We spoke with M. Erdal Eren, President of the Turkish Contractors' Association (TMB) about the current situation in the construction sector and expectations for the coming period.
How do you assess the current situation in the construction sector?
The Turkish construction sector, which completed 2024 with a growth rate of 9.3 percent, recorded a growth rate of 7.3 percent in the first quarter of 2025, exceeding that of the overall Turkish economy. Thus, despite losing momentum in 2025, the sector maintained its production capacity thanks to the reconstruction of the earthquake-hit zone and ongoing urban transformation projects in major cities, continuing its streak of 10 consecutive quarters of uninterrupted growth. In June 2025, the Construction Production Index in Turkey rose by 24.9 percent, continuing its upward trend. During the same period, the Construction Turnover Index rose by 32.6 percent year on year, while the number of buildings granted building permits increased by 47.4 percent and the number of buildings granted occupancy permits rose by 18.1 percent in the second quarter of 2025. However, the confidence index for the construction sector declined by 4.0 percent in August to 85.3, continuing its downward trend below the threshold value of 100 points. This decline indicates that companies' medium-term risk perceptions remain high and that they are acting cautiously due to costs and financing. In other words - things are going well today, but we have concerns about tomorrow.
On the other hand, under the public savings package announced in 2024, it was decided that new projects would not be included in the investment program except in the earthquake-hit zones and, in cases of necessity, priority would be given to projects that were 75 percent complete, projects that had already been tendered would be slowed down, and budget allocations would be cut. Consequently, the continuation of projects that are not a priority in the short and medium terms has placed an increasingly heavy financial burden on contractors. Therefore, as has often been brought to the public's attention, granting contractors the unconditional right to liquidate projects with a completion rate below 75 percent that are not prioritized in the investment program would be the most appropriate step for the sector and the public budget. This would make savings for the public budget, while also alleviating the increasing financial burdens on companies.
On the other hand, the five percent tax withholding applied to public projects poses a serious problem for the sustainability of the sector. With the presidential decree dated March 30, 2025, this rate was reduced to one percent only for rail system projects, but general construction and repair activities were excluded. This rate, based on the assumption of a 25 percent profit, is unrealistic under current economic conditions. In particular, long payment delays in public projects cause the five percent deduction to place further strain on companies' cash flow.
Extending the regulation provided for rail system projects to cover all construction, contracting, and repair work spread over several years and reducing the withholding rate to two percent is important for the sustainability of the sector. This step will both strengthen public-private sector cooperation and contribute to the survival of contracting companies under high financial pressure.
How do fluctuations in steel prices affect the contracting sector?
As steel is one of the main inputs in construction, every movement in its price is directly reflected in our sector. Fluctuations in energy costs and raw material prices in global markets create serious cost pressures for the construction sector. This situation reduces predictability in long-term projects and complicates risk management.
What are your views on the role of imported inputs in the sector and their impact on competition?
Although the Turkish construction sector has strong production capacity in many areas, it remains dependent on imports for high-tech materials. The costs of imported products, combined with exchange rate fluctuations, can negatively affect competitiveness. Therefore, strengthening domestic production and developing high value-added products is of great importance. We advocate supporting domestic industry on every platform and developing stronger partnerships with our contracting sector. In this context, as TMB, we are preparing to host a very important event in Ankara on June 17-18, 2026. We plan to hold our signature event, the "Construction Summit Turkey," every two years, and we will organize the first one in 2026 under the title "Construction Technologies and Innovative Building Materials". With this summit, we aim to bring the construction sector together at an international level and address the future of the sector with all its actors.
At what stage is the reconstruction process in the earthquake-hit zone?
