Construction sector in Georgia slows down after several years of growth

Activity in Georgia’s construction market is decreasing after a period of rapid expansion. According to the National Statistics Office, the number of permits and the pace of housing sales are declining, while costs remain high. Analysts note that an oversupply of apartments in Batumi is reducing profitability, and investor interest is gradually shifting toward hotel projects operated by international brands.

New projects

In the first nine months of 2025, Georgia issued 8,597 construction permits, which is 2.8% fewer than in the same period of 2024. The total planned area of new buildings reached 8.48 million sq. m., down by only 1%, indicating that project volumes remain high.

Almost half of all permits were concentrated in Tbilisi (45.3%). Significant shares were recorded in Kvemo Kartli (10.8%), Kakheti (9.8%), and Adjara (6.7%). Together, these regions accounted for more than 70% of new projects, dominated by residential complexes, hotels, retail, and industrial facilities.



In the same period, 2,452 buildings were completed — 5.6% fewer by number, yet their combined area increased by 6.7% to 2.48 million sq. m. This reflects a shift toward larger and more capital-intensive developments. Most completed buildings are located in Tbilisi (34.8%), followed by Mtskheta-Mtianeti (12.7%), Kakheti (11.6%), and Kvemo Kartli (9.1%).

Cost decline in September

In September, Georgia’s construction cost index decreased by 0.1% compared with August, but remained 4.7% higher year-on-year. The key factor was a 1.6% reduction in wages in the sector, which lowered the overall index by 0.23 percentage points. Transport, fuel and electricity fell by 0.4%. Costs for machinery and equipment remained unchanged since August but increased by 5.3% year-on-year. Prices for construction materials rose by 0.1% over the month and by 0.2% over the year.



In residential construction, the index fell by 0.5% month-on-month but grew by 7.5% compared with September 2024. In the non-residential segment, the index increased by 0.5% month-on-month and by 5.9% year-on-year. Civil construction showed no monthly change, while the annual increase amounted to 1.7%.

Batumi: growing housing stock and declining sales

According to Galt & Taggart, Batumi’s housing stock increased by almost one-third in four years — from 86,000 apartments in 2020 to 119,000 in 2024. Another 58,000 units are expected to be delivered between 2025 and 2029, of which nearly 80% are intended for short-term rentals, while only 11,400 are designed for permanent living.

Of the 46,300 new apartments, 64% are priced at $1,500–2,500 per sq. m, 20% below $1,500, 12% in the range of $2,500–3,500, and only 5% belong to the luxury segment. More than half of these new buildings are mid-range studios, increasing the risk of a homogeneous supply.

Meanwhile, primary-market sales are declining: whereas 3–3.4 thousand units were sold annually in 2022–2023, sales fell to around 2 thousand in 2024, and to only 1.5 thousand in the first eight months of 2025, despite supply of roughly 6 thousand units. Excess construction continues to pressure the market and reduce rental yields.

Real housing profitability

According to experts at International Investment, the actual rental yield of Batumi apartments is significantly lower than advertised. With an average occupancy of about 43% and a studio price of $59,500, gross annual revenue is around $5,900. However, after expenses, net income does not exceed $1,700 per year — equivalent to 2.8% annual yield and a payback period of about 35 years.

Even long-term rentals perform only slightly better, reaching about $1,900 per year, or 3% yield, with a payback period of roughly 32 years. Around 30% of income goes to online-platform commissions, 10% to management and cleaning, and another $1,300 annually to utilities, taxes, and renovations. All this reduces real profitability by nearly a factor of three compared with expectations.

Hotel projects: profitability higher by 19%

Against the backdrop of declining apartment yields, analysts highlight rising interest in hotel projects operated by international brands. With an investment of about $286,000, the annual net income from a branded hotel room, such as Wyndham Grand Residences in Batumi, may reach $34,600 — equivalent to a 12% annual yield and a payback period of around eight years.

The profitability of branded luxury hotels is on average 19% higher than that of apartments. Considering price per square meter and gross income, the payback of a hotel room is roughly 4.8 times better than that of a residential apartment. This gap explains why investors are turning toward hotel projects, which offer more stable demand and predictable income.