Financial Transformation and Housing Finance in Turkey

The Real Estate Sector in Turkey Since the adoption of import-substitution industrialization as development strategy from the 1960s onwards in Turkey, the construction industry has been considered as an engine of economic growth. With the reorientation of economic policies since the 1980 stabilization programme, the construction industry has been assigned a new role as part of the export-oriented growth strategy as Turkish contractors have expanded their activities abroad, especially in the Middle East and North Africa. Meanwhile, within the domestic economy, the construction industry assumed a new saliency with the foundation of the Housing and Public Partnership Directorate in 1984 and its subsequent separation into the Public Participation Administration and the Housing Development Administration (TOKI) in 1990. Like most other developing countries, Turkey has been experiencing premature deindustrialization processes that have been accelerated by the Adalet ve Kalkinma Partisi (AKP — Justice and Development Party) government after the 2001 economic crisis. 1 In other words, Turkey is rapidly becoming a service sector-based economy without having fully industrialized, which is a result of Turkey’s post-1980s neoliberal economic policies and subsequent financialization processes tied to wider financial globalization (Rodrik 2015). The urban policy consequences of premature de-industrialization have been the creation of a ‘new’ middle-income class — the urban rich , who take risks, demand and consume a lot — and the commodification of cities and urban spaces by the AKP government through a radical change in urban legislation and city building. Consequently, within the region, including the Eastern Europe, Middle East and Russia, Turkey has been one of the fastest-developing real estate markets since 2002. Large-scale housing projects with shopping malls and office developments emerged in big cities. Likewise, the Turkish housing market and its financing have experienced significant changes over the last decade. These changes have given rise to three main dynamics: the need for affordable housing for low-income households; the increased entry of global investors into the Turkish real estate market; and legislative reforms...