Mr. O.OrkhonFirst Deputy CEO, Trade and Development Bank

September, 2011

Mongolia’s Real Estate market outlook

Part 1- Real Estate Market in Mongolia

Driving forces

• Double digit GDP growth in following years

• GDP per capita to triple in next five years (USD 7500)

• Attraction of foreign investment in many economic sectors

• Strong demand and increasing household income

• Economic stabilization and favorable government policies

• Development of mortgage financing

• Mining towns and industrial construction in rural areas

Real Estate in Mongolia

Residential

Office

Hospitality

Plants

Retail

Commercial

Part 1- Real Estate Market in Mongolia

Standard apartments

Luxury housing

Others28%

Mining and quarrying

18%Agriculture

16%

Net tax on products

15%

Transportation

12%

Manufacturing 6%

Real Estate

5%

0%0%

GDP contribution by sector 2011.II.Q

Part 1- Real Estate Market in Mongolia

Source: National statistic office

270.3208.9

344.5

169.5

15.1

6.1

32.3

3.3

20.6

56.6

33.5

10.2

15.132.6

46.6

46.6

17.4 20.6

50.4

74.1

0

100

200

300

400

500

600

2008 2009 2010 2011.06

MN

T b

ln

Total production of Real Estate Market

Residential Industry Trade andservice

Hospital,sc hool, culturalinstitutions

Other

• The Ulaanbaatar city was built for 250 thousand people, but there are now 1.2million people living today. Increasing migration to Ulaanbaatar (UB)

• About 700 thousand people still live in Ger and need modern housing

• Fueled by fast growing economy wealth of Mongolians increases, placing demand for quality apartments

• Every year about 40,000 couples got married, half in UB

• Necessary to build apartments over 2 mln sq.meters. It requires investment worth USD 1 billion

• Interest rates on mortgages significantly declined, offering affordable credits to young families buying new apartments

Part 2- Residential Property Market

151.7

100.493.3

31.5

0

20

40

60

80

100

120

140

160

2008 2009 2010 2011.06

MN

T b

illio

n

Residential property production

Part 2- Residential Property Market

• As of June 2011, residential buildings reached MNT 31.5 billion,increased by 107 % compared to the same period of the previousyear

Source: National statistic office

• Residential property prices uparound 30% in last fewmonths

• Today average residentialproperty price is around USD1150 per square meter

• Property prices willcontinuously increase 15% to20% annually in followingyears

Part 2- Residential Property Market

3725

5416

6338

9899

7587

0

2000

4000

6000

8000

10000

12000

2007 2008 2009 2010 2011.II.Q

New residential apartments/ by units

Source: National statistic office

Part 2- Residential Property Market

720

1000 1043.8 975.2

14001090.8

1356.4 1150.21250.3

1726.5

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2007 2008 2009 2010 2011.II.Q

MN

T m

illio

n

New Apartments Price per m/sq

Standard apartments/ m2 Luxury apartments /m2

Source: TDB

• 100 thousand apartments project by Mongolian Government

– Project duration: 2000 to 2016

– 75 thousand apartments in UB, 25 thousand units in rural areas

• “Future District Project ” by Mongolian Urban development association

– 16 thousand apartments will be build in the Khan-Uul District

– The main target is low and average income residents

– To reduce the capital city air pollution

• “Clean air project” by Millennium Challenge Account (MCA) and UNDP

– To launch green housing into the Mongolian property market to save energy and reduce

air pollution

• “4000 apartments” project to state employees by Mongolian Mortgage

Corporation

– The MIK was founded in 2003 to develop secondary mortgage market in Mongolia.

