Armenia: The Challenges of Growth
Armenia: The Challenges of Growth


by Juilia Hakobyan

A glance across Yerevan's panorama shows a city in the throes of construction, with cranes and dust and noise, and expectation mixed with apprehension. Barely a street in the center of the capital is unmarked by blue tarpaulin stretched over unfinished projects, or great craters chiseled into the ground for still more building work to begin.

Apartment buildings, hotels, offices and retail shops are being constructed, renovated, enlarged or redesigned. The face of the city changes with each multi-storied tower—many rising to replace or obscure the skyline imagined by city architect Alexander Tamanian a century ago.

Critics say the construction rises on the backs of vulnerable residents, powerless to fight authorities who claimed property "for state need" at prices far less than market value. Others, though, concede that if Yerevan is to be a modern city, it cannot avoid gentrification and urbanization.

Where before only streets bore names, now the new luxury buildings also carry titles indicating their origin—"Griar," "Elite Group," "DH Group," "Mika City," "Levon A"—names of the developers or investors who have triggered this new building boom in Armenia.

So-called "elite" design has become a catch-all term for any modern construction that differs from the style of building dominant in Yerevan from Tamanian's time until independence.

As recently as 10 years ago, Armenians saw such buildings only in Western movies or on trips abroad. Today, dozens are visible in their capital city.

In the new city center, doormen welcome residents who have paid $1,000-2,000 per square meter for the shell of their apartments—interior work comes extra. Modern facilities include air conditioning, independent water, heat and electricity, security, parking, and satellite television, usually for additional fees of from $40 to $200 a month.

Astghik Tovmasian's family is among locals who can afford "elite" living. The Tovmasians sold their three-bedroom apartment for $95,000 and took a loan for a new apartment in the first alleyway of Arshakunyats Avenue.

The five-story building constructed by the Italian company, Renco, has fully satisfied the needs and expectations of the Tovmasian family (though they have yet to move in). They paid $1,400 per square meter for the new apartment, which included some interior work, such as ceramic tile flooring.

"I think this building is one of the best in the city as it is located in the park," Tovmasian says. "There is a small bar and a store in the fenced yard as well as a children's playground. I think my family will be very secure in this building."

Tovmasian says that all apartments were bought before the building was completed. Presently, she and her family live at her parents' home while the new apartment is being finished.

"I don't know many of my neighbors in the new place but I think we are the only local family there. Two of my neighbors are French Armenian; I also know that some of the neighbors are from the United States."

Real estate agent Vladimir Khachatrian says that families such as the Tovmasians are lucky to have bought apartments already, because the prices for real estate will continue to increase. He says Armenia is simply following an international trend.

While it is expected that even low-income families will benefit from economic growth brought by new construction, ownership of such property remains out of reach for the vast majority of Armenia's 780,000 households, and is beyond the dream of 100,000 families who, according to official figures, live in temporary or substandard accommodations. The nouveaux riches enjoy their spoils in a society where the average income is $177 per month.

Aharon Adibekian, head of Sociometer, the Armenian Center for Independent Sociology, says his research shows that only 15 percent of the population can afford apartments costing $100,000 or more. High-ranking officials and professionals such as doctors, lawyers, and computer programmers account for three percent of the local market, and the remaining 12 percent are businessmen who earn money abroad.

Oddly, real estate—immovable by its very nature—has become an Armenian export of sorts.

In 2000, only four multi-story buildings were approved for construction in Yerevan. Since then, approvals have been given for 275 such buildings in Yerevan—10 times as many per year as at the beginning of this decade.

Currently, there are some 70 construction projects either nearing completion or recently started in the city, each offering from 50 to 200 apartments. Some observers estimate that as many as 5,000 flats are being built on a single square kilometer of the city center.

Some residential buildings blend harmoniously with their surroundings; others squeeze into existing parks or courtyards like alien invaders. Buildings rise to 16 stories in the yards of four- or five-story buildings, cutting out light and space and often blocking mobile phone signals.

Environmental protection groups estimate that new construction has swallowed up 700 hectares [1 hectare = 2.47 acres] of green space, twice as much as was lost when trees were cut during the energy crisis of the early 1990s.

As in the order of evolution: some lose; some gain.

From ditch diggers to designers, jobs have been created as a result of construction. Construction work is always in flux, making it difficult to record the number of employed. Architects interviewed for this article, however, estimate that each building project requires a minimum of 200 workers, and as many as 550.

