction is done.
Even if the cost of a project is limited by a budget, this budget can be expanded in
extensive projects by supplying additional finance from local banks, or foreign
construction lenders and banks. Because of the low uncertainties in KIPTAS projects
this credit can be supplied easier with low interest rates.

Construction and formal opening: In this stage KIPTAS has generally a role as only
the controller. Some staff from the organisation controls every single step of the

6.3 REICs (GYOs) in Turkey

Inadequacy of capital in Turkey has been one of the most important problems of Turkish real
estate sector. Except for the publicly financed development projects, real estate sector has
been developed by co-operatives and private construction companies with limited
possibilities. New applications of GYOs16 (REICs)17 were initiated in the search of solving
this capital problem.


Gayrimenkul Yatirim Ortakligi

Real Estate Investment Companies


It is said that all the portfolio investments in the whole world is worth 95-100 trillion US
dollars. And %10 of these funds is accepted as real estate investments18. GYOs in Turkey
have been applied as a way of capturing a share from this worth. These applications can
attract interests of global capital in the world since GYOs must have the international finance
and investment standards.
REICs (Real Estate Investment Companies) are the institutions that can invest on real estate,
real estate development projects and establish partnership structures, in order to undertake
large-scale, distinctive real estate projects. The real estate sector in Turkey acquired the first
GYO company in 1997 and today (last quarter of 2004) there are 9 GYO companies which
are traded in Istanbul stock exchange market with a total portfolio of around 1 billion dollars.
This number seems very low especially compared to the REITs in the USA which has a total
portfolio size of more than 370 billion dollars with 180 companies being traded in a stock
market. The GYO companies in Turkey claims similar rights and tax advantages from the
government. Although tax and legal infrastructure exists in Turkey, the economic situation in
the country slowed the development of the sector.
Investing to the GYO companies is the only investment opportunity to the sector in Turkey
except for direct purchase of housing units.
Even though REICs sector is a newly developing sector in Turkey, a considerably high capital
has been gathered to the sector. By the tax advantages that Turkish government supplies,
several companies have established REIC partnerships to get new financial resources from the
stock exchange market.
These institutions have to sell their 49% shares in Istanbul Stock Exchange which is the only
stock exchange market in Turkey19. These companies have also some tax advantages by not
paying some kinds of taxes. They gather investors money in a fund and use these funds to
structure portfolios with high revenues or to construct development projects.
Although they exist in real estate sector, they are not permitted to get in construction or real
estate agency activities. For these kinds of activities they have to sign contracts with
By this method it is possible for the capital that is managed by the sectors professionals to
enter the development and construction sectors. Application of the mortgage system long
period housing financing, will make it easier for REICs to play a more crucial role in the
After 2000 economic crisis in Turkey the demand for large-scale, luxurious office area has
decreased and smaller office units have been preferred more. This has led to a decrease in rent
revenues of REICs in Turkey. However the demand for luxurious housing units has been
increased. REICs have had a crucial role in meeting this demand. Almost all of the property
units that these corporations have developed include mostly this type of property units. They
develop apartment units near to the CBD of Istanbul city or villa type housing units in regions
close to the suburbs.


Real Estate Summit IV



There are currently 9 GYOs traded in Istanbul Stock Exchange Market. The total net asset
value of all these corporations is around 1 billion USD (March 2005).
Net Asset Values of GYOs Traded in IMKB


million USD





















Diagram 6.1 Source: TEB market report

Market Values of GYOs Traded in IMKB (March 2005)



million USD
















Alarko Y.Kredi Atakule



Diagram 6.2, source: TEB market report

Distribution of Real Estate Portfolios of GYOs
Development Portfolio
Lands Buildings
(millon USD)
YK Koray 44%
Table 6.1, Source: Gayrimenkul expertiz AS (2005)


As it is shown in table 6.1, although the GYOs have been getting more active, only 16% of
their whole activity takes place in the development sector. Mostly they hold and lease
buildings and lands.
Total market value of GYOs is 823 million USD (March 2005). This value reached 1,3 billion
USD which has been the peak, in 200020.
In order to solve the finance problem of the real estate development sector, it is also needed to
develop a mortgage system (housing credit system with mortgage). This system leads to use
the customers future incomes. By preparing the sufficient infrastructure for the system it will
be seen that the potential of the sector comes out.

6.3.1 Procedure in Development Projects of GYOs (REICs)

GYOs develop generally luxurious housing sites which are affordable for people with higher
level of income. This requires more detailed and prepared researches about the market and the
demand among the people who can afford these units. Because Istanbul is a city that attracts
international capital and companies, the projects of GYOs take place mostly in Istanbul. The
target market of their projects includes foreign managers and staff of foreign companies.
Therefore these institutions are mostly active in metropol cities such as Istanbul or Ankara
where the capital city of the country is.
The four asset problem is generally a difficulty in development projects of these institutions
except for the knowledge. In most cases GYO companies establish partnerships with large
scaled construction companies that are very experienced in the development sector. Tenant is
a problem because of the limited profile of the target market. Especially in the periods of
crises, this problem comes into the market. Land is acquired by purchasing in some projects
or promising the landowner some share from the final development product depending on the
possible prices of units. Finally capital is sometimes a difficulty depending on the size of
projects. However one of the most important goals of establishing these institutions was
solving the equity shortage problems by selling some shares in the stock exchange. This
makes the capital problem less considerable for these companies comparing other private
developers in the market.


Inception of an idea: Because the goal of these institutions is acquiring higher profit
margins in their transactions, inception of an idea comes from the demand among the
people with high income. Their real estate development ideas include mostly
apartments close to the CBD or villa type housing units in extensive areas in suburbs
of metropol cities, especially Istanbul.

Refinement of the idea: For these institutions acquiring the needed site is a costly
procedure which costs around 30-40% of all project costs. This procedure can be
realised either by purchasing the needed land or proposing some share from the final
product to the owner of the land, depending on the contents of the subject project, such
as how much area is needed or how luxurious the projected housing units are.
Searching the possible competitors is also an important part of this stage. These
competitors are mostly the other GYO projects.