Part 2- Residential Property Market

Part 2- Residential Property Market

Banking sector mortgage loans

Source: Bank of Mongolia

321.6 383.2 383.0 349.4 499.3

2,055.6

2,635.1 2,655.0

3,228.2

4,517.3

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2007 2008 2009 2010 2011.06

MN

T b

ln

Mortgage Loan Total banking sector

Part 2- Mongolian Banking Sector in Real Estate Market

• MNT 4517.3 billion Total banking sector loans

• MNT 499.3 billion Total real estate loan

• The Pleasant mortgage condition

Term – up to 15 years

Interest rate – 1.2 %

Amount - up to MNT 100 million

Source: Bank of Mongolia & TDB

• Increasing foreign investment

• Growing supply chain and trading activities

• Development of tourism sector

• Infrastructure development need in rural areas

• Industrial sector development

Part 3- Commercial Property Market

Part 3- Commercial Property Market

• As of June 2011, non-residential buildings reached MNT 36.1 billion,

increased by 41.7% compared to the same period of the previous year

54.7

115.9

162.8

36.1

0

20

40

60

80

100

120

140

160

180

2008 2009 2010 2011.06

MN

T b

illio

n

Commercial property production

Source: National statistic office

Part 3- Commercial Property Market

Commercial Rental Rates in Ulaanbaatar

Type Rental price per m/sq Class

Office

USD 20 New

USD 16 Older

Trade and Service

USD 15 New

USD 8 Older

Industry

USD 25 New

USD 22 Older

*Prices depend on location

Source: TDB

Indicative capital costs of town development:

Mine projectBuildings,

mln.usdInfrastructure,

mln.usd

Total, ( to 2015 )mln.usd

Oyu Tolgoi 490 69 559

TavanTolgoi 238 42 280

Dalanzadgad 238 42 280

Nariin Sukhait 112 29 141

Shivee Ovoo 70 23 93

Tsagaan Tolgoi 18 20 38

Total 1,166 225 1,391

Undergoing and Future Infrastructure Projects in Southern part of Mongolia

Part 3- Commercial Property Market

Source: Ministry of Road and Transport, Construction and Urban development

1258

50327967

16772 16772

33544

0

5000

10000

15000

20000

25000

30000

35000

40000

Additional population growth (by 2015 )

Part 3 - Developing Projects

Name of projects Investment needed Project lifeBuilding and construction

cost

1 'New Sainshand-2 district'' Project of Dornogobi 2011-2015 3.2 million USD

2 “High tech Industrial Park”

Selenge aimag, Zuun

kharaa soum 2009-2015 20.0 million USD

3

“Khar khorum – 13th

century” tourism

development project

In Khar Khorin soum,

Uvurkhangai Province 2010-2014 350 million USD

4 “Students town” project

Khan-Uul District,

Ulaanbaatar 2011-2015 255.0 million USD

5Dalanzadgad project

Dalanzadgad, South

Gobi, Mongolia 2012-2015 2.7 million USD

6

Erdenet Real Estate

Opportunities Erdenet city, Mongolia

2012-20151.5 million USD

Source: Ministry of Road and Transport, Construction and Urban development

• Favorable investment conditions in Mongolia attracts increasingnumber of foreign investors

• There is a free repatriation of profit, without withholding tax orcapital gains tax-which is driving lots of return on investment onMongolian property market.

• There are also opportunities arising from the need for servicedapartment buildings to cater for the expatriates coming into thecountry to work in the mining industry.

• There is a lot of interest in Mongolian property at the moment frominvestors in Hong Kong and Singapore.

Part 4- Investment Opportunities in Real Estate Market

Part 5 – TDB is a leading real estate financer

From 2010-2011, TDB has financed 20 real state projects,totaling USD157.2 million

“Grand Plaza” center USD10.3 million

“Tuushin” hotel USD10.3 million

“Peace tower” complex USD10.0 million

“Golden Park” complex USD19.0 million

“Green Springwoods” complex USD12.0 million

“Swans town” complex USD13.0 million

“Puma” complex USD 8.7 million

“Rapid castle” USD 8.0 million

Source: TDB

Thank you for your attention

Trade and Development Bank of Mongolia

Juulchin Street - 7

Baga Toiruu - 12

Ulaanbaatar, Mongolia

Tel: 976-11-31 99 43

Fax: 976-11-31 24 18

http://www.tdbm.mn

http://www.mongolianbusinessguide.com

Email: corrbanking@tdbm.mn