In 2024, with the stabilization 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, according to the CEO of Karma Group, Nikolas Karoullas.
In an interview with InBusinessNews, as part of the “IN Business Forecasting 2024,” Mr. Karoullas explained that the construction sector has been in instability following the shocks caused by the pandemic and the global geopolitical imbalances that followed. However, he highlights that construction and real estate have repeatedly proven to be the safest and best investments, especially in times of crisis.
Noting that during this period the sector demonstrated strong resilience, the CEO of Karma emphasizes that there is still much to be done in 2024, prioritizing the fight against bureaucracy, simplifying and accelerating the processes related to licensing and development control.
Nikolas Karoullas points out that in 2023, Karma Group announced its first residential project, Setai Residences, in the Limassol district, which, according to him, was the starting point for the company’s expansion into other cities in Cyprus, beyond the Famagusta district, where it holds a leading role in shaping the eastern coastline of Cyprus.
“In 2024,” he emphasizes, “we will continue our development plan with our first project in the Nicosia district, while continuing to focus on projects that invest in green development.”
How do you see the economic environment shaping up in 2024, given inflationary pressures, high interest rates, and unpredictable geopolitical developments?
Cyprus’ economy is particularly vulnerable due to its dependence on the political and economic developments occurring in Europe and the broader world. This was confirmed by the recent crises of the pandemic, the ongoing conflict between Russia and Ukraine, and the war in our neighboring Israel and Gaza.
The instability in the global economy and international relations is expected to continue into the new year, once again testing our resilience. However, the forecasts from the Ministry of Finance for the Cypriot economy in 2024 are optimistic, as they predict an economic recovery with a higher growth rate of 2.9%, while inflation and unemployment are expected to decrease.
The forecasts are encouraging but should not make us complacent. Both the government and the private sector must focus on the next steps and proceed with the transformative changes necessary to create a more sustainable and resilient economy, one that does not rely heavily on external factors.
What do you consider to be the biggest and most challenging issues that the Cypriot economy will face?
2024 is expected to be another year of significant challenges. With inflation decreasing significantly, our concerns are now focused on high interest rates and the impacts they may have if not reduced soon.
At the same time, we must address the consequences that the sanctions imposed on Russia have had on the Cypriot economy, which have significantly affected the services and investment sectors.
Furthermore, the ongoing war in Israel and Gaza creates uncertainty for the country’s tourism industry, while other major challenges include the energy sector, extreme weather events, the dysfunction of the global supply chain, and lower export performance.
The role of the state and the private sector
Would you say that, considering recent upgrades, Cyprus is now firmly on a growth trajectory?
The country’s acquisition of investment grade from Moody’s, the positive ratings from other agencies, and the macroeconomic forecasts from the Ministry of Finance and the European Commission for 2024 send encouraging signals regarding the country’s developmental path.
However, significant steps must be taken to ensure our efforts move in the right direction, both as a state and as the private sector.
The government must first implement the reforms and investments related to Cyprus’ National Recovery and Resilience Plan, move forward in areas and regulations that will accelerate procedures, eliminate bureaucracy, and provide incentives for new investments.
On our part, businesses must invest in technology and artificial intelligence, in specialized human resources, and in applying practices related to the environment, society, and governance (ESG).
Real Estate: The Safest Investment
What do you think will be the path of the sector you operate in during 2024?
Construction and real estate have repeatedly proven to be the safest and best investments, particularly during periods of crisis.
The projects already underway in energy, tourism, and healthcare are contributing to a surge in investment in the sector.
In 2024, with the stabilization 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 sector’s growth will come from the Recovery and Resilience Plan through capital investments, and according to the macroeconomic estimates of the Ministry of Finance, they are expected to positively contribute to growth, especially in 2024-2025, by approximately 0.8%.
If you had the opportunity to request specific measures or policy changes to support/enhance your sector from the government, what would they be?
The housing problem and affordable housing are perhaps the most pressing issues for society, with significant implications. This is an issue that requires immediate regulation by the government, which recently announced measures in the right direction.