TEB Yatirim (TEB Investment Comp.) The analysis of the GYO sector.


Feasibility: Market study mostly includes analysing absorption rate and capture rate
among the professionals who are employed mostly in the management teams of large
companies and mostly foreign companies investing in Turkey. Among these
corporations this activity can be realised by professional research companies. Design
is shaped depending on general needs of the members of the target market. It affects
strongly both the development costs and the final price of the units because developers
need to select high quality material in their projects. Cost estimate is realised generally
by using the cost data of similar previous projects. This cost changes depending on
many different parameters unlike the projects of TOKI. Land cost changes in a wide
range and the cost that conceptual design makes up is also considerable in estimating
total project cost.

Contract negotiation and formal commitment: Several of all GYO corporations in the
sector include large construction companies in their partnership structures. General
contractors of the projects of such GYOs are generally these partner companies unless
the project includes some special elements. Other GYO companies must hire
experienced large construction companies to realise their development projects. There
are also some cases in which two GYO companies make up partnership in one specific
project for either this reason or supplying the needed capital. Design negotiation phase
is also crucial for GYO projects. For the final design of units and environment some
professional and sometimes famous international consultants are used.

Construction and formal opening: In the development projects of GYOs, physical

structure is constructed by either in-house staff or a general contractor who needs to
prove that he is capable for the subject project by showing his previous completed
projects. Depending on the size of the project the formal opening phase can be
initiated before the construction of all units is completed. In large projects on
extensive lands with villa type housing units some parts are completed, sold and
opened before the whole project is completed. Depending on the demand for a specific
project, after the formal opening, some new units can be initiated to be constructed by
also supplying additional land.

Property management: When the target group is considered, in GYO projects it is

obvious that professional teams are needed in property management phase. Social
activities and security are some of the most important terms in this sense for the target

6.4 Cooperatives in Turkey: Example of Batikent Project

Using cooperative institutions is also a common system for developing new housing units. In
this type of development cooperatives are established with their future residents. They pay
monthly payments to these institutions to finance their project. This means the marketing
procedure of a project is done before beginning of the construction.
The Project of Batikent has been the biggest mass housing project accomplished through
cooperatives in Turkey. A whole city has been developed through the project.
Batikent is on the western corridor of Ankara, the capital city of Turkey, lying over an area of
about 10,000,000 m2. Fifty percent of the area has been allocated for housing areas. The

Batikent Project was started by the Municipality of Ankara in 1974. 250.000 people were
planned to be living and 50.000 houses to be built on the land at Batikent. The total cost of the
project was about 1 billion $ including expropriation, social and technical infrastructure, fixed
investments and housing construction21.
Having commenced in 1979, with the foundation of Kent-Koop which has been a union of
housing cooperatives, the Batikent Project has sheltered 200,000 persons in 45,000 housing
units since 1983, in which the first settlement had begun with only 516 housing units.
Kent-Koop has started and developed BATIKENT Project as a joint, tripartite endeavour and
initiation based on cooperation among cooperatives (as non-governmental and voluntary selfhelp organizations) with the municipality and central administration in Turkey.
For the first time in Turkey, the sources and experiences of those three different types of
organization has been brought together in order to meet the housing demands of lower and
middle income groups, by creating a new, decent, green, clean, liveable and sustainable urban
environment as well as a community life socially and culturally desirable, by establishing a
civic engagement and spirit of citizenship on the part of new dwellers who are the members of
the same cooperative.
In order to accomplish this financially and technically big project, workers, civil servants,
traders, and low or middle income people who all could not own a house under the existing
mode of supply came together in cooperatives. Thus the project was accomplished through
cooperation among civil social organizations, the local administration and the central
The establishment of the cooperatives by the workers of limited income, lower public officers
and non-organised groups, were realised under the social cooperation model introduced in the
Batikent Project for the first time in Turkey. 13 cooperatives came together in 1979 in order to
form the Union of Housing Cooperatives in Batikent, KENT-KOOP.
Kent-Koop began to form the model of organization to be developed towards three aims.
These aims are:
* Organise on a project basis, particularly the lower and medium income people who suffer
from the housing problem and urge them to cope with their problems through democratic and
participative ways.
* Treat the cooperative movement not only with its housing construction dimension but rather
as an urban cooperative movement which also involves the social and economic dimensions.
* To effect cooperation among public organizations, particularly among local administrations
and civil organizations.
Three delegates from each member cooperative union have formed a general assembly who
meets once a year to discuss the operation and audit reports for the current year and the
programme and budget for the following year.
For the financing of the Batikent Project, Kent-Koop could supply some foreign resources in
1980 by introducing the Project to the European Resettlement Fund. On 21 May 1980,

http://www.unesco.org , Batikent Project


European Resettlement Fund allotted a loan of 28.5 million USD to the project for utilisation
in fixed investments and housing loans. The sum of the loans, allotted to the Batikent Project
by European Resettlement Fund between 1980 and 1984 was 86 million USD.
Batikent Project has an environment sensitive approach. Fifty percent of the project area was
allocated for housing and fifty percent allocated for non-housing areas; especially in green
and open areas the land use is above the standards.
The model of urban cooperatives, which was initiated by Kent-Koop, extended beyond
Ankara first in 1984 and later became popular nation-wide. At present, this model has taken
its place as nearly 600 cooperatives in 30 settlement sites, covering a 300 million m2 land in
the form of civilian organizations.
With the Batikent Project, Kent-Koop was awarded International Year of Shelter for the
Homeless 1987 trophy, which was organised, by UK Building and Social Housing
The Batikent Project was also entitled to another prize at a competition, organized in 1995
within the framework of the celebration programme for the 50th anniversary of the foundation
of the United Nations.
As a whole, Batikent project:
- is the biggest housing project in Turkey,
- is the first to demonstrate the success of public and cooperative collaboration and
- is the pioneer in bringing lower and lower-medium income people together in cooperatives,
either place of work and through workers unions,
- is successful, through cooperative action, in making the people able to decide on the housing
and environment plans and projects.
However for the last 10 years these cooperative institutions have lost their reputation, since
many of them could not complete their projects on the time that they promised. They were
quite easy to misuse and cheat because of their weak management structures. In 2004, more
than 1800 cooperatives got sued22.
Today because of the shortage of an implemented mortgage system in Turkey, cooperative
system is still a widely used type of housing development. It is quite hard to pay all the price
of a unit in advance for a person with middle-income. However a mortgage system is about to
come into the Turkish real estate market and this is expected to cause a decrease in the
number of cooperatives in the future.

