Nicolas Karoullas: Construction and real estate have proven they are the safest investment
Maria Karaiskou 12:48 - 18 January 2024
Construction activity is expected to recover, both in the private and public sectors in 2024 through the stabilisation of external factors affecting the Cypriot economy and the reduction of inflation, the CEO of Karma Group, Nicolas Karoullas anticipates.
In an interview with InBusinessNews, in the context of "IN Business Forecasting 2024," Karoullas points out that the construction industry is experiencing instability after the tremors caused by the pandemic and the global geopolitical imbalances that followed, but also points out that construction and real estate have several times proven to be the safest and best investment, especially during times of crisis.
Noting that during this period the sector has shown strong resilience, Karma's CEO emphasises that there are several things that need to be done in 2024, prioritising the fight against red tape, simplifying and speeding up procedures related to licensing and development control.
Nicolas Karoullas noted that in 2023 Karma Group announced its first residential project, Setai Residences, in the district of Limassol, which, he said, was the starting point for its expansion to other cities in Cyprus, beyond the district of free Famagusta where the company already plays a leading role in shaping the east coast of Cyprus.
"In 2024", he underlines, "we are strongly continuing our development planning with our first project in the Nicosia district, while we continue to put emphasis on projects that invest in green development."
How do you see the economic environment shaping up in 2024, in light of inflationary pressures, high interest rates and unpredictable ever-changing geopolitical developments?
The dependence of the Cypriot economy on the political and economic developments taking place in Europe and the wider world make it particularly vulnerable. This has also been confirmed by the recent crises of the pandemic, the ongoing conflict between Russia and Ukraine and the war in our neighborhood between Israel and Hamas.
Instability in the global economy and international relations is expected to continue into the new year, testing our mettle once again. However, the estimates of the Ministry of Finance for the Cypriot economy in 2024 are optimistic as they foresee a recovery of the economy at a higher rate of 2.9%, while inflation and unemployment are expected to decrease.
The forecasts are encouraging but we should not be complacent. Both the state and the private sector should focus on the next day and move forward with the transformational changes needed to create a more sustainable and resilient economy that is not heavily dependent on external factors.
What do you consider to be the biggest and most difficult challenges that the Cypriot economy will have to face?
2024 is expected to be another year of significant challenges. With inflation coming down significantly, our concerns now focus on high interest rates and the impact they will have if they don't come down soon.
At the same time, we have to deal with the consequences caused to the Cypriot economy by the sanctions imposed on Russia, and which, to a significant extent, affect the services and investment sectors.
In addition, the ongoing war in Israel and Gaza is causing uncertainty in the country's tourism industry, while energy, extreme weather events, global supply chain dysfunction and lower export performance are also significant challenges.
The role of the state and the private sector
Would you say that, taking into account the latest upgrades, the Cyprus economy is now well on its way to growth?
The acquisition of investment grade by Moody's, the positive evaluations by the other houses, as well as the macroeconomic estimates of the Ministry of Finance and the Commission for 2024, send us encouraging messages about the development path of our country. However, we need to take several steps to move in the right direction both as a state and as a private sector.
First, the government should implement the reforms and investments related to the Cyprus National Recovery and Resilience Plan, move forward in areas and regulations that will speed up processes and eliminate red tape, and provide incentives for new investments.
Businesses, on our part, should invest in technology and creative artificial intelligence, skilled human resources and environmental, social and governance (ESG) practices.
Real estate: The safest investment
What do you think will be the course of the sector in which you operate in 2024?
Construction and real estate have proven several times that they are the safest and best investment, especially in times of crisis.
Projects already underway in the energy, tourism and health sectors are helping to accelerate the investment sector.
In 2024 with the stabilisation of external factors affecting the Cypriot economy and the reduction of inflation, construction activity is expected to recover in both the private and public sectors.
A significant contribution to the rise of the sector will be played by the Recovery and Resilience Plan through the planned capital investments, which according to the macroeconomic estimates of the Ministry of Finance are estimated to contribute positively to growth, especially in the years 2024-2025, at around 0.8%.
If you could ask the government to take specific measures or formulate policies to support/enhance your sector, what would they be?
The housing problem and affordable housing are perhaps the top issue for society with significant ramifications. This is an issue that needs immediate regulation by the government, which recently announced measures moving in the right direction.
