Earthquake’s Aftermath: “Reconstruction Cost of Housing and Infrastructure to Exceed $45 Billion”

Two weeks after the Hatay earthquake , the damage assessment is also nearing completion. So far, the total number of houses that need to be rebuilt, including those that collapsed during the earthquake and those that are severely damaged and need to be demolished, has reached 384,000. When the work is completed, it is expected that this number will exceed 535,000.

According to first-class construction costs, infrastructure investments such as roads, water, electricity, and sewage, as well as land acquisition costs for building 535,000 homes, excluding the cost of construction, will require spending over 843 billion Turkish Lira. This figure represents 30% of the budget deficit for the year 2023, nearly double the total investment allocation for all public institutions in the budget, which is 454 billion Turkish Lira. In addition, it represents 18.8% of the budget expenditure item of 4 trillion 470 billion Turkish Lira.

According to EKONOMİ newspaper, based on the announced damage assessment results, the estimated amount of expenditure for the construction of new buildings to replace those that collapsed or need to be demolished in the earthquake has been calculated. So far, in the damage assessment work, the number of buildings that need to be demolished or reconstructed has reached 105,000, and the number of independent units, i.e., homes, is 384,545.

Murat Kurum, the Minister of Environment, Urbanization, and Climate Change, announced last week that new housing for citizens whose homes were destroyed in the earthquake will be 105 square meters in size.

Infrastructure costs reach half the construction cost.

According to official prices, the 2023 building construction cost index ranges from 6,000 to 8,000 Turkish liras per square meter. This figure represents the rough construction cost, which excludes the elements inside the building, such as the bathroom, toilet, flooring, and fixtures.

Sources in the construction sector informed EKONOMİ that the average cost per square meter, including expenses for items such as parquet, sink, kitchen cabinets, etc., is approximately 10,000 Turkish liras at today’s prices.

The total cost per square meter reaches 15,000 Turkish liras when investments made for public facilities such as roads, sewage, water, electricity, mosques, schools, and health facilities are included. These cost elements do not include land shares or expropriation fees.

If the Ministry’s projection of a 105 square meter housing plan does not change, the cost of a 105 square meter house, excluding infrastructure, amounts to 1 million 50 thousand Turkish liras. When the infrastructure cost is added, the total cost reaches 1 million 575 thousand Turkish liras.

According to the latest data released by the Ministry of Environment, Urbanization, and Climate Change, the total number of buildings that were destroyed or severely damaged due to the earthquake was 105,000. Data on the number of buildings that were directly destroyed by the earthquake was released for the first time, indicating that 20,662 buildings were destroyed due to the earthquake in the affected provinces.

The number of houses to be demolished is expected to exceed 500,000.

In damage assessment studies, it was determined that 384,545 of the 105,000 buildings needed to be demolished. When the studies are completed, the number of severely damaged buildings that need to be demolished is expected to reach 130, and the number of independent sections to be demolished is expected to reach 535,600.

To rebuild 535,600 houses, 56 million 238 thousand square meters of building construction is required, costing 562 billion 380 million Turkish liras, excluding infrastructure costs. When social facilities and infrastructure are included, the construction cost increases to 843 billion 570 million Turkish liras. Based on a dollar exchange rate of 18.82 Turkish liras, the cost excluding infrastructure today is estimated to be 29 billion 882 million dollars, and the cost including infrastructure is 44 billion 823 million dollars.

One-fifth of the budget, twice the total investment budget

Both President Recep Tayyip Erdogan and the Minister of Environment, Urbanization, and Climate Change, Murat Kurum, announced that the new houses would be completed within one year. As we are still at the beginning of the year, assuming that almost all earthquake construction expenses will be made this year, the comparison reveals that there is a significant need for additional resources in the budget.

The estimated cost for the reconstruction of buildings that collapsed or need to be demolished due to the earthquake seems to exceed 843 billion Turkish liras. This figure corresponds to 18.8% of the 4 trillion 470 billion lira budget expenditure for the year 2023. Additionally, the expenditure amount that is close to twice the 457 billion lira allocated for investments from the budget, corresponds to more than 30% of the budget deficit estimated at the level of 660 billion lira.

The President’s authority to transfer funds

The 5th article, 4th paragraph of the 2023 Budget Law is titled “Natural Disaster Expenditure Allowance.” The article authorizes the President to transfer funds from the allocation in the Strategy and Budget Presidency budget under the order of 99-41.32-01-09.05 to any existing or newly opened accounts for the purpose of covering all kinds of natural disaster expenses. However, even this source that can be transferred can only cover 10% of the total expenditures. Furthermore, the 5th article gives the President the authority to transfer from the Strategy and Budget Presidency allowance to many different expenditure items, not just for natural disasters.

535,600 independent units expected to be demolished in 10 provinces

The earthquake disaster caused significant damage in 10 provinces, and the total number of independent units that need to be constructed in these provinces is equal to the total number of independent units in 11 small-populated provinces in Turkey. According to the Turkish Statistical Institute (TÜİK) data, the total number of independent units in Bayburt (24,347), Ardahan (28,669), Tunceli (29,606), Gümüşhane (49,045), Iğdır (49,386), Hakkari (52,571), Artvin (58,847), Siirt (67,578), Bartın (67,709), and Çankırı (68,624), and Bilecik (72,972) is 569,354. The number of independent units that need to be demolished in the provinces affected by the earthquake is estimated to be 535,600.

Translation: Cem Cetinguc