In Tbilisi, a Battle Over Buildings Fires Investment Debate

A frenzy of construction in Tbilisi's historic district has set off a fierce debate over Georgia's efforts to attract investors. City officials maintain that the new buildings will only enhance the Georgian capital's image, but preservationists counter that the campaign is destroying the very aspects of Tbilisi it was meant to defend.

A maze of winding cobbled streets, laced wooden balconies and tilting townhouses, Tbilisi's old town is a melting pot of Middle Eastern and European influences.

But the timeworn buildings, many of them gems of neoclassicism or Art Nouveau, are starting to crumble, leaving entire households without roofs over their heads. Flaking plaster and yawning wall cracks have become part of the district's look.

"Every time it rains, I'm thinking which house is going to collapse this time," commented art historian Marina Khatiashvili.

Of late, the Tbilisi city government and private developers have become increasingly appreciative of the old town, a sprawling area mostly tucked behind the city's central Freedom Square. The Georgian capital's real estate business is booming, with building construction one of the few economic sectors where jobs are easy to find. In 2007, the sector generated around 1.5 billion lari (slightly over $1 billion), according to the Department of Statistics.

"If before, developers simply wanted to demolish an old house, build a high-rise and sell it, now they've come to understand that you can actually make money on history," said Nino Chanishvili, a cultural heritage expert at the Old City Rehabilitation & Development Fund, an organization which works on contract with the Tbilisi city government.

To enhance the odds, the mayor's office has earmarked some 10 million lari (over $7 million) for restoration of Tbilisi's old town. "We are implementing a development project which aims to enhance Tbilisi's tourism, culture and business potential," said Deputy Mayor Mamuka Akhvlediani.

But, for the most part, the cash-strapped municipality relies on private developers. "The city will never have enough money to restore and develop all the historical monuments and we have to engage the private sector," explained Akhvlediani.

"Today there as many as 1,700 buildings that are categorized as historical monuments, which is way too much for a town like Tbilisi," he said. "Places like Florence don't have that many protected buildings."

To attract more investment into the city, Akhvlediani wants to give a freer hand to developers to add extra floors or to replace old buildings with new ones if they adhere to old Tbilisi's architectural style. "Ideally the investor preserves the façade, but is allowed to expand the rear side of the building and use it for commercial purposes," Akhvlediani elaborated.

Reconciling those interests with preservationists, though, has proven to be an uphill task. Preservation is not necessarily the utmost thing on construction and real estate companies' minds, complained art historian Khatiashvili. "Where we see a historical monument, investors simply see square meters of building space," she said.

Residents are also often concerned with the bottom line. Asking prices, according to Khatiashvili, who serves on a city commission charged with reviewing building sales plans, can go as high as $5,000 per square meter – a fee that would put Tbilisi among Eastern Europe's most expensive real estate markets.

"Obviously, no investor is interested to pay this much for rubble," scoffed Khatiashvili. "Financially, it only makes sense to an investor if there is an opportunity to put up a multi-storey building with lots of space to sell, not just renovate a half-ruined building."

Homeowners like Lamara Tarkhnishvili, though, think that $4,000 or $5,000 per square meter is a fair price. "Maybe it's a little too much today, but tomorrow it will be nothing as prices go up every day," Tarkhnishvili said.

To encourage sales, the mayor's office has stepped in as a go-between. "We act like real estate agents, buying houses from residents and selling them to investors," Deputy Mayor Akhvlediani said. "Otherwise, the residents may charge too much for their apartments and end up with nothing.