I believe that the problem will be alleviated by the development of significant housing projects that will meet the needs and help to reduce rents.
This can be achieved through incentives, subsidies and green finance. An important issue is also the imperative review and modernisation of the development permit system.
Adaptation to new developments-ESG and new technologies
What are the biggest industry trends/changes you anticipate in 2024?
With climate change a top priority globally, sustainable and green developments have a role to play in efforts towards a carbon neutral future.
More energy efficient and environmentally friendly buildings are today one of the biggest demands of buyers looking for high energy efficiency properties, to enjoy the short and long term benefits they offer.
At the same time, we should not ignore the rapid development in technology, and artificial intelligence with appeal and influence that strong in the new generations who are looking for "smart homes" with high-tech services and tools.
The adaptation of our industry to modern developments will determine our sustainability. Companies that integrate ESG criteria and new technologies into their projects will undoubtedly gain a competitive advantage.
More specifically, what role does technology, such as artificial intelligence, play and what changes is it expected to bring about in your field?
The integration of technology and artificial intelligence (AI) into our industry is expected to bring about dramatic changes in the coming years, both in construction and real estate.
The adoption of innovative technologies such as robotic process automation (RPA), virtual reality (VR), project management information systems (PIMS), drones, smart sensors and artificial intelligence will streamline various processes and lead to increased efficiency and reduced costs.
As far as artificial intelligence is concerned, we still have a long way to go as although it is used in specific projects its contribution and impact is limited to a negligible percentage.
However, this will soon change as developments are moving at a rapid pace and I expect that very soon companies will be investing significantly in AI equipment and tools for data and document management, enhanced security and communication, and object simulation, such as digital twins that will predict the performance of a specific object or service in the real world.
The revolution of technology and artificial intelligence in our sector will bring about multiple benefits, but it is important to take into account important challenges such as data privacy, security and the need for a skilled workforce capable of utilising these advanced technologies.
The sector’s most significant problems
What are the most important problems that are plaguing your sector today and the resolution of which you consider to be a priority in view of the new year?
The construction industry is experiencing instability after the tremors caused by the pandemic and the global geopolitical imbalances that followed.
Supply chain disruption, rising construction costs as a result of inflation, energy and high interest rates are factors that have contributed to the slowdown in the sector, which is reflected in building permits showing a decline in both number and square footage.
During this time, the sector has shown strong resilience. It created rational risk and challenge management models to select profitable projects, invested in the physical and mental health of its employees, and made significant strides in sustainable development and digital transition.
But there are quite a few things we need to do in 2024. First, to fight red tape, to simplify and speed up the procedures for permitting and controlling development. This is something we hope will be achieved with the implementation of the Local Government reform.
We must also find a solution to housing, which today is an elusive dream for the new generations who are unable not only to acquire their own home but also to rent one.
At the same time, among our top priorities is the green transition and digitisation of the construction sector, so that new projects keep pace with the requirements of the modern era and incorporate: The circular economy, numerous innovations and energy autonomy.
Additional issues that should concern us are the production processes of public works, the quality offered, the protection of cultural heritage, as well as the safety of the construction sites and the specialisation of human resources.
Karma’s expansion in Nicosia and Limassol
What are your organisation's plans/strategy for 2024? Should we expect new developments and your further consolidation in the market?
In 2023 we announced our first residential project, Setai Residences in the Limassol district, which was the starting point for our expansion to other cities in Cyprus, beyond the district of free Famagusta where we play a leading role in shaping the east coast of Cyprus.
In 2024, we will strongly continue our development planning with our first project in the Nicosia district, while we continue to put emphasis on projects that invest in green development.
We are also in the process of announcing our first zero energy project in the area of Cavo Greco, Protaras.
A complex located in nature and which will be built taking into account the surrounding area, recyclable, natural and biological materials manufactured with zero pollutants and which will have its own water recycling system, photovoltaics, etc.
At the same time, at Karma Group, we will continue to create works with contemporary aesthetics that respect the surrounding space in which they are constructed, serving our timeless strategy of organically and harmoniously pairing the aesthetics and construction materials of our works with the space in which they will be built.
This is a policy that makes us stand out from the competition.