Last updated January 31, 2017

Dateline: Tbilisi, Georgia

The title of this article was originally “why I’m not investing in Tbilisi real estate”. Since that date, I have done a deep dive into the real estate scene in Georgia’s capital city and purchased one dozen properties.

Back in 2014, however, my opinion on investing in Georgia had yet to be formed. One temperate December day, I spent the morning driving around Tbilisi with one of the most colorful real estate agents I’ve met to date.

While we frequently discuss the idea that capital is fungible and goes where it is treated best, capital can’t go where it doesn’t know.

And at this international real estate expo, my agent told me that practically no one had even heard much about Georgia, let alone be able to find the Eurasian country on a map.

In a sense, that is a good thing. Just the other day, I shared my Georgia is one of the most capitalist countries on earth. The place is a really efficient place with a developing yet quaint European feel.

I love this place. The fact that Georgia is such a small country is part of why I love it. After all, small countries often treat wealth much better than giant ones that have millions of allegedly wealthy citizens to steal from and pay their cronies to start wars.

Georgia can’t do that, which is why it slashed the number of taxes from 21 to just six. The government figured doing so might get it on the map.

While Georgia is headed in the right direction and scores well on all of the “free market country” charts, it is still so small that most of the world isn’t paying much attention.

That’s great if you’re starting a small business. You can set up a Georgia company in a matter of minutes and open a highly functional bank account in a snap. Until I got to Tbilisi, I had never seen a business be able to get a ready-to-use business Mastercard so quickly and so easily.

But while all of this “small talk” may be good for offshore structures or as a banking haven, it’s decidedly bad for real estate. The market buoying news that Donald Trump had planned to invest here doesn’t sway me, either.

Because the Tbilisi real estate market appears to be rather dominated by interest from none other than… Georgians.

Tbilisi, the capital city, has fewer than 1.5 million residents, a mere third of the country’s population. Other than the seaside city of Batumi, the rest of the country is largely agricultural. And not even the most productive agricultural land at that.

In fact, the country of Georgia is less than half the size of the US state of Georgia. It’s small.

That small size doesn’t cause me to have too many geopolitical concerns regarding Russia. The Russian economy is in such tatters these days, with rampant inflation, negative growth, and a falling knife of a currency to be much of a threat.

Besides, a recent CNN headline that suggested Russia was angling to take over the similarly small nation of Moldova ended up being a weak article describing how Moldova’s elections have it aligning more with the European Union and its Romanian heritage than Russia.

Nothing about a real threat of an invasion. I’d say the same goes for Georgia right now.

However, the reason I find Tbilisi real estate to be a weak investment now is that the domestic demand just doesn’t impress me. Half of the Georgian population lives in rural areas earning $100 or $200 a month.

Unlike Istanbul which serves as a more neutral Muslim safe haven for Arabs in the Middle East, Georgia is not a safe haven for Russians due to political tensions (that title goes to Montenegro).

While Georgia undeniably has its act together better than anyone else in the region, Tbilisi real estate doesn’t excite me. The same fix-and-flip I can buy in Southeast Asia for $50,000 doesn’t exist here.

The renovation projects in Tbilisi consist of old buildings with plumbing and electrical work you might as well light on fire.

On top of that, the same cheap older buildings sometimes come with communal kitchen facilities. Not exactly what someone buying a rehabbed property would want.

In terms of new builds, most developers in Georgia turn properties over as a shell. No floors, no cabinets, no appliances. Nothing. I can’t see enough value add in installing a floor.

Where I do see great opportunity in Georgia is in entrepreneurship. Like so many other countries we talk about here, Georgia lacks a lot of the modern services Americans and Europeans are used to.

Young Georgians have a fanatical interest in the west and are thrilled their country now has even a fleeting association with the European Union. (The real estate agent told me my criticism of the EU’s Monitoring Mission in Georgia’s war zones was “cynical”).

But Georgia has no Amazon, no Lazada… it doesn’t even have much of a uniform way to sell real estate. When a few real estate agents formed the country’s first informal association of professionals a few years back, most of the old hat brokers refused to join.

They love the freedom that comes with a total lack of regulation. And so would I. Except for the fact that the 10% of truly forward-thinking Georgians who have the money to invest in property don’t have that many options to find their dream house or investment.

While I will readily admit that Tbilisi is so small and business is conducted through word of mouth – heck, my lawyer there has dined with the President – I do believe there is room for some improvement in delivering goods and services online.

And that is where an on-the-ground entrepreneur could shine. Just making the ad hoc taxi system more efficient, or making it easier for arriving passengers to get a taxi, would be a super simple business someone could get into.

Georgia is a rapidly developing country that has made great strides in the basics they knew would be needed to compete in the global economy. Internet speeds are rather fast, the banking sector is well funded and developed, and infrastructure is surprisingly good.

It is the small business space that will be one to watch. And I believe that the top tier of Georgians are concerned that their fellow citizens aren’t entrepreneurial or innovative enough to step up and turn the country into a truly developed place.

This is one of those countries where you could show up with your suitcase, poke around town for a few weeks, and set up a business with a good chance of success. You don’t need a lot of business intuition or even much of an aptitude for competition.

You just need to understand how the culture works, like the fact that women tend to live with their families into their thirties. Or that small, one-bedroom apartments are totally undesirable here.

If you’ve been looking for a place to start a business but aren’t as keen on the beaches of Cambodia or up-and-coming Colombia, Georgia has a European feel with the connections to the growing CIS and Eurasian region and might be a great place to become an entrepreneur.

Andrew Henderson
Last updated: Aug 18, 2021 at 8:37PM