Executive summary
Georgia’s latest economic data show that construction and real estate remain among the country’s most influential economic sectors, but the sector now requires a more cautious and quality-focused reading. In Q1 2026, construction accounted for 13.6% of total business sector output, making it the third-largest sector by output share. Real estate activities, meanwhile, showed faster growth in both turnover and output.
In Q1 2026, construction turnover reached GEL 2.807 billion, only 1.2% higher than in the same period of the previous year. Construction output reached GEL 3.177 billion, up 1.5% year-on-year. Real estate activities grew faster: turnover increased by 10.8%, while output rose by 11.6%.
BTU researchers interpret this as a signal that the sector should no longer be assessed only through new projects, square meters or transaction activity. The key question is whether growth remains sustainable when construction costs rise, housing affordability becomes more difficult, and investment quality increasingly shapes the future of urban development.
Main analysis
Construction is large, but growth has slowed
Construction in Georgia is not only an economic sector. It is also a social, financial and urban development issue. It creates demand for materials, transport, engineering, architecture, finance and professional services. At the same time, it is directly connected to one of the largest financial decisions households make: buying a home.
In Q1 2026, construction accounted for 13.6% of total business sector output. This places it among Georgia’s key real-economy sectors. However, its growth dynamics require caution: turnover increased by only 1.2%, while output rose by 1.5% year-on-year.
This does not mean the sector has stopped. It means that after a period of expansion, construction is entering a more complex phase. Demand alone is no longer enough. Cost control, project quality, financing structure, real housing needs and long-term urban value are becoming more important.
Real estate is growing faster than construction
Real estate activities show a more dynamic picture. In Q1 2026, turnover in real estate activities increased from GEL 602.2 million to GEL 667.3 million, or by 10.8% year-on-year. Output increased from GEL 588.0 million to GEL 656.0 million, or by 11.6%.
This distinction matters. Construction reflects the physical creation of new value. Real estate activity reflects the market circulation of assets – transactions, rent, management, brokerage and property-related services.
If real estate grows faster than construction, this may indicate that asset activity, rental demand, investment expectations or property-related services are moving faster than physical construction itself. This requires careful interpretation because a more active real estate market does not automatically mean that housing needs are being better met.
Construction costs remain a central risk
In April 2026, Georgia’s construction cost index increased by 1.1% month-on-month and 3.8% year-on-year. Compared with February 2022, the index was up 27.4%.
This is one of the most important signals for the sector. When construction costs rise significantly, risks increase for developers, buyers, banks and the state at the same time. Developers face more expensive projects. Buyers face more expensive housing. Banks face higher credit risk. The state faces broader urban and social affordability challenges.
The structure of cost growth is especially important. In April 2026, the cost category of transportation, fuel and electricity increased by 6.4% month-on-month and contributed 0.78 percentage points to the monthly index change. Year-on-year, the same category increased by 12.7% and contributed 1.61 percentage points to the annual change.
This shows that the future of construction is not determined only by construction material prices. Energy, fuel, transportation and logistics directly affect the economics of the sector.
Residential and non-residential segments show different pressures
The construction cost index also shows different dynamics across segments. In April 2026, the residential construction index increased by 1.1% year-on-year, while the non-residential segment increased by 5.9% and the civil segment by 5.7%.
This matters because not all parts of the sector move in the same way. The residential segment may show more moderate cost growth, while non-residential and infrastructure-related construction may face stronger cost pressure.
For Georgia, this means construction policy and business strategy should not be overly generalized. Housing affordability, commercial space, infrastructure projects and public construction require different types of analysis.
Investment: real estate is strong, construction is more modest
Foreign direct investment data show that in Q1 2026, real estate attracted USD 48.8 million and ranked second among sectors by FDI. Construction attracted USD 12.3 million.
This suggests that foreign capital remains interested in real estate, but direct investment in construction itself is more limited. The distinction is important: capital may be more interested in assets, property income and market positioning than in the construction process itself.
BTU researchers argue that Georgia’s challenge is to ensure that real estate investment is not based only on asset price growth. It should be linked to urban quality, energy-efficient buildings, long-term rental markets, business infrastructure and regional development.
The next stage depends on quality, not only scale
Three questions will shape the next stage of Georgia’s construction and real estate market.
First, how affordable is housing for households? If prices and debt burdens grow faster than incomes, formal demand may continue, but real affordability will weaken.
Second, how good is urban development? A city needs more than just buildings. It needs schools, transport, green space, parking, energy efficiency, safe infrastructure and human-centered environments.
Third, how ready is the sector for technological and managerial renewal? Digital project management, material control, energy-efficient design, financial analysis and data-based market assessment are becoming essential.
Key findings
- Construction accounted for 13.6% of business sector output in Q1 2026, ranking third among major sectors.
- Construction turnover increased by only 1.2%, while output rose by 1.5% year-on-year.
- Real estate activities grew faster: turnover increased by 10.8% and output by 11.6%.
- Georgia’s construction cost index increased by 3.8% year-on-year in April 2026 and by 27.4% compared with February 2022.
- Transportation, fuel and electricity costs were a key driver, increasing by 12.7% year-on-year.
- Real estate attracted USD 48.8 million in FDI in Q1 2026, while construction attracted USD 12.3 million.
- The sector’s future depends not only on new projects, but on affordability, cost control, urban quality and energy efficiency.
Data and evidence base
In Q1 2026, construction turnover reached GEL 2.807 billion, compared with GEL 2.775 billion in the same period of the previous year. The growth rate was 1.2%. Construction output increased from GEL 3.131 billion to GEL 3.177 billion, or by 1.5%.
Employment in construction increased from 59,296 to 59,625 people, or by 0.6%. Construction accounted for 7.5% of total business sector employment.
Turnover in real estate activities increased from GEL 602.2 million to GEL 667.3 million, or by 10.8%. Output increased from GEL 588.0 million to GEL 656.0 million, or by 11.6%. Employment in real estate activities increased from 19,050 to 19,490, or by 2.3%.
In April 2026, the construction cost index increased by 1.1% month-on-month and 3.8% year-on-year. The residential segment increased by 1.1% year-on-year, the non-residential segment by 5.9%, and the civil segment by 5.7%.
In Q1 2026, FDI in real estate amounted to USD 48.8 million, while FDI in construction amounted to USD 12.3 million.
Why this matters for Georgia
Construction and real estate matter for Georgia not only because of their economic weight. They shape cities, household finances, infrastructure quality, banking-sector exposure, investor expectations and the cost of living.
If construction grows while housing becomes less affordable, the country gains economic activity but also increases social pressure. If real estate activity grows without improving urban quality, cities receive more buildings but not necessarily better living conditions.
Georgia’s key challenge is balance: investment, affordability, urban quality, energy efficiency and long-term sustainability.
Construction and real estate are no longer only private-sector or household issues. They are issues of economic security, social affordability and the future of Georgian cities.
BTUAI assessment
BTUAI assesses the latest data as a sign that Georgia’s construction and real estate sector is moving from a phase of quantitative expansion toward a phase where quality and sustainability matter more.
Slower construction growth, faster real estate activity and rising construction costs together show that the sector’s future will no longer depend only on demand. Cost management, financial sustainability, urban planning and real affordability are becoming decisive.
In BTUAI’s view, Georgia’s construction and real estate market should now follow four principles: do not build only more – build better; do not increase only asset prices – increase quality of life; do not rely only on short-term demand – create long-term urban value; and do not treat energy efficiency as an additional cost – make it part of competitiveness.
If these principles are applied, construction and real estate can remain not only sources of growth, but also foundations for better cities, more sustainable investment and more accessible living environments.
Article identification
Article type: Sectoral analytical article
Topic: Georgian economy, construction, real estate, construction costs, urban development
Geographic focus: Georgia
Period: Q1 2026; construction cost index – April 2026
Main sources: National Statistics Office of Georgia, business sector results, foreign direct investment statistics, construction cost index
Prepared by: BTUAI Research Team, Business and Technology University
Platform: BTUAI.ge
Publication year: 2026
Methodology
This analysis is based on publicly available official statistical data, including Geostat’s Q1 2026 business sector results, foreign direct investment statistics and the April 2026 construction cost index. The data were analyzed by sectoral share, turnover, output, employment, cost dynamics, segment-level differences and investment.
The purpose of the article is not to assess individual projects, companies or property prices, but to identify broader trends in Georgia’s construction and real estate sector and highlight practical implications for business, urban policy, investors and citizens.
Limitations
This article is based on publicly available data and analytical interpretation. It is not an official statistical report, real estate price forecast, investment, financial, legal or tax advice. Some indicators may change after new or revised data are published. Specific business, investment or real estate-related decisions should be made in consultation with relevant professionals.
Sources
National Statistics Office of Georgia – Business Sector Results, Q1 2026.
National Statistics Office of Georgia – Foreign Direct Investment in Georgia, Q1 2026.
National Statistics Office of Georgia – Construction Cost Index in Georgia, April 2026.
FAQ
Why is construction important for Georgia’s economy?
Because it creates infrastructure, housing, jobs and demand for materials, transport, finance and professional services.
What does the Q1 2026 data show about construction?
Construction ranked third in business sector output, but turnover increased by only 1.2% and output by 1.5% year-on-year.
What is the main risk for the sector?
The main risks are rising construction costs, energy and transportation expenses, housing affordability and financial sustainability of projects.
Why should real estate be analyzed separately from construction?
Because real estate reflects not only physical construction, but asset circulation, rent, property management, investment and market expectations.
What should businesses consider?
Businesses should consider real cost dynamics, energy efficiency, quality of demand, urban environment, buyer affordability and long-term financial sustainability.
Keywords
Georgia construction sector, Georgian real estate market, construction cost index Georgia, housing affordability Georgia, urban development Georgia, real estate investment Georgia, BTUAI, Business and Technology University.
Citation format
BTUAI Research Team. “What Should Georgia’s Construction and Real Estate Sector Consider Based on the Latest Economic Data?” Business and Technology University, BTUAI.ge, 2026.
Prepared by the academic team of Business and Technology University and the BTUAI Research Team.
Tbilisi, Georgia
BTUAI is an analytical platform of Business and Technology University that studies the impact of artificial intelligence, digital transformation, innovation, startup ecosystems, data analytics and emerging technologies on business, the economy, education and society. BTUAI materials are designed to explain complex technological and economic changes in a clear, reliable and Georgia-focused way.