The real estate and construction sector became the second largest recipient of foreign capital in Romania, after industry

Bucharest, October 2024: The real estate and construction sector attracted approximately €2.2 billion of foreign direct investments (FDI) in 2023, as the share of this economic activity in the overall FDI stock stood at 17.5% at the end of 2023, according to data from the National Bank of Romania analyzed by the Cushman & Wakefield Echinox real estate consultancy company.

Moreover, foreign direct investments  in construction and real estate transactions have more than tripled in absolute value, increasing by €14.4 billion euros during the 2013 – 2023 period.

The data from the National Bank of Romania ilustrates the fact that the FDI stock increase in construction and real estate transactions was mainly due to the positive accounting revaluations of tangible assets held by companies active in this industry and also the robust operational results recorded by the respective companies, which allowed both debt repayment and lending to non-resident affiliated companies, thus reducing the need to access external financing instruments.

Bogdan Sergentu, Head of Valuation & Consultancy Cushman & Wakefield Echinox: „The real estate asset values have increased by a margin exceeding the inflation rate between 2015 and 2024. After a significant growth during the 2015 – 2019 period, the market liquidity remained stable during the pandemic in 2020 – 2021 and it is still healthy in 2024, as Romania boasts some of the most attractive yields in the region. The rise in inflation in 2022 and 2023 resulted only in minimum yield adjustments for prime assets, while the key interest rate cuts operated by the National Bank over the last few months are expected to have a positive impact on asset values.”

The real estate and construction sector became the second largest recipient of foreign capital in Romania, after industry (38.6% of the FDI stock) ahead of trade (17.1%) and financial intermediation and insurance (13.4%).

The overall FDI stock continued to register significant growth in all the above-mentioned segments, as they were able to attract between €1.1 and 3.5 billion in 2023.

The total FDI flows in Romania were of €6.7 billion in 2023, with the overall FDI stock reaching a level of €118.2 billion.

The FDI position breakdown in greenfield enterprises in terms of the main economic activity placed construction and real estate transactions among the top three receivers, with a share of 19.4% of the total FDI in greenfield enterprises, after industry (27.4%) and trade (23.2%). Moreover, the contribution of those particular business sectors to the closing FDI position in this type of enterprises remained relatively stable throughout 2023 compared with 2022.

Foreign direct investment includes the paid-up capital and the reserves related to a non-resident investor holding at least 10% of the voting power or of the subscribed share capital of a resident enterprise, debt instruments between the investor or the group to which the investor belongs and the resident direct investment enterprise, as well as the reinvestment of earnings.

The consistent increase of the FDI flows in real estate and construction during 2023 also reflects the evolution of the total stock of modern commercial properties, with the foreign investors being the largest owners of such properties in Romania on all market segments, owning more than 70% of the total stock at national level.