If, then, each current project uses the average (375), it would mean that at least 26,250 jobs have been created due to construction. Unskilled laborers who previously were likely to have been jobless account for a great number of the workers. According to information from some of those laborers, they make about $10-12 per day—hard work, but good (if temporary) money in this environment. Masons average about $800-1,000 per month.

The building boom also acts as a stimulus for businesses specializing in home decoration and furnishings. Local production of decorating materials accounts for a percentage of the market and is generally regarded as being of poor quality. As a result, several companies in Armenia now specialize in importing materials from Turkey, Russia, Spain and Italy to meet the demand for high-quality interiors.


The re-building of Yerevan began in 2001, when the first urban project, North Avenue, was approved and started. In autumn of that year, thousands of Diaspora Armenians visited the country to celebrate 1,700 years of the adoption of Christianity as Armenia's state religion. Links between Armenia and its Diaspora have strengthened over the years through the Diaspora Conferences, the "Baze" All-Armenian youth expositions, the Pan-Armenian Games, and other events.

Initial investments in North Avenue proved to be viable and were followed by new construction throughout the city. At the beginning, growth focused on new hotels and cafes to service the summer tourist trade, but gradually expanded to construction of residential buildings.

Armenians are known throughout history as builders, so the construction boom can be said in some respects to reflect a national tradition. This is apparent even in the language. For example, while people in some other nations express exasperation by saying "what do you mean!?" Armenians say "tunt shinvi," which literally (if oddly) means "let your home be built!"

While the urge to own property in the homeland may drive some to invest in Armenia, pure business speculation is the force for many.

Real estate experts estimate that every dollar spent on construction returns five to 10 times as much to the investor. Consequently, whether ugly or beautiful, necessary or inappropriate, construction continues to be the fastest-growing sector of Armenia's economy, rising each year, and approaching a third of overall product.

Construction accounted for 26.7 percent of Armenia's Gross Domestic Product (GDP) in 2006, up from 21.7 percent in 2005, when the aggregate monetary volume of construction reached $1 billion. In 2006 (republic-wide) the figure reached about $1.5 billion. Central Bank of Armenia predicts the volume of construction will have risen by 18 percent in the second half of this year (over last year).

Armenia's media is rife with speculation that nearly all of the country's top ministers and officials have a stake in the construction business. At least one hotel, the luxurious "Golden Palace" built atop the city in Victory Park, is believed to belong to President Robert Kocharian and Prime Minister Serge Sargsian, while MP Gagik Tsarukian's "Multi Group" concern is constructing up-scale cottages and hotels in the resort town of Tsakhkadzor.

Real estate agents in Yerevan say there is a large demand for luxury apartments. Armenia's high-ranking officials are among top buyers, followed by Diaspora Armenians and foreigners mostly from Iran, Syria and Lebanon, who find Armenia an attractive area for investment. The smallest group of buyers consists of local Armenians, who are not affiliated with the government but have well-paying jobs.

Officials say that the flourishing construction sector is a reflection of the improved socio-economic situation in Armenia, as people seek to bring their surroundings up to 21st-century standards. Others are more skeptical.


Eduard Aghajanov, dean of the economic faculty at the Armenian-Russian Slavonic University, says that Armenia's economy is being distorted by a construction bubble that cannot last for long.

"The construction sector now appears to be an unhealthy circle, when one group of well-to-do people builds and another group buys. I know some businessmen who have bought 10 to 15 apartments, spending millions of dollars. They prefer to turn their money into dead stock rather than to invest in industry for a profit, because they are afraid to take the risk in a country where the whole economy is in the hands of a single group of people," he said.

"A country can be 'industrial' or 'agricultural' in terms of the share of GDP, but I have not heard of any 'construction' country. An economy based on construction will burst like a soap bubble one day."

Aghajanov dismisses economic growth statistics in Armenia as fictitious: The growth rate is determined by the volume of construction, while the share of GDP of main indicators such as industry and agriculture is declining.

Though today's skyline of mirrored-glass and concrete skeletons overwhelms Yerevan's physical image, the volume of construction at its peak in the Soviet era was five times today's level. Even so, construction formed a minor element of the economy, while industry accounted for around 60 percent.