6.4.1 Procedure in Development Projects of Cooperatives

Cooperative institutions in Turkey are active in developing sites that are financed by future
owners of the produced units. That means finding all the customers before initiating a
development project is the core activity of this type of development. This requires a
membership system in which all customers pay regular or sometimes irregular -depending on
the procedure, fees for financing a whole project. These projects may include luxurious

www.aliihsanbayir.com (website of a consulting and education company)


housing units if the members can afford these payments. Construction companies can also
establish and run a cooperative system if they have not enough capital.
Finding affordable customers who are willing to pay for a planned development project is the
most important question for these systems, among all other asset problems. Capital comes
also by that way from these customers. They pay all the capital that is needed for their future
properties. Land is also a problem since they need the land before negotiating with the
possible customers. People need to see the land to be convinced in order to get in these
membership systems. Knowledge and experience are important terms for especially managing
the general contractor. It is widely seen in Turkey that general contractors break their
promises about the finishing date of constructions. That damages the customers if the system
is not managed well.

Inception of an idea: These systems are set up for individual projects. This requires
that the inception of an idea comes before a cooperative is established. A person or a
group of people plan developing a site and establish a cooperative system.

Refinement of the idea: Acquiring the needed land for a project and negotiating with
possible customers are the core activities of this stage. Land cost is a problem in this
stage. Management team of a system generally need to get the land before negotiating
with the customers. Some loans from local banks may be arranged for land costs and
some part of payments that the customers pay, can be used for repaying this loan with
the interest rates. Another option for acquiring the needed land is sharing the future
property units with the owner of the land. Selecting the right option determines how
much the members of a project need to pay in the future.

Feasibility: Because the future owners of the units of a project are determined before
the development is initiated a detailed market study for analysing absorption rate and
capture rate is not needed. Design and cost estimate phases are crucial for this stage.
These phases should be also realized before finding the future customers. Before
getting in a project the possible members would like to know how the units are
designed and how much they will pay for the development. Design phase is generally
realized by professional architectural offices. The cost of a project is estimated by
either a consultant firm or an in-house staff.

Contract negotiation and formal commitment: If a cooperative is not established by a

construction company, a general contractor with relevant staff and equipment is
needed. Selecting the general contractor is one of the most crucial phases of all
activities in this type of development. Its widely seen that contractors do not finish
their jobs in cooperative systems because of weak law structure about cooperative
organisations. Negotiating for finance is important especially in the process of
purchasing the needed land. Because the members of a system start paying after the
land is purchased.

Construction and formal opening: Construction phase must be managed very carefully.
The members who pay for financing the development of a cooperative system have the
option to leave the project and to stop paying. They would like to see how the
construction goes on in order to continue paying. If one or some of the members chose
to abandon project -since the construction is not going well, some compensation must


be paid by the management to these members. In this condition the cooperative must
find new members instead of the leaving ones.

Property management: In this system property management is realised by the

management team of cooperatives depending on the scope and size of the
development. In small development projects the members set up a new management
team and this team manages the property management.

6.5 Construction Companies

Finally construction companies are the other players of the sector. They can sign contracts as
contractors or sub-contractors, realize new development projects, construct companionships
with other developers or construct cooperative institutions.
The most important problem and difficulty for these construction companies is the capital for
decided projects. Even if a company is financially strong enough it is generally hard to
finance a high scaled project because there is not a developed credit system in Turkey. The
widely used method for financing among small scaled companies, is marketing before
completing their projects, by constructing cooperatives and finding members who can pay
annual fees.
There are also some large and well-known construction companies which are included in
partnership structures with banks establishing GYO (REIC) that are inspected more detailed
One more important problem is the land problem for these companies. Especially in urban
areas it is getting more difficult to find appropriate lands for a reasonable price for
development projects. The most used method for solving land problem in Turkish urban areas
is letting the landowner join as a partner for only that project such as promising the landowner
40-50% of all units of the project. On the similar logic a landowner can hire a construction
company as contractor, but in this model the landowner is the developer and the construction
company is the contractor.
Construction companies also get into development projects as contactors and sometimes subcontractors. This choice is also reasonable especially due to lack of capital, by getting rid of
risk and marketing problems.
Construction companies in Turkey have limited possibilities finding loans for their projects.
In large-scaled projects, credit can be supplied from foreign banks or construction lenders via
some public corporations such as TOKI. In this condition TOKI becomes the guarantor of the
credit. However its been very difficult to find credit options with low interest rates in Turkey
since the 1980s.

6.5.1 Procedure in Development Projects of Construction Companies

In Turkey, construction companies are generally active on the local base. The size of a
construction company is mostly related with the size of the city in which the company is
active. Because of the increasing demand with better macroeconomic conditions in large cities


such as Istanbul, Ankara, Izmir and Antalya, the city gives the opportunity of getting larger.
Consequently these large cities create high competition level.
Land, capital, knowledge and tenants are main factors a construction company needs to
consider. The land problem is mostly solved by promising the landowner 40-50% of the
future property units. Capital is more important for small and beginning developers. Since the
business is risky, starting developers and construction companies must think twice.
Knowledge and Experience are the least important terms -among others, for small Turkish
construction companies. When the national economy is growing, people not having enough
experience but having little capital start running a construction company. Finally, if a
construction company has at least some of the needed tenants or customers, before a
development project is initiated, it is easier and less risky for the company to develop new

Inception of an idea: This stage is initiated depending on the needs of different target
groups in different geographical regions. The average purchasing power of a target
group determines the size and the scope of a project. Market research is done
professionally only for the projects of large scaled construction projects which are
generally active in cities like Istanbul or Ankara because of the diversity of purchasing
power in these cities. In rural areas or small cities it is easier to decide the target group
without making detailed market research. Having the needed site is a great advantage
in large cities to initiate a project.

