Feb. 17, 2015


Mukhit Azirbayev

Kazakhstan

Mukhit Azirbayev

Chairman of the Supervisory Board, Global Building Contract (GBC)

"We apply our financial background in several ways."

BIO

After graduating from the Kazakh Economic University in Almaty, Mukhit Azirbayev started work in the banking sector at ABN AMRO Bank, the first foreign bank in Kazakhstan. He started as a cashier and made his way up to be head of the currency exchange department. In 2007 he went to work for Kazkommertsbank (KKB), where he was responsible for promoting financial leasing, mainly for developers and construction companies. In 2008 he entered the construction market by establishing Global Building Contract and became the Head of the company’s Supervisory Board.

Where is Global Building Contract (GBC) positioned in the Kazakhstani market?

The Kazakh market is highly competitive and segmented. GBC operates in the residential segment of the local Almaty market, where we have around a 40% share of the primary market. The percentage of primary deals is about 15-20%. GBC positions itself as a developer. We estimate projects mainly in terms of investment attractiveness. As for the real estate market, GBC positions itself as a company that develops all the residential market segments, including comfort class, business, and high-end. We have all sorts of properties in our portfolio.

The company was recently awarded for its remarkable performance and its high-quality buildings. How could it turn into a major player in Kazakhstan's real estate segment?

We didn't expect to receive these awards because we are quite a new company and we are not actively promoting ourselves. The awards were the result of a survey where the majority of the respondents mentioned GBC as a fast-growing company. The company restarted some of the projects that were stopped, and there were some social projects among them. At the time, it was important to complete them because there were a lot of people waiting for their apartments. We have been active in developing all segments of the real estate business, from comfort to high-end projects. In four to five years, the company has established a solid reputation and managed to put up a great deal of real estate in the city. I believe there is one crucial thing that has greatly contributed to the company's success. Since the very first day, we were crystal clear about GBC's positioning in the market. We positioned ourselves as a developer not a construction company. This has allowed us to mobilize the talent and succeed as a team. We create and supply, rather than build and construct. This is the cornerstone of our business philosophy.

“We apply our financial background in several ways."

How is your network of financial partners supporting GBC in its operations?

We apply our financial background in several ways. We work in the real estate market and that requires having not only financial, but also a real economy background. We have quite a few advantages. First, we have managed to streamline the decision-making process. I see many companies using GBC as a model. We had the chance to work with leading financing institutions such as banks, Kazkommertsbank (KKB) in particular. Secondly, we have managed to avoid over-complicated business processing. And thirdly, we have managed to mobilize talent: our team combines professionals working in GBC, as well as architects and designers. In terms of architecture, we have taken a market-oriented approach. We could see that the market could not consume the products available before the downturn. We've put marketing and sales first. We focused on creating a result-oriented sales team and managed to get some of the most experienced professionals and put them to work with very enthusiastic newcomers to the profession. We don't use aggressive marketing to make people purchase what they don't really need. Instead, we analyze the market and meet the existing demand. That is what distinguishes us from our competitors. The relocation of the capital city from Almaty to Astana is one of the major forces driving the real estate segment.

How is the company taking advantage of the booming construction sector in the capital?

Astana is a fast-growing city and is one of our target markets—it is in our strategic development plan. We have a very good understanding of how the local Almaty market works. We keep an eye on the contractors and major players and we know how to develop business relationships and business processes here. Expansion for the sake of it is not what we're looking for. It is essential to know the market properly to come up with a good product or service. Obviously, premature expansion makes doing business more complicated. I can't tell you the exact date when we will enter Astana's market, but we are definitely going to operate there at some point. Another factor that requires consideration is the market segment we will operate in for Astana. As for Almaty, the market volume is as great as in Astana. However, given that there are 1.5 million people living in Almaty, and 800,000 to 850,000 people living in Astana, the demand is not the same in terms of quantity. Nevertheless, Almaty's market is very saturated, whereas the demand for housing and so the prices have been growing much faster in Astana. To date, the prices in Almaty and Astana are more or less the same. It is possible that the prices have actually reached their upper limit, meaning further development in Astana is going to be more complicated. It is essential to have a very solid offer to enter Astana's market and hence we are not rushing in. It is a question of timing. The new capital keeps growing and there is a great deal happening in Astana's residential and commercial segments because of Expo 2017. We work closely with our peers in Astana despite the fact that we are actually competitors. President Nazarbayev recently participated in the 10th World Islamic Economic Forum (WIEF) in Dubai, and Almaty, as well as Kazakhstan in general, received a lot of publicity in the newspapers. We do believe that Almaty will become a financial hub for several reasons. Firstly, this is what the President wants to make out of it. Secondly, the development of ecotourism is big in Kazakhstan, and Almaty is quite popular with tourists. And thirdly, Almaty is an educational hub already.

The Green Building Council (KazGBC) plans to focus on the development of sustainable buildings in Kazakhstan. How is GBC aligned with this approach?

One of KazGBC's key objectives is to define the exact areas for the development of green technologies. Obviously, construction and development is a vital part of this program. At the moment, there is no accurate benchmark or clear criteria in terms of residential construction. We are now at the discussion stage to define what green construction and architecture is, how it will affect costs, and what products and services are already in the market to pay for it. Profitability is certainly a crucial point for green construction. There is a certain philosophy behind green technologies. In my opinion, environmental issues in Kazakhstan are not quite at the significant level at the moment, as we are not fully integrated into the global economy. Considering the natural resources available in the country, its vast territory, and relatively small population, Kazakhstan is not facing any acute environmental problems. The country is a member of the Kyoto Protocol. Since the country is trying to attract more foreign investment, we have to play by the rules. The rules regarding green technologies are rather concise; traditionally, the standards used are the Leadership in Energy and Environmental Design (LEED) guidelines. Here we are looking for useful and practical decisions in terms of green technologies. We're seeking to make the international standards more applicable to the country. There are several projects in Astana, including those of Expo 2017, which are certified according to LEED guidelines. However, this does not imply a tradition or a trend in the market.

What is GBC's business outlook for the short term and its mid-range goals?

We're part of a huge construction sector that employs over 800,000 people here in Kazakhstan. At this stage, it needs a breath of fresh air in terms of human resources and training for people who work in project and facility management. Funding investment is, obviously, the biggest issue. There are questions about which directions should be developed and how they should be developed. I believe that we, as a country and as a sector, will have plenty of opportunities to develop. My goal is to be in the residential real estate market for as long as possible. However, the commercial and industrial segments of the real estate market are our mid- and long-term objectives. The real estate and construction sector is directly and substantially supported by President Nazarbayev. Nevertheless, the sector needs to become more investment attractive, and those investors will need strong local partners. There are two ways for GBC to be a strong partner: first, we can offer good, solid projects that demonstrate our knowledge of the market, offer a full package, and show our expertise; second, we can continue to be a local investor. In that role, it is essential to achieve financial transparency and to be a reliable partner.

© The Business Year - February 2015

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