"There is always a demand for industrial production because people need it in every aspect of their lives. As for construction, there will come a day when the market will be saturated with apartments because all those who have money will have bought enough apartments for themselves, their children and their grandchildren," Aghajanov says. "Then there will be a chain reaction, GDP will be drastically reduced and Armenian officials will no longer boast about their economic figures. Many construction workers will be left without jobs."

Aghajanov predicts that when the city center is finished, construction work will ripple out to the outskirts of Yerevan and then to nearby regions. By then, though, the scope for construction will decrease rapidly because of a lack of infrastructure in the regions.

The economist is also concerned about the concentration of Armenia's economy in the capital, which accounts for 80 percent of Armenia's GDP. In terms of economic development, he says, the country resembles a body with a big head and weak legs.

"God help us, but if something happened in Yerevan, like an earthquake, it would mean the collapse of the whole country," says Aghajanov.

Historian Gevorg Altunian, host of a prime-time analytical program on Armenia TV on which the construction growth has been debated, says that he would welcome the boom if it turned out to be good for ordinary people.

"Construction, which is the most lucrative part of the economy, has also become one of the most corrupted spheres. Tax returns from some companies working on several projects in the city say that they are operating at a loss, which is ridiculous," he says.

"If the proper amount of tax from construction entered the state budget, then the government could provide housing in just a few years to all needy families, at least in the suburbs, or introduce assistance for young families."

Yerevan City Hall, which authorizes construction work, is being strongly criticized in the local media for turning the capital into a zone for private investments. Campaigns against particular developments by local residents, environmentalists and human rights groups have failed to prevent a single project from going ahead so far.

In July, at least two green sites in the city became battlegrounds between residents and the municipality, to no avail for protesters. A 250-square-meter space on Pushkin Street, in the center, and an area adjacent to a children's playground occupying 40 square meters on Hakobian Street in the Arabkir district were handed over for development of a residential building and a store.

Construction projects required approval from the local district authority until 2005, when the responsibility was transferred to City Hall.

Yerevan's Chief Architect Samvel Danielian, who signs off on all major city construction, says that every project conforms to urban planning laws.

"A group of experts from different fields examines the proposed scheme and, if it corresponds to the construction normative (foundation, seismic stability, emergency evacuation, etc.), the project is approved," says Danielian, the sixth Chief Architect of Yerevan since independence.

Against widespread belief to the contrary, Danielian emphatically says: "There is not a single illegal construction in the city." (Meaning that all have been granted official permits.)

Danielian is unhappy that newly constructed buildings are labeled as "elite," emphasizing their exclusivity.

"These buildings are for our citizens and I wonder why people call them 'elite'? Such buildings can be found in all countries," he says. "They are just residences that offer incomparably better comfort and conditions, and therefore the prices are high compared to those built in Soviet times.

"After all, whatever is being constructed in the city is for the city and its residents. If someone can not afford to buy an apartment today, then maybe his children will be able to."

Danielian says he likes the changes he sees in the city and the modern architecture of the new buildings gives an energized pulse to Yerevan.

"The city cannot keep one architectural style; it should reflect all the layers of its past and demonstrate modern tendencies," the Chief Architect says. "Yerevan has not reached its final image yet. What we have to do now is find a good balance between old and new."


City Hall has devised and approved a master plan for Yerevan's development to 2020, which includes new highways to be built around the center, an enlarged subway system, and the development of subterranean space (i.e., parking garages). The project will embrace 1,360 hectares with districts grouped into seven zones. It is expected that the public green area of Yerevan, which now totals five hectares, will be expanded to nine hectares by 2020 (using existing territory adjacent to Hrazdan Gorge).

The master plan foresees the density of population in Yerevan rising by 2020 from 219 people per hectare now, to 259. Danielian says that this will be due to the enlarged housing stock that will rise by 1.55 million square meters to 3.36 million square meters.

Officials also plan to create a new center in the city called Yerevan Berd (fortress), covering 150 hectares in Kentron and Shengavit districts from Isakov Avenue to Hrazdan Gorge. The Yerevan Project (Joint Stock Company) is to implement construction of the project.

Gurgen Musheghian, director of ArmProject, says the new district will reduce pressure on the overcrowded downtown area, which suffers from a high volume of vehicular and human traffic.

"A new center in the southwest of the capital and a new highway will become a new gateway for the city," says Musheghian.

The Berd Project will embrace several historical spots such as the ruins of a medieval Yerevan fortress, Saint Sarkis Church, Paskevich Hill and others. The historical value of the territory and the picturesque landscape of the gorge were key factors in designating it an area for diplomatic missions, hotels, restaurants, business centers, banking and shopping.

Danielian declined to discuss the financing, though some sources estimate the cost at around $1 billion. The Chief Architect made it clear that this project, too, will involve the destruction of many buildings in the area on grounds of "state need," as provided by Armenia's constitution.

Residents of the affected districts are already concerned that they will share the same fate as those formerly living in the city center area now covered by North Avenue. Hundreds were evicted from their houses with paltry compensation to make way for the $150 million project. Danielian assures that there will be clear mechanisms for protecting residents' rights to avoid any repeat of the conflict over North Avenue.

According to sociologist Adibekian, 600 families moved into government-sponsored housing last year, leaving 30,000 on waiting lists and living in undesirable conditions. He and others worry that demolishing homes for "state need" will only increase the number of socially impoverished.


While the debate around Yerevan's future goes on, some buildings are already creating an image of a modern megalopolis and probably will soon become symbols of the capital as well known as the Opera House or Republic Square. Currently, about 50 companies are competing not only for the best locations in the city but also for the images of their companies. Half are companies from Russia, Iran, France, and the United States.

One of the leaders in the market is Elite Group, which owns 18 buildings including hotels, luxury homes, and residential apartment complexes, four of which are already completed. The "Northern Ray" complex currently under construction comprises two 14-story buildings, rising above 18 luxury homes, each comprising 730 square meters. The company was founded in 2000 and is now among the country's 300 highest taxpayers.

General director Armen Mkoyan says some 53 per cent of residents in Elite Group's buildings are foreigners or Armenians from abroad, mostly from Russia, Iran and the US. Clients have come from Holland, Belgium, Spain and even China to buy homes, either as investments or residences.

Mkoyan says his company was the first in Armenia to introduce a method of seismic protection in high-rise buildings that relies on laminated rubber-metal bearings to absorb horizontal movement during earthquakes.

"The technology is expensive and takes a long time," Mkoyan says. "That's why our buildings are constructed more slowly than others that appear like mushrooms in the city. We do it because the seismic safety of our buildings is no less important to us than their appearance."

Mkoyan says that development companies are experiencing a shortage of qualified labor because many carpenters, masons and engineers left Armenia during the economic turmoil of the 1990s. "Now some of them are back, but what we really need today is to restore technical schools, because all the indications show that construction work will keep growing."

Construction also depends on qualified architects and designers. Dozens of architectural companies have opened in recent years, offering everything from complete development to interior design. One such company is headed by Yerevan's former Chief Architect Narek Sargsian.

If their status and earnings were low a decade ago, now qualified architects can afford to reside in the buildings they design. An average fee is $5 to $7 per square meter of construction, which may be low in comparison with other countries, but is enough to allow an architect to live comfortably by designing at least two buildings a year.

Experts in construction say that there are 25 to 30 architects who are most in demand, among them Hovhanes Mutafian. The 55-year-old architect and his company "Ahsen-Vix" have designed 12 new complexes in the city, including some elements of North Avenue.

Mutafian, an architect for 30 years, says that some of Yerevan's new buildings are very complementary to the city scheme, while others are simply disgraceful. He believes that the uneven quality is due to the fact that growth in construction started very suddenly. People entered the field who had money but no connection to architecture and who simply did not want to miss a chance to earn money by building apartments.

Mutafian regards the former Chief Architect Sargsian as a "pioneer" in Armenia's construction industry.

"He did a remarkable job when he introduced the North Avenue project. Few know the real story behind North Avenue, when the country's officials were objecting at first, saying that it would fail," explains Mutafian.

"Sargsian believed that the urban project was of political rather than social significance and that it would bring investments to the country, and he was right. North Avenue was a statement to the international community that Armenia exists and is a country where they can come, invest and profit."

Mutafian says that the scale of the work has kindled mistaken debates over the legacy of Alexander Tamanian. He explains: "If some shabby building is destroyed in the city, it has nothing to do with Tamanian. Tamanian's greatness is that he sketched the city and several very important constructions, which, thank God, remain in their places."

Yerevan's appearance started to evolve in the 18th and 19th centuries, when the Tsar of Russia made investments in the Caucasus. Many two-story buildings faced with black tufa began to appear.

Tamanian's purpose was to make the town into a city, and when Armenia became part of the Soviet Union in 1921, to make it not just a city but the capital of Soviet Armenia. The hