TBY talks to Ahmet Haluk Karabel, the President of TOKİ, on urbanization, the country's housing needs, and his company's performance targets.

Ahmet Haluk Karabel
For 25 years Ahmet Haluk Karabel worked as an architect, chief supervising engineer, site chief, project manager, and senior executive in the private sector. In 2003 he was appointed Vice-President of TOKİ, and in 2003 he was commissioned as Deputy General Director at Emlak Konut REIT. He held the Vice-President position until he was appointed as President in 2011.

What are the unique challenges of Turkey's urbanization trends?

Turkey is a rapidly urbanizing country. Turkey's demographics are characterized by its population of about 73.7 million inhabitants at end-2010, with a median age of 29 years. Although the population growth rate has been abating in recent years, increasing urbanization has created housing pressure, primarily from low-income groups, and this has contributed to the establishment of slum areas in major cities. This has also put pressure on infrastructure such as water, sanitation, housing, and health care.

The provision of social housing in Turkey is a priority. Access to private funding through the banking system to buy a home remains limited due to income and savings levels that are inadequate to meet housing loan repayments.

Articles 56 and 57 of the Turkish Constitution declare that every Turkish citizen has the right to decent housing and that the state has a responsibility to help meet those needs and to promote mass-housing projects. Similar to the situation faced in almost all developing countries, making adequate shelter available and accessible to meet the housing requirements for the ever-increasing populations of urban settlements has always been, and remains a challenge for Turkey.

What is the current urgent housing need in Turkey?

According to data produced by TurkStat and the State Planning Organization, the urgent housing need has been estimated at approximately 2-2.5 million units.

Which segment of public housing projects are currently the most significant to TOKİ?

TOKİ intends to satisfy 5-10% of the urgent housing need in Turkey. In line with this target, TOKİ provided 500,000 housing units by the end of 2010. In the last eight years, TOKİ has mainly been focused on the target groups of low- and middle-income families, which are not able to own a housing unit within the existing market conditions in Turkey. TOKİ is trying to find real solutions to the country's demand for housing and urban renewal.

How much of TOKİ's housing development is aimed specifically at the transformation of informal housing areas?

One of TOKİ's main application areas is the “Renovation of Squatter Areas/Urban Renewal Projects in Turkey". In this context, since 2003 TOKİ has followed a comprehensive policy toward supporting modern urbanization in collaboration with local administrations. Between 2003 and 2010 a total of 500,000 housing units were constructed by TOKİ, with 60,000 of those units constructed within the context of urban renewal projects.

On the conventional market side, which resource development projects have been most significant for funding TOKİ's social initiatives?

Income sharing projects create crucial capital for the financing of low- and middle-income housing projects. TOKİ has developed this innovative model to fill the gap between short-term capital outlays for construction and long-term receivables from housing sales. Large income sharing projects are currently being built in metropolitan areas of Istanbul and Ankara, and these projects are significant to fund TOKİ's social initiatives.

How significant has TOKİ been as a catalyst for the construction industry and ancillary sectors?

As of the beginning of 2011, TOKİ undertook the construction of approximately 500,000 residential units, including social facilities and landscaping work. Further enhanced by TOKİ's role as a catalyst for the construction industry, its domestic numbers are very impressive.

Determined to make a profound difference in the lives of its citizens, in January 2003 the newly elected 58th Parliament passed the Emergency Action Plan for Housing and Urban Development.

The Administration offered 3,000 tenders during this time, providing jobs to 600 contractors and 30 sectors related to the construction industry.

Over 800,000 individuals profited directly or indirectly from involvement in TOKİ's projects. Using a process of open tenders the administration made competitive bidding a hallmark of its business practices.

What steps has TOKİ taken to improve the availability of housing credits?

The Mass Housing Law is the framework law defining the fundamental principles giving direction to the solution of the housing problem in Turkey. According to the tasks determined by this law, TOKİ defines the finance terms for housing projects according to the target groups' income levels and saving patterns. The sales prices are determined by taking into account the construction costs with no commercial benefit aims—namely profit.

Especially for the poor and low-income groups, no down payments or low down payments are taken and long maturities of up to 240 months are provided for beneficiaries. Additionally, in some low-income projects, monthly payments begin only after construction finishes.

Also, the sales prices of the housing units produced for poor citizens—one of the categories of TOKİ's housing program—do not include the cost of land.

These kind of financial implementations include government subventions in order to meet the needs of low-income target groups.

What is your outlook for TOKİ's financial performance?

TOKİ's balance sheet consists essentially of long-term receivables related to housing sales at 42% of total assets in 2009, construction in progress at 18%, and its land bank at 15%. The size of TOKİ's land bank was 110 million square meters at the beginning of 2011, and the value of this land bank was approximately TL9 billion.

Carrying out its housing mandate through a dedication to fiscal responsibility, TOKİ's long-term financial forecast is decidedly positive. Responding to the dire need for housing from Turkish citizens, TOKİ has initiated a very ambitious program, which has led to a narrowing liquidity position.

Observing TOKİ's low debt-to-asset ratio, Moody's notes that the administration is in an excellent position in terms of debt leveraging. Innovative financing and well-managed operational risk, along with the continued strong support of the Turkish government, are the major reasons behind this opinion. TOKİ will implement its large investment program without substantially increasing its level of debt leveraging.

With a Ba2 global scale rating from Moody's International Sub-Sovereign and a BB+ rating from Fitch Ratings International Public Finance, TOKİ is seen as a stable potential investment.

Moody's notes TOKİ offers a strong business model that encourages efficiency and careful management of any risk of exposure that comes its way. Fitch Ratings gives TOKİ a positive key rating based on several factors.