Refinement of the idea: this stage is important for the construction companies
especially when the needed land is purchased. Because if the land is not productive for
the development, it is costly to abandon the project after purchasing the land and small
construction companies may not be able to bear that cost. Right use of the right site is
crucial for this stage. Widely used way of acquiring the needed land is sharing the
future product with the landowner instead of purchasing. However when a project
includes luxurious and expensive units, this method of acquiring land may not used so
widely. Since construction companies generally have the needed knowledge and
experience of constructing structures, they dont need to make contracts with a general
contractor. They are both the general contractors and the developers of their projects.
They manage their projects and make contracts with sub-contractors. Negotiations
with the public sector, future possible tenants, engineering and architectural offices for
preliminary project design and sources of finance are some other activities that the
company need to do on this stage.

Feasibility: For construction companies which are active especially in small cities, the
characteristics of the region have an important role in the market study which is the
first phase of the feasibility stage. For larger companies developing more than 1000
units, national economic conditions are more important. Estimating the capture rate
and the absorption rate of a project is also done in the market study phase. Design
phase is realized depending on the scale and scope of a project. According to the target
market, designer team may be selected among famous architects and engineers. In
construction companies cost of a project is estimated by in-house staff. Hard costs and
land costs are the most considerable terms of cost estimation.

Contract negotiation and formal commitment: Construction companies as the general

contractor, select their sub-contractors. These sub-contractors are generally fixed

teams unless some problems occurred in former projects. In rural areas and small
cities final design and finance problems are solved in the same way without
negotiating detailed. But in more extensive and costly projects these terms are
negotiated more deeply.

Construction and formal opening: For these companies construction stage is the easiest
stage since the activity is in their professions. They are active in all the phases of the
construction stage. However controlling the construction is also done by some other
companies which are charged by the municipalities. In large-scaled projects formal
opening may be done with some ceremonies but in small projects only some
documents are signed and the customers get their units.

Property and asset management: This stage is realized depending on the scale of the
project. Small construction companies do not take place in this stage. The new owners
of the units are responsible for establishing a small organisation for this activity. But
in large projects the developers can take this responsibility of managing the developed
sites. In this condition every property owner pays a fee to the developer.

6.6 GECEKONDU: Illegal Housing Development in Turkey

This type of development procedure is also worth to investigate, because, even if it is illegal,
it is a part of Turkeys housing and construction sector. According to the numbers of 2004
only %62 of all housing units in Turkey has building permits23. One reason for this condition
is the lack of institutionalization in the sector. This type of development causes both a tax
deficit for the government and a danger for the people who live in these units.
Gecekondu is a Turkish concept, which means built overnight. Gece means, night and
kondu can be translated as landed in Turkish. It takes this name because of the quick
construction process. It etymologically means constructed in one night. It was commonly
constructed as surrounding an unused land with walls and closing the top with a roof. Very
significant characteristic of a gecekondu is that it is constructed on somebody elses land,
generally the states land, without owners permission.
Since using a property without the owners permission is a crime, it is obvious that, use of
these lands should have been accepted as a crime. However there are some reasons for
Turkey not to behave like this. First, many of these illegal settlements are really built for
survival, separating from the commercial ones. Secondly the population of these settlements
are preferred to be weak by the government and the manufacturing capital as they need
always cheap labour.
Legalising gecekondu settlements has always been a populist policy issue for politicians and
political parties. Before all elections, political parties have used this promise to collect vote
for the last twenty years. Thus the best time to construct one of these illegal houses has been
just before the elections.
In 1984 gecekondu amnesty gave permission to the construction of four story buildings on
gecekondu land and this law turned many of gecekondu owners into profit seeking gecekondu

Real Estate Summit IV


What happened in Istanbul local elections in the last twenty years can be interpreted as an
attempt of gecekondu populations to transform traditional urban politics into some other form
that would not exclude them. Traditional urban politics always tended to see both gecekondu
and informal economic activities as unwanted urban land uses and activities. However, both
urban and economic growth was developed. Urban policies excluding these two factors are,
then, neither realistic nor for the people of the city.
Gecekondu inhabitants were accepted as people who usually preferred this type of housing in
order to survive. After 1980s, this type of informal housing has been transformed to a way of
making money from land. It started to be sold and purchased by the people and to be seen as
an investment for the future. There were important changes both in the physical appearances
and the construction processes of these settlements. For the municipalities whose duty was to
prevent this type of structuring, it was almost impossible to decide which of those informal
housing were to survive. Gecekondu concept has turned to a very complex process from that
innocent one.
Land and housing market in gecekondu neighbourhoods can be considered as a way of profit
making for many people who are living there especially for the early migrants. The recent
researches pointed how complicated the production of these settlements are, regarding three
simultaneous processes: first the inclusion of the actors like land mafia, gecekondu traders,
secondly changing forms of illegal housing from three or four story buildings to the
construction of lower middle class quality and luxurious apartments, and finally political or
economic struggle over gecekondu lands.
High urban growth rate and illegal housing has led to inadequate services and infrastructure.
In the report of United Nations Centre for Human Settlements (UN-HABITAT) these people
are defined as the people who are crowded and lacking of basic services and clean water.
Basic environmental problems in these regions are as follows:
Lack of adequate water with the risk of infections and diseases- especially for women
and children,
Indoor air pollution occurring because of low quality fuels such as charcoal and
animal dung for cooking and heating,
Solid and hazardous wastes creating problems in squatter settlements with no or little
garbage collection,
These problems in gecekondu settlements have some costs such as, medical costs,
productivity losses because of ill health days lost and finally loss of pleasure of a natural area.

6.7 Urban Transformation Projects

The biggest urbanization problem in Turkey is illegal housing. This problem creates another
problem about standards for earthquakes. In the 1999 earthquake of Marmara 42% of
properties in the area are infected and 33% of them have been dangerous to live in24. Most of
all illegal units of course have not been constructed according to the standards of static and
architecture and these units constitute a danger for an expected future earthquake especially in

Real Estate Summit IV


The approximate cost of Illegal housing to the municipalities is about 20-25 billion dollars.
The land policy of the government plays another role in this problem. 55% of all lands in
Turkey belong to the public19. This constitutes a huge area and it is hard to control all these
For the last ten years municipalities suffering from illegal units and the government have been
applying projects called urban transformation projects. The main idea is to produce land for
urbanization by demolishing the old illegal units by promising new legal houses to the owners
of these units. The most important aim is to get rid of or at least decrease poverty in suburbs.
These projects are only for the poor living in illegal houses.
Furthermore with the new law entry municipalities get more rights to acquire the lands that
the treasure ministry has, in order to apply their projects. Metropolitan municipalities like
Istanbul or Ankara will be able to get the lands larger than 10 000 m2. Municipalities have the
authority to produce infrastructured lands for providing systematic urbanisation, to purchase
or nationalize land for constructing and selling property, selling these lands to individuals and
co-operatives and applying projects in cooperation with public and private companies.
In Istanbul where the illegal housing is most comprehensive, it is planned to demolish more
than 85 000 property units in the scope the project. The owners of these illegal houses will be
settled in temporary social dwellings until their new units are suitable for living. The project
comprises not only the lands of illegal housing but also some lands of Treasury Ministry. The
constructed units are planned to be sold to former illegal housing units owners. They are
supposed to pay only the total cost of the unit that they purchase. As an average example they
will pay 50 000 YTL (300 000 SEK) to a flat which can be sold by the price of 120 000 YTL
(700 000 SEK).
Public companies like TOKI and KIPTAS have the greatest role in the project by managing
the individual projects especially in suburbs of Istanbul city. They sign individual contracts
with construction companies according to the size of each project.
An example of an urbanization project which is called Orange Flower project is shown in
figure 6.4. First figure is a picture of former situation of the project area and the second
picture is the present form of the area. An average price of a 120 m2 apartment flat varies
from 120 000 to 150 000 YTL (700 000 900 000 SEK).


Figure 6.4: Portakal Cicegi (Orange Flower) Project in Ankara.

Source:Gayrimenkul Zirvesi IV (Real Estate Summit IV)


7.1 Yeni Umit Evleri Project
The Name of the project: Yeni Umit Evleri Project
The Developer: DIKEN NSAAT
Developer is a small, family owned construction company working both as a contractor and as
a developer in different projects.The project is the first development project of that scale of
the company. The firm was previously more active in consultancy services for some other
construction projects and companies.
Husnu Diken who is a civil engineer and the partner of the company is assigned for the
management of Yeni Umut Evleri project.
The decision making process of the developer involves both partners to negotiate and make a
decision accepted by whole partners.
Location: Kurtkoy / ISTANBUL
Land: 7100m
The Subject of project: Low density, detached residential real estate project. It includes 35
detached units (ranging 169-244 m2), social center with an outdoor swimming pool, tennis
courts, playgrounds for basketball and some areas prepared for walking.
The Contractor: DIKEN NSAAT
The Purchase of Land: The vast majority of the land had been purchased by the family long
time before the project started, the remaining part of the land was purchased with the
commitment of 10 units.
The calendar of development: The planned and realized calendar of process is defined

The construction of sub-structures initiated in April 2001

The construction of infrastructures initiated in March 2002
The first unit is delivered in October 2002

However, in the development program the whole units are projected to be sold and, delivered
until May 2003, 25 (ten of them were sold for the part of the land) units of 35 units have been
sold until the end of 2003 and 6 units are still for sale25


The numbers are for the first half of 2005


The motivation behind the development: There are several reasons/motivations behind the
decision of initiating the development process;

The land is owned by Diken family and, the permission of construction was initiated
to be given to lands in Kurtkoy. Thats why one of the major motivation is the site
looking for a use.
By the time, the Diken Construction Company initiated importing a pre-fabricated
construction system called ATY (Ahsap Tasiyicili Yapim Sistemi) and was looking
for a site to demonstrate the system.

The Strategy of the development: Development strategy is based forming a residential

development, planned to be financed by pre-sails, via which the developer will transfer the
land into cash equity and demonstrate the ATY system.
The Feasibility of Project: The feasibility study of the project followed the steps listed

Determining the target market

Target market is used for modeling the quantities by determining how much a member
of the target group is able to pay for a house.
Designing the concept project and layout up to the target market
Conceptual design was shaped by the inputs (total payment capability and duration of
payment) of target market.
Calculation of costs and designing the cash flow and budget
Having the conceptual design and layout drawings, the construction cost was modeled
then, additional costs for marketing and general overhead was added in order to form
the budget of the project.
As the land is purchased with the commitment of 10 units, the revenue, projected to be
gathered from remaining 25 units, was accepted to finance the project and form the incepted
income. The selling price of the units has changed from 1000 to 1400 USD/m2 depending on
the selling date.
The major deficit in calculations occurred in the cost calculations of infrastructure and,
purification structure, which is the first experience of the company and thought to be caused
by calculating the cost without the proper design. These costs were calculated using the
theoretical knowledge of the team. Because of the lack of practical experience some gaps in
these calculations occurred in this process.
The major deficit in budget occurred in the item of general overhead. By the economic crises
the projected sales schedule couldnt be reached and by the delivery of sold units and the
extending project schedule, a gap occurred in the budget, which was later financed by own
wealth of the developers.
The Equity of Development: Up to the development budget, the major financial resource of
development is Pre-Sails and the equity of the construction company. The construction system
enables the developer to build the house within 3 months after the sales, thus only infra and,
sub structure and, common areas items needed to be financed before sales. (Also the