Our sector, together with our government, is focusing all its attention and energy within the country on healing the wounds caused by the earthquake and rebuilding the region. The earthquake-hit zone has become the world's largest 24-hour construction site. The work being carried out in this context is not limited to the reconstruction of housing, but covers a wide range of areas, from infrastructure to social facilities, industrial and commercial areas to public buildings. The biggest obstacles our sector has faced in this process have been the difficulty in finding qualified labor and rising labor costs. Contractors, struggling to find tower crane operators, formwork carpenters, plasterers, and even general construction workers, have been forced to accept the high wages demanded. As TMB, we have frequently brought this issue of blue-collar workers on to the public agenda and it has become a common concern not only for our sector but for all sectors. Solving this problem requires the long-term restructuring of education policies in line with the spirit of the times and in parallel with our economic policies.
How do you assess the conditions for accessing finance in the sector?
Financing is one of the most critical issues in our sector today. High interest rates and restrictions on access to credit make it difficult for contracting companies to undertake long-term projects in particular. Austerity measures implemented by the public sector also have a negative impact on cash flow. Under these conditions, our companies are forced to use their own resources more effectively and turn to foreign financing opportunities. However, the development of affordable and long-term financing instruments is essential for the sustainable growth of the sector. Our association continues its efforts to strengthen our member companies in terms of foreign financing, particularly by increasing cooperation with international financial institutions in third countries.
How are the increasing protectionist tendencies globally affecting Turkish contractors?
In the global economic and political climate during and after the pandemic, the concept of globalism has given way to rising protectionism worldwide, leading to the emergence of new barriers in global trade. The global economic crisis has shrunk the pie in all sectors, and countries' tendency to eliminate rival players has also increased. In this context, carbon regulations and trade restrictions, in particular, are reflected in our sector as increased costs. However, the Turkish contracting sector has managed to become a sought-after brand, as it has the flexibility and experience to turn these challenges into advantages.
How are geopolitical developments affecting the sector?
The Turkish construction sector has a strong presence in neighboring regions, particularly due to geographical proximity and cultural ties. However, the Russia-Ukraine war has had a serious negative impact in this regard. Projects in Russia, our largest market to date, have come to a standstill due to the war. We believe that Turkish contractors will play an active role in the reconstruction process that will begin in both Russia and Ukraine once the war ends. On the other hand, the Middle East and North Africa region (MENA) offers great potential with its infrastructure and superstructure investment opportunities. The mega projects planned in the Gulf countries and Iraq's Development Road Project are important for our country. These projects will not only increase the volume of construction but also strengthen Turkey's role in logistics and trade corridors.
Meanwhile, the end of the war in Syria, our neighbor whichhas recently undergone major changes, is certainly a welcome development. Studies conducted by international organizations estimate that the cost of rebuilding the country will be between $250 billion and $400 billion. However, it is unclear who will cover this cost and how. While the lifting of US sanctions on Syria and the interest shown by Gulf-based capital are viewed positively, the country's unstable situation makes it difficult to make clear projections about the future. Of course, as Turkish contractors, we will be involved in the reconstruction of Syria, but we must proceed with realistic and appropriate steps, without being overly optimistic.
How do you assess the first half of 2025 and what are your predictions for the rest of the year?
For our sector, the first half of 2025 was challenging, much like the previous year, due to global uncertainties, cost pressures and geopolitical tensions. Rising labor costs, financing difficulties and fluctuations in raw material prices continue to negatively impact our sector. However, the reconstruction of the earthquake-hit zone and urban transformation projects across the country have been factors that have kept the sector's production capacity afloat. On the other hand, the sector, which slowed down due to austerity measures taken in public projects in Turkey, turned its attention abroad but faced different challenges globally. Increased global competition, geopolitical uncertainties, and tighter financing conditions have emerged as factors negatively affecting the success of Turkish companies abroad. Of course, all these challenges are not obstacles to our success; on the contrary, they have further strengthened our determination to cross borders, open up new markets, and develop sustainable projects in different geographies.
Between 1972 and the end of July 2025, Turkish contractors undertook 12,641 projects worth $545 billion in 137 countries. Indeed, in the "Top 250 International Contractors List" published annually by ENR (Engineering News Record), a globally referenced construction industry magazine, based on the revenues contractors earned from activities outside their home countries in the previous year, Turkey ranks second after China with 45 companies in 2025. We wholeheartedly believe that this success will continue to grow.