New Challenges in Georgia’s Real Estate Sector

February 2025 brought signs of significant transformation in Georgia’s mortgage lending market. According to statistics from the National Bank, 3,499 new mortgage loans were issued during the month — a drop of 18.5% compared to the same period in the previous year. However, despite the decline in the number of loans, the total loan volume rose to 328 million GEL, marking a 2% year-on-year increase. This shift highlights an important trend: banks are issuing fewer but larger loans.

The change is most evident in the growth of the average mortgage loan size. In February 2024, the average mortgage stood at 74,800 GEL; a year later, it had increased to 93,700 GEL, a 25% jump. This rise is likely tied to the increasing cost of real estate, particularly in Tbilisi and other major cities. Rising inflation in construction materials, land plots, and labor costs has driven up housing prices overall.

In response to slowing mortgage issuance and rising loan sizes, the National Bank of Georgia (NBG) introduced regulatory easing. On February 26, the Financial Stability Committee announced a reduction in minimum down payment requirements. From now on, borrowers are required to cover just 10% of a property’s value — down from the previous 15% threshold — making mortgage access significantly easier. In other words, banks can now finance up to 90% of a property’s price. This move likely aims to stimulate demand, balancing out the observed decline in loan issuance.

The changes also benefit Georgians living abroad. For those purchasing homes in Georgia with foreign-earned income, the minimum down payment has been reduced from 30% to 20% — a major relief for members of the diaspora aiming to invest in homeland real estate.

Another point of interest is the average mortgage interest rate, which now stands at 11.81% — a 0.27 percentage point decline from the previous year. While the drop is modest, it signals a gradual softening of monetary policy. Lower interest rates may act as an incentive for potential buyers, although price stability remains crucial to ensure genuine affordability.

Overall, the latest data indicates that Georgia’s banking sector and the NBG are actively adjusting to new market realities. Inflationary pressure on real estate and reduced consumer purchasing power are causing a decline in mortgage volume, but growing loan sizes and relaxed regulations reflect a deliberate effort to maintain balance: encouraging lending while safeguarding financial stability.

In the long term, it will be crucial to monitor the impact of these regulatory changes — will they stimulate loan demand, lower housing prices through increased competition, or spur a new wave of construction? Each of these outcomes holds the potential to influence both economic growth and social mobility in the country.