I believe that addressing the problem will come with the development of significant housing projects that will meet demand and help reduce rents.
This can be achieved through incentives, subsidies, and green financing.
Another critical issue is the urgent need for the revision and modernization of the licensing system for development projects.
Adaptation to New Trends—ESG and New Technologies
What are the biggest trends/changes in your sector that you expect in 2024?
With climate change being a top priority globally, sustainable and green developments are playing a role in the efforts for a carbon-neutral future.
Energy-efficient and environmentally friendly buildings are now one of the greatest desires of buyers seeking high-energy performance properties to enjoy both short- and long-term benefits.
At the same time, we must not overlook the rapid technological development and artificial intelligence, with their growing influence on new generations who are seeking “smart homes” with high-tech services and tools.
The adaptation of our sector to modern trends will determine its sustainability. Companies that incorporate ESG criteria and new technologies into their projects will undoubtedly gain a competitive advantage.
Specifically, what role does technology, such as artificial intelligence, play and what changes are expected in your sector?
The integration of technology and artificial intelligence (AI) in our sector is expected to bring 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 AI will streamline various processes and lead to increased efficiency and reduced costs.
As for AI, we still have a long way to go, as although it is used in specific projects, its contribution and impact are still limited.
However, this will change soon, as developments are progressing rapidly, and I expect that companies will soon make significant investments in AI tools and equipment related to data and document management, enhanced security and communication, and object simulation, such as digital twins, which will predict the performance of a specific object or service in the real world.
The technological revolution and AI in our sector will bring multiple benefits, but we must also take into account important challenges such as data privacy, security, and the need for a specialized workforce capable of leveraging these advanced technologies.
The Sector’s Biggest Problems
What are the most significant issues currently affecting the sector, and which ones do you consider to be a priority to address in the new year?
The construction sector has been in instability after the shocks caused by the pandemic and the global geopolitical imbalances that followed.
Disruptions in the supply chain, rising construction costs due to inflation, energy issues, and high interest rates have contributed to the sector’s slowdown, which is reflected in the decline in building permits both in terms of numbers and square footage.
During this period, the sector demonstrated strong resilience. It developed rational risk management models to select profitable projects, invested in the physical and mental health of its workers, and made significant strides toward sustainable development and digital transition.
However, there is still much to be done in 2024. First, we need to combat bureaucracy to simplify and accelerate the processes related to licensing and development control. This is something we hope to achieve with the implementation of the Local Government Reform.
A solution also needs to be found for the housing crisis, which today is an unattainable dream for young generations who are unable not only to acquire their own homes but even to rent.
At the same time, one of our top priorities is the green transition and digitization of the construction sector, ensuring that new projects align with modern demands and incorporate: the Circular economy, numerous innovations, and energy autonomy.
Other issues that need to concern us are public works production processes, the quality offered, the protection of cultural heritage, as well as construction site safety and workforce specialization.
Karma’s Expansion in Nicosia and Limassol
What are your plans/strategy for 2024? Should we expect new developments and further establishment 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 into other cities in Cyprus, beyond the Famagusta district, where we hold a leading role in shaping the eastern coastline of Cyprus.
In 2024, we will continue our development plans with our first project in the Nicosia district, while continuing to support projects that invest in green development.
We are also in the process of announcing our first zero-energy performance project in the Cape Greco area, Protaras.
A complex located in nature, where it will be built with consideration for the surrounding area, using recyclable, natural, and biological materials that are constructed with zero emissions and will have its own water recycling system, photovoltaics, etc.
At the same time, at Karma Group, we will continue to create projects of modern aesthetics that respect the surrounding space in which they are built, supporting our timeless approach, which integrates the aesthetics and construction materials of our projects organically and harmoniously into the space where they will be constructed.
This policy sets us apart from the competition.
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claudia@karmadevelopers.com.cy
16 Kennedy Avenue (Kapparis), Paralimni
