Government investment in new housing programs and increased commercial development in Astana are driving Kazakhstan's construction sector, which has seen strong growth in recent years.

Kazakhstan's construction and real estate sectors have been on the rise recently thanks to increased foreign investment and a rise in government investment in housing infrastructure. President Nursultan Nazarbayev has pledged to spend more than USD 1 billion on housing as part of the government's “Affordable Housing 2020" program, and as a result new building projects have begun on a previously unforeseen scale. This housing growth, combined with the continued commercial construction from Kazakhstan's industrial sector, has reshaped the real estate industry.


Kazakhstan's construction industry has registered several years of positive growth, largely driven by significant public and private investments in large projects. Total spending on building construction from January to September 2016 was up 7% over the previous year thanks to a more efficient business climate that allowed for new large-scale initiatives. All sectors of construction have shown improved performance; from January to May 2016 housing construction rose by 9.9% over the previous year, renovation and maintenance work grew by 25%, and new facility construction rose by 11%. These numbers come on the back of a similarly strong 2015, which saw growth of 4.6% over 2014. The high percentage of construction spending that is focused on new building construction bodes well for the future of the industry; in 2015, new builds accounted for over 85% of all construction work, up from 82% in 2012. As a result, Kazakhstan saw the number of new houses constructed hitting its highest point in two decades in 2014, and that figure was then exceeded in the following two years.
Due to geography and natural resources, Kazakhstan relies heavily on imports to supply its construction projects. The construction growth of the past year is particularly significant due to the strengthening of the tenge against the dollar over the same time period. This means that construction spending went up because of the rise in projects, while the cost of importing materials decreased.


Foreign firms have begun to play an increasingly important role in the Kazakhstani construction industry, which has traditionally been driven by state investment. Market research showed that the percentage of construction work being performed by foreign firms rose to a new high of 23.2% in 2015, up from just over 15% in 2014. This increase in foreign contractors showed no signs of abating in 2016, growing by 30% in the first half of the year. The rise in foreign involvement has been spurred by a regulatory push to forge new connections abroad. The government has relaxed regulations and made it easier to obtain contractor licenses and bid on state contracts. Additional work is continuing to be done to create new relationships with foreign contractors; in November 2016 President Nazarbayev held a forum with a delegation of Japanese industry leaders in Tokyo to promote Kazakhstan's improved investment environment. The forum resulted in the creation of 15 cooperation agreements worth USD1.2 billion, which included a deal for the construction of wind power and chemical plants. Similar partnerships were formed with Russia and South Korea in 2016, and these regional collaborations bode well for the future of the construction sector.


Much of Kazakhstan construction growth has been spurred by the country's massive investments in housing, which has traditionally dealt with a shortage of adequate construction. In 2014, President Nazarbayev announced the Nurly Zhol, or “Bright Path," stimulus program, which included as one of its goals the strengthening of the nation's housing infrastructure. The program calls for 1.4 million sqm of housing to be constructed from 2015 to 2019 to accommodate the increased urbanization of the population. Most of the funding from this program will come from government sources and bonds, with a small percentage coming through public-private partnerships with construction firms. The first year of the program saw housing construction reach new highs, with 8.94 million sqm listed in 2015's official records, up almost 19% from the year before. 2016 saw similar growth, with 17% more residential space constructed in the first half of the year. The sector received an additional boost in when President Nazarbayev transferred USD1 billion that was allocated for 2017 spending to 2016 to spur housing construction in the midst of stagnating GDP growth. Nazarbayev's actions generated USD147 million toward the construction of rental housing, USD414 million for the construction of mortgage housing, USD169 million to support infrastructure for high-density housing areas, and moved USD270 million to a fund to support private developers. Kairat Orazbekov, president of construction firm Elitstroy, sees the government's willingness to invest in this sector as a promising sign for the economic development of the nation as a whole. “This program was very well thought out," Orazbekov told TBY. “It is good because it is not just for commercial projects but is also a smart thing for the country."

Nazarbayev's actions demonstrate the Kazakhstani government's recognition of the importance of state support for the housing market. Facing economic uncertainty and a rapidly growing population, increasing the stock of affordable housing is an action that will have considerable benefits in both the short and long term. Funding construction will create jobs and spur GDP growth, and the infrastructure improvements will give the nation a firm economic foundation for decades to come.


Kazakhstan's growing economic prominence and regional clout has made its major urban areas a more popular site for commercial real estate investment. Almaty, the country's largest city and financial center, has a commercial and hospitality market that is well established after intense development over the past 10 years. With more than 800,000sqm of office space newly launched or planned, there is a concern that vacancy rates could continue to rise. Almaty also saw the opening of three major shopping centers in 2016, the 34,000sqm Almaty Mall, the 37,000sqm Moscow Shopping Center, and the 12,000sqm Colibri Boutique Mall, as the city continued to position itself as a commercial hub for Central Asia. In an interview with TBY, Dmitry Revin, Executive Director of Eurasia Real Estate Development, called Almaty one of the industry's “core markets." “Almaty is the place to be when it comes to retail," Revin told TBY. “In 2017 we will complete a 60,000sqm third-stage extension of A'Port Mall. In 2018, we will build a new mall in eastern Almaty, A'Port Mall Kuldzha, just in front of the new Almaty International Airport terminal. More than 90% of our tenants have asked us to build another mall in the eastern part of Almaty, so there is demand and we are responding to this."

Astana, which became the new capital in 1997, has seen its commercial real estate market rise dramatically in recent years thanks to high levels of government investment and the city's status as a new political center for Central Asia. The city has seen double-figure construction growth in recent years, with much of the recent growth coming from preparations for Expo 2017. Astana is in the midst of a significant increase in retail and office space, with an estimated 300,000sqm planned through 2020. This is coming from facilities like Abu Dhabi Plaza, the Talan Towers, and Expo 2017 spaces that will be turned into offices after the completion of the exhibition. Astana has also seen a new surge in hotel construction in recent years as the city prepares to host more major global events; as of 2014 Astana had 146 hotels and 5,570 rooms, but that figure has expanded by nearly a quarter with further growth planned. New construction has emerged across all sectors, with international brands such as ibis, Ritz-Carlton, Marriott, St. Regis, and Hyatt all completing new development projects in the city in recent years. One concern for industry participants is that development is outstripping population and leading to a saturated market. As Revin explained, “There is twice the quality retail space in Astana per 1,000 inhabitants compared to Almaty, which means there is much fiercer competition in Astana." Still, Astana's status as the political center of the country means that demand will continue to rise for more and higher-quality developments.


As Kazakhstan continues with its ambitious construction projects, it is taking new care to ensure that its new projects are environmentally friendly whenever possible. Expo 2017's theme will be “Future Energy" and focuses on the need to reduce CO2 emissions, and in keeping with this theme Kazakhstan's government has made green construction practices a cornerstone of its construction sector in preparation for the exhibition. In 2015, Kazakhstan launched an ambitious green economy transition plan that calls for renewable energy usage to rise to 50% by 2050 and carbon emissions to drop by 40% over the same time frame. Green construction strategies are primed to play a major role in Kazakhstan's affordable housing push, with the recently created Kazakhstan Green Building Council working with the UN Development Program to create green buildings standard that will be compulsory by 2030. Several major projects are already underway in compliance with eco-friendly standards, including Park View Office, a 22,108.8sqm office complex in Almaty that was the first Central Asian building to achieve BREEAM certification. Another major project, the 140,000sqm Mega Silk Way shopping center in Astana, is being built using sustainable materials and energy-saving practices. Elsewhere in the housing sector, the government is implementing green strategies in its development efforts. BI Group is working on the Green Quarter, a green housing area in Astana that is set to be completed in 2017. The facility will feature high-tech energy saving methods with the goal of developing a landmark smart city. Aydin Rakhimbayev, Chairman of Bi Group, explained the project's significance: “It is the first residential complex in Kazakhstan with a sustainable product," he told TBY. “Everything is there: smart houses, intelligent water facilities, and so on." Projects such as these demonstrate Kazakhstan's commitment to new building standards and technologies, which will serve the sector and the country well as they move into the future.

Dmitry Revin
Executive Director, Eurasia RED
Most of our focus in the last 10 years has been on building Kazakhstan’s largest shopping and entertainment mall, A’Port Mall (, which opened in 2009. It was the first shopping and entertainment mall in Kazakhstan to comply with International Council of Shopping Centers (ICSC) standards.