I will always remember 2023 as the year when the long-standing conception shattered — a year in which the reality we were used to changed completely. The new security situation, coupled with the unstable political climate, reshuffled the deck, disrupted the government and economic agenda, and threw the entire country into a whirlwind that forced all of us to quickly adapt to a new reality.
Immediately following came 2024 — a year that, for me, marked the awakening phase. A year in which we shifted our thinking, reformed our positions on numerous political, security, and economic issues — and of course, also regarding the real estate sector in which we operate.
Over the past year, real estate developers have faced major challenges: a severe labor shortage that extended project timelines and sharply raised construction costs; delays in construction starts; soaring raw material prices; growing difficulty in marketing apartments without aggressive promotions — all of which increased credit consumption and financing costs, in an economic environment already burdened by high interest rates.
These factors led directly and indirectly to a significant erosion in developer profits — a trend that is very likely to remain at the center of our focus as financial backers throughout 2025.
In addition to these direct industry challenges, developers also suffered indirect consequences of the war: a dramatic decline in foreign investment, a heavy blow to the tourism industry, financial measures imposed on the public that reduced purchasing power, the collapse of small businesses — and the list goes on.
If 2023 was the year of collapse and 2024 the year of awakening — then 2025 must be the year of reorganization. In other words: the year of strategic consolidation.
For the past two decades, we’ve been used to a market where demand exceeded supply — a situation that drove consistent price increases and fueled overall industry growth. That chronic undersupply masked many of the sector’s inefficiencies, making problems barely noticeable.
But now we must ask honestly: can that same undersupply of housing once again heal the wounds left by the war? Can demand still manifest when the public’s purchasing power is eroded and disposable income has shrunk, even if supply remains low?
The Key Challenges for the Real Estate Sector in 2025
High-Interest Rate Environment – Despite forecasts of a gradual interest rate reduction during the year, it's unclear whether such a reduction will actually occur, or whether it would be substantial enough to lower credit costs and stimulate consumption.
Labor Shortages – The lack of workers is expected to continue affecting schedules, execution costs, difficulty in recruiting contractors for new projects, and delays in advancing projects that don't meet the minimum execution threshold required by financing institutions.
Increased Regulation on 20/80 Deals – Tighter oversight by the banking supervisor is expected to slow apartment sales even more and increase developers’ reliance on credit.
Bureaucratic Barriers – The current government, bogged down in political survival struggles, is failing to focus on core economic problems — especially in streamlining permit approvals and construction licenses — which is further delaying project advancement.
These challenges are expected to lead to continued growth in real estate credit consumption, rising financing costs, and deeper financial exposure for both real estate companies and financing bodies alike.
So What’s the Plan?
As mentioned, 2025 must be the year of strategic consolidation — a period to redefine the scope of operations and formulate a safe and sound action plan. Recommended steps include:
Geographic Diversification of Investments – The real estate market in the periphery offers more affordable prices, allowing the public to buy and invest even in a time of reduced purchasing power and lower disposable income.
Strengthening Cash Flow, Even at the Expense of Asset Value – In this period, it’s preferable to maintain positive cash flow rather than hold leveraged or burdensome assets. For financing entities — both banks and non-bank lenders — a company’s ability to service its debt is more important than the estimated value of its assets.
Favoring Equity Partnerships Over Debt – Rather than taking on more debt to plan projects with uncertain futures, it’s better to build partnerships with strategic investors who understand the path ahead, enter as real partners, and are willing to wait for appreciation — even if it takes time.
Diversifying Funding Sources – Strengthening ties with non-bank and institutional lenders is advised, as they often offer flexibility and creativity on par with — or even exceeding — that of traditional banks. In a challenging period, diversifying funding sources is key to managing capital structure wisely and maintaining financial resilience and operational agility.
Written by Poli Tetro, Partner and Co-Founder of Leader Top Capital, specializing in non-bank financing for real estate projects.