But because of the economic crisis (Increase in construction costs and decrease in speed of
sales) there have been a lack in the financial resources of the project and the own wealth of
the partners, which was transferred to the company, was used to finance the gap.
Features of development concept: The construction system provides the flexibility of
making changes in interior layout and electrical-mechanical structure. As the construction
begins after sales (Accept sub and infra structure) each customer has the choice of making
changes in interior design.
As the building process after sales takes only 3 months, system also serves flexibility for
fitting the building process to the payment schedule of customers.
The marketing of the project: However, it had been negotiated to out source the marketing
and sales activity of the project, the cost of such effort did not seem feasible within the budget
of the project. Thats why the development team also undertook the marketing responsibility
of the project. Marketing effort followed the below listed steps;
Defining the target market
The target market is defined as the middle stage managerial staff of international firms.
Reaching the target market
Like the other development projects, advertisement played a major role for reaching the target
market. Another key tool was using customers themselves as sales representatives by building
the social center buildings (Accept swimming pool) first and motivating the customers to visit
the project with their friends in the weekends.
Demo house Demonstrating the end product
The demo house, which was built first play a key role for convincing customers.
The Strategic decisions through out the process: The major problem that development
team faced was the economic crisis of year 2001. Five units have already been sold and, the
construction of infrastructure was initiated when the economic crisis began.
The sales stopped and the construction costs (Especially imported items) increased. The vast
majority of the target market of the project was affected economically by the crisis. The
strategic decision was to continue to the projects infrastructure and give the whole customers
the message that the project is going on.


Figure 7.1: Demo House of the project for advertising

7.2 Dort Mevsim Evleri Project

The Name of the project: Dort Mevsim Evleri (Four Seasons Houses)
The Developer: Alarko Real Estate Investment Company (Alarko GYO)
The developer company was established in 1996 as a real estate investment company (GYO)
but Alarko Holding as a whole company was established in 1978. 49% of the company is
traded in the stock exchange market.
The developer is one of the leading and well-known companies not only in the real estate
development business but also in many other professions such as air-condition systems. Real
estate development is one of the several business branches that the group involves. The
general management authority of each branch is undertaken by a coordinator thus, for the
general management authority of development projects the Coordinator of Land Development
is assigned.
The developer is organized up to the functions and each Coordinator assistant undertakes the
responsibility of a function. Above the coordinator, there is a strategic apex called DDO
(Denetim, Danma, Onay26)
The decision making process is divided into three major parts. Operational, coordinative and
Operational: The staff of each functional Assistant Coordinator, for a project is
responsible for decision making
Coordinative: Assistant Coordinators are responsible for decision making.
Strategic: Land Development Coordinator and DDO are responsible for decision
Developer defines his strategy as defining the market niches and, developing reformist
properties in order to be a trademark in development environment. The company considers

control, consultancy, approval


customer satisfaction having a key role in the strategy by providing customers the new
projects. Developing new areas where other developers have not already been is one of the
key concepts.
Location: Riva / stanbul
The Subject of project: Low density, detached residential housing project. It includes 164
detached and units and social centers.
The Contractor: KUZEY NSAAT
The Purchase of Land: The land was owned by a several private people and brought to the
developer with regard to some of the units after completion. The land was purchased with
regard to %30 from the development. This share seems lower than the general market
numbers. The reason is the fact that these planned units would be constructed with the first
class and luxurious material and therefore the future prices of the units are excepted to be
higher respectively to the worth of the land.
Before the purchase of the land the developer made a market research to constitute the basis
for feasibility study. By the completion of the feasibility study of subject development, the
developer negotiated with the land owner for the purchase conditions of the land.
The calendar of development: The development process was divided into three phases listed

First phase: 86 detached units

Second phase: 46 detached units
Third phase: 32 detached units

The planned and realized calendar of process is defined below;

The sales initiated in 2000
The construction of first phase initiated in 2000
The construction of second phase initiated in 2001
The construction of third phase initiated in 2003
The whole project was delivered in 2004
42 units were sold before the construction phase within a short period of time (25 units were
projected to be sold in the period of feasibility study). The sales schedule of the second phase
was designed according to the inception that the demand would decrease because of the
economic crisis. There were not any delays or deficits in the schedule of the project.
The motivation behind the development: There are two major motivations behind the idea;
The price of the land. Because of the following reasons the price of the land was cheap
(30% of the project) and there were not much development around the area; there were
not any developed infrastructure (Electric, sewer, sanitary, energy), building
permissions was not given to the area, the land was in the form of unplanned (also the
area) lots.
Trends of the date. By inception of the idea, country life in the periphery of stanbul,
also with the economic climate of the date, was a new developing trend.


The Strategy of the development: Development strategy is based forming a residential

development, planned to be financed by pre-sails. The pre-sails are based on the reputation
and previous customer profile of the developer. Each phase is excepted as a different income
center and thats why each phase is undertaken as a different project within the main
development frame.
The Feasibility of the Project: The feasibility study of the project followed the steps listed
Market research and planning activities
Three different firms were assigned to make market research for the subject
development and planning activities are performed to decide on the building density of
the site.
Defining the key concept of the project
The results of market research and other information gathered are used to define the
concept and price of the land.
Calculation of costs and designing the cash flow and budget
Cost is modeled via the cost data of the previous projects. The cost is modeled up to
the approximate construction space. End product is further modeled up to the
feasibility study.
The major deficit in calculations occurred in the cost calculations of land development
because of the low bearing capacity of soil. Developer provided resources for to make
additional measures for the structures. (Some of them are much more than needed)
The Equity of Development: Up to the development budget, the major financial resource of
development is Pre-Sails. The whole development process is financed by pre-sails and, there
hasnt been any need for additional resources.
The developers projection for initiation was 25 units thus, accepting the price 200,000 USD
per unit, projected development equity at the beginning was 5,000,000 USD. The developer
sold 42 units after initiating the sales, which means %65 more fund than development equity.
The marketing of the project: For the first and second phases of the project, marketing
responsibility was undertaken by an in house staff but only for the third phase of the project,
as the quantity is less than the other phases, an informal connection was established with an
outside lease organization.
Marketing effort of the development process began with the market research that is
outsourced to three different firms, in order to refine the idea and set the basis for feasibility
study. The results of market research are later used for;

Defining the target market and end product

Defining the approximate sales price of the units.

The sales schedule was better than projected in the feasibility study, which made initiating the
following phases easier and provide the developer the chance to increase the sales prices of
units. The approximate sales price was 200,000 USD at the beginning where the approximate
sales price of similar units increased to 500,000 USD through out the following phases. This
time period was a process of getting out of the economic crises for all sectors in Turkey.
Thats why these prices increased so sharply.

The developer made a strategic marketing decision by initiating the second phase of the
project after the economic crisis in 2001 and while the construction of the first phase was
going on. Initiating the second phase enforced the trust to the project and developer.
His strategy of satisfying the customers provided the developer with customers from previous
projects. Eighty percent of the customers of the first phase were owners of a developers
previous project, Alkent project.
However the only on-site sales tool in the first phase was the sales showroom, the developer
build and decorated five different demo houses each for a different type of unit, those made a
great contribution to the sales.

Figure 7.2: Completed units of the project

7.3 stanbul-stanbul Project

The Name of the project: stanbul-stanbul
The Developer: Yap Kredi Koray Real Estate Investment Company
The company was founded in 1996 by the participation of two leader firms in their sectors,
Yap Kredi Bank (%26) and Koray Building Industry (%25). The rest of the shares are traded
in Istanbul Stock Exchange. The developer defines his concept as proper analysis of demand
in the market and realization of projects with in the international standards. The developer is
the first real estate investment trust that undertakes development project as an investment and
defines his strategy of undertaking development business as generating more value to the
investors by creating concept and terminating them to trade marks of real estate. The
developers portfolio consists of residential and office properties.


The developer defines measurable aims for five years time horizon and aims to reach the
defined goals via an optimum in house staff focused on coordination.
The management system of the developer is evolving from basic development staff to matrix
organization by the new investments of the company. There exists three basic functions;
Finance, Marketing and Project Management. For each development project, coordinators
from both project management department and marketing department are assigned whose
responsibility is limited with the decision making on the details of project without affecting
the main concept or end product.
Location: Kemerburgaz / STANBUL
The Subject of project: Low density, semi detached and apartment type residential housing
project. It includes 144 semi detached and 60 apartment units and social centers (Spread to
8500m area). Social centers include a small lake, outdoor and indoor swimming pools, tennis
courts, squash courts and a restaurant.
The Contractor: Koray Yap Endstrisi
The Purchase of Land: The land was owned by Koray Yap Endstrisi and, a family. The
land was purchased from the owners and constituted the first investment of the company. The
value of the land (max. price), up to the procedures of SPK27, was defined by analysis of three
different appraisers.
The calendar of development: The development process was divided into two phases listed
First phase: 117 semi detached units (188-274 m2) and 29 apartment units (79-158 m2)
Second phase: 27 semi detached units (188-280 m2) and 21 apartment units (79-158
The planned and realized calendar of process is defined below;
The sales initiated in October 1998
The construction of first phase initiated in May 1999
The construction of second phase initiated in September 2002
Whole units of the first phase have been sold approximately one and half year before the
initiation of the construction and there havent been any delays or deficits in the schedule of
the project. The decision of initiation of sales by the completion of preliminary design served
the developer the chance of completing the first phase when the economic crisis occurred.
The approach of the developer is to assign the architect before the decision of development
and the architect plays a key role in the selection of the site and features of the product. The
property manager of the project (property management firm YKS28) was assigned by the
completion of the first phase thus, the property manager had no affect on the features of the
project but the developer aims the early assignment of the property manager (also to
participate in the take over from the contractor) for the new developments.


Sermaye Piyasai Kurulu (Capital Markets Board of Turkey)

Yapi Kredi Sigorta (A sub-company of the main developer)


The motivation behind the development: There are two major motivations behind the idea;
The demand in the residential market for the target market of professional managers
aged between 35 and 40.
The land, partially owned by one of the partners, fits the concept of development.
The Strategy of the development: Development strategy is based forming a residential
development, planned to be financed by pre-sails. The developer defined the niche in the
residential market and aimed to serve the market by forming a trademark of residential
The Feasibility of Project: The feasibility study of the project followed the steps listed
Market research and analysis
The market research was out sourced to different firms and the information gathered is
analyzed in order to define the target market. The residential development segment for
professional managers, especially the enlarging families, came out as an evolving
Defining the key concept of the project
By the participation of the architect, the key concept and conceptual layout of the
project is formed. This layout formed the basis of cost calculations up to the cost/m of
gross floor area.
Fitting the property to feasibility
The design than is formed to fit the pre-defined cost of construction by also keeping
the standards of commitment to the customers.
The major deficit in calculations, as the cost of the construction is formed via the conceptual
layout, occurred in the unpredicted construction details those realized while transforming the
preliminary design to detailed design. But the cost of construction had never been above the
limits defined in the feasibility study.
The Equity of Development: Up to the development budget, the major financial resource of
development is Pre-Sails. The whole development process is financed by pre-sails and, there
havent been any needs for additional resources.
The trade off of the project investment occurred eight months after the initiation of sales (also
7 months earlier than the initiation of construction) and the cost of the land was financed by
finance of pre-sails. From that point whole of the project was figured out without any
financial commitment of the developer. The developers plan, in the circumstances of a lack
in financing the development, was adding extra resource from the own equity of the firm and
describes the circumstances of economy, during development, unstable for purchasing a loan.
The financial approach of the developer, to financing the process via financial instruments,
can be summarized as to be cautious.
The marketing of the project: The marketing strategy of the developer is to create a
trademark of real estate based on product and customer oriented approach to development


The developer defines his strategy also by standing by the customer not as a part of
commitment and realizes this approach by constituting a customer relations department. The
developer undertakes two major missions; serving the customer in the period of guarantee and
assisting the customer at all. This approach served the developer for customers from their old
Sales activity was undertaken by the in house staff of the developer and the developer also
defines this approach a strategy of securing the know-how in house.
The strategy of increasing the prices periodically also enforced the sales activity. The price of
1200 USD/m increased up to 1700 USD/m till the economic crisis. After the economic crisis
the developer reinforced a new sales strategy by decreasing the sales price through 1500
USD/m to keep the sales speed still.
The Strategic decisions through out the process: The major strategic decision of the
developer was made by the decision of initiation via conceptual design.
The risks associated with the decision were; defining the sales price of the units up to the cost
projections based on conceptual layout and sales of units again up to the conceptual design.
An unidentified product commitment might have caused further problems between the
customers and the developers about the end product.
The developer undertook the risk up to the analysis of performed market researches thus, the
developer should move fast to supply the demand of the market niche in the residential
development. Supply of the right product to the evolving market served the customer with the
sales of whole units of the first phase approximately one and half year before the initiation of
construction. And by the economic crisis occurred, the units of the first phase were being
delivered to customers.

Figure 7.3: Final picture of the units

Source: www.yapikredikoray.com


Figure 7.4: Map of Istanbul29


Yeni Umut Evleri Project: Kurtkoy (near Cekmekoy in the map), Dort Mevsim Evleri Project: Riva (above
Beykoz in the map), Istanbul-Istanbul Project: Kemerburgaz



Turkey is a country with a high population growth rate which indicates both a potential and a
problem. This growth rate has always led a continuous demand in the real estate marketespecially in residential real estate market. Since the beginning of the 1960s, when the
urbanisation in big cities such as Istanbul or Ankara started to be fed by immigrations from
rural areas, the real estate has been one of the most reliable and valuable investment tools in
the country. The people in Turkey have been suffering from high inflation problem and
property investments have been considered as the strongest and respectively guarantied
investment tool against this high inflation among small investors.
Until the recent years the market in Turkey had been dominated by individual small
construction companies and cooperative associations being established by these construction
companies. For these developers the land and the finance were the main two difficulties to
reach the success in the business. The most widely-used solution to the land problem was
forming a partnership with the landowner for that particular project, and for finance problem
the developers without needed capital generally established cooperatives in which the buyers
of the produced housing units are supposed to pay monthly (and sometimes separately a
couple of times in a year) fees.
However in the recent years public sector such as TOKI and municipal companies like
KIPTAS has been more active in the process. These companies have searched for solutions to
problems such as illegal housing in large cities which have been suffering from immigration
and housing supply for the poor. They have developed also luxurious housing with the goal of
supplying more capital for other development projects. But except for KIPTAS in Istanbul
and some other municipalities of metropolitan cities, TOKI is the only public developer that is
active in the whole country.
The term of GYO (REICs) got into the Turkish market in 1996. Even if they are getting more
and more active in the sector, the share that they can capture from the market is respectively
small, especially when we consider the same share in the US market or other developed
markets using the system in the world. However the success of these companies shows that
they are going to be more active with new GYOs which will be structured after the overall
economy of the country will be sustainable.
The case studies in this study showed that the land and capital problems are the main
problems that the professionals of the business meet. As it is shown it is not too difficult to
start marketing before the construction is initiated especially when the subject project has
particular characteristics such as a special design or a well-known and reliable developer. The
demand needed exists in the market.
In Sweden, as far as I have observed, the public sector is more active in the market especially
because of the high costs of construction. In spite of high demand of housing, construction
costs make it difficult to get in the business for small developers. When we consider Turkish
municipalities, municipalities in Sweden are more active in the development business getting
more shares from the market. According to SABO records there are nearly 300 member
companies which are mostly municipal companies in Sweden. In Turkey municipalities are
only responsible for inspecting development projects within their physical municipal areas
with the exception of companies such as KIPTAS.

Cooperative companies are also very active in Sweden working different from Turkey. The
main difference is the fact that the cooperatives in Sweden are staying active in also the
process of property management where as the cooperatives in Turkey get completely out of
the process after delivering the units to their future owners.



The research done has provided a brief overview of real estate development, the main actors
of the business in Turkey with some differences from Sweden.
The activity of real estate development is growing more and more complex. The development
activity is not only constructing and leasing of projects but a teamwork requiring the
participation of professionals of different disciplines.
The process includes many different activities from the renovation and re-lease of existing
buildings to the purchase and development of raw land. The development process also
undertakes a major role in the transition and development of cities may affect the planning
schemes and population distributions of cities.
The process includes a great deal of uncertainty, especially in fluctuating economic climates
like the one in Turkey. Thats why the developer should understand the economic climate in
which the development process takes place thus, the real estate trends are connected to
national (also global) economic trends.
However the developers those are members of diversified group of companies have the
advantage of using economic analysis of the group as a strategic tool of investment,
fluctuations in the Turkish economy (mostly unpredicted) have direct impact on the
development process. The economic climate and conditions affect the process by;

Change in construction costs

Fluctuation in market segments
Fluctuation in rate of exchange

As a result of unstable economic conditions, the developers mostly focus on using their own
equities and prefer to be cautious about using financial instruments.
By the earthquake and economic crisis, the real estate market in Turkey shifts to customer
focused market thus, the real estate customer is more knowledge than ever before about the
point that the purchase of real estate is an important investment decision.
The environment of the development process is like the environment of developing a new
product but with a major difference, there is not a special way to test the performance of the
subject property. Thats why the developer should perform detailed analysis while deciding
on the features (Location, target market, features of subject property) of the project.
In the Turkish market, the decision of investment is key point for the developer thus,

In order to make a proper investment decision (also to pursue others especially the
financial players), the developer needs a feasibility study. The developer should
search, gather information, make analysis and perform projections for the feasibility
study. Feasibility is mostly based on a conceptual design and a cost model, mostly
cost/m of gross floor area.
Analyzing the information gathered by market research, the developer defines his
projection of sales price and schedule in the feasibility study.

After the decision of investment, the developer focuses on planning. The features of
the subject property, which will compete with existing and developing market, are
defined at this stage, with regard to the costs assigned in the feasibility study.

As the construction initiates, the developers focus shifts to construction project management,
where time quality and budget appears to be the items to be controlled. The main objective of
the developer is the coordination of efforts. By the completion and formal opening of the
subject property, the development process ends where as the property management process
From the beginning of the process till the end, the developer should observe the project from
the perspective of each participant. Especially, successful developers should be able to
examine the feasibility study from the perspective of financial players.
The key point that a developer should be aware of is that performing the activities of
searching, gathering information, analyzing and planning does not guarantee the success of
the process, but minimize the risk associated with investment. The success of a real estate
development project is much more related to fitting the demand in the market.


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