The Association of Real Estate Investors in Romania (AREI) presents the conclusions of an extensive study examining the impact of the real estate and construction sector on the national economy in 2023. According to the study, the real-estate sector, which has been a key driver of the economy in recent years, is going through a critical period, which may affect Romania’s economic stability. The report reveals a considerably negative impact on the national GDP, caused by an uncertain urban climate and major administrative blockages, especially in Bucharest.

According to the public data analysed by AREI, the contribution of the construction and real estate transactions sector to GDP formation in Bucharest is below the national average, standing at 12.8% in 2023, down 2 percentage points compared to the peak in 2020. 

Bucharest has a decreasing contribution to GDP formation at the national level, reaching only 29.4% in 2023 (the minimum of the last decade), compared to 34.6% in 2021, 36.2% in 2020 or 37% in 2019. The negative effects are already visible, with the uncertainty generated by the urbanistic climate having negative economic consequences. 

The loss of tax revenues results in a significant drop of budget revenues. These losses, caused by the uncertainty of urban planning regulations and administrative blockages at the level of Bucharest, are estimated at RON 18 bln. for the period 2023-2026, while the estimations reported for the last two years (RON 2.8 bln.) almost materialized (RON 2.4 bln.). This is a major impact, given the dimensions of the public budget approved for the Bucharest Municipality in the amount of RON 11.6 bn for 2023.  

According to the public information analysed by AREI, in the next four years, the total loss of added value to the economy could reach RON 61 billion, which means an annual average of 1% of Romania’s GDP and 3% of Bucharest’s GDP. This significant drop could destabilize not only the capital city, but the entire national economy, given the importance of this sector.

The much more accelerated decrease in the volume of construction in Bucharest, compared to the rest of the country, is also visible due to the significant reduction in the number of building permits issued for new buildings, which has declined to half. The 10% drop in the number of completed housings projects in the capital city over the last two years will further enhance in the coming years.

The existing administrative deadlock in Bucharest has placed the capital city at the bottom of the top 10 counties in terms of fixed assets held by construction companies, respectively at 17% in 2023 and below 10% in 2021 and 2022, while the average investments in the sector at the national level accelerated from 12% (2021), 21% (2022) to 24% in 2023. 

The Association of Real Estate Investors in Romania emphasizes the need for public authorities to take urgent measures in order to unlock the development projects and assume a clear strategy regarding the existing urban planning regulations. In this context, it is essential to approve the Land Planning, Urbanism and Construction Code and to speed up the drafting process of the new General Urban Plan of Bucharest, where no significant progress has been registered so far. The member companies that form the AREI community already have in their portfolios and continue to plan the development of projects that are oriented towards the needs of the community, including social and public utilities such as day-care centres, kindergartens or educational units, but they are facing major hold-ups due to uncertainty and lack of action regarding the urban development strategy in Bucharest. In this context, the recent initiative to block the activity of the Technical Traffic Commission of the Bucharest Municipality unfortunately does not represent a constructive step in this direction. Unless rapid action is taken, the difficulties faced by the sector will continue to severely affect the economy. 

According to Dennis Selinas, President of the AREI Board of Directors (Association of Real Estate Investors in Romania), “In Bucharest, we are facing a significant stagnation on the issuance of building permits in recent years, and this affects not only the private sector, but also the public investments required for the development of the city. AREI’s vision is that through a real partnership between investors and the local public authorities, this situation can be improved, and we are committed towards investing and contributing to develop projects that support both local communities and the business environment in Bucharest. In this context, we are trying to improve the communication with the authorities and to facilitate some progress, while complying with strict urban planning regulations that are in place. We want to work more effectively with decision-makers to ensure a sustainable development and a favorable investment environment.

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About AREI

The Association of Real Estate Investors in Romania (AREI) is the only Romanian real estate association that brings together the most important real estate investors, covering the entire spectrum of the industry: residential buildings, office buildings, commercial and logistics. 

AREI’s mission is to represent, promote and protect the interests of real estate investors in Romania, with a special focus on strengthening cooperation between the relevant authorities and investors. Through its actions and constant involvement in all public policy approaches with impact on the real estate industry, but also on the economy as a whole, AREI has managed to become a relevant voice of the Romanian business environment, a partner for discussion and collaboration, having a substantial contribution in the public consultation process. AREI aims to operate as a dynamic body, constantly growing and reinventing itself to the demands of the market and its members. AREI supports relevant partnerships between members and partners of the association, understanding the importance of creating a high standard of activity that is respected by all members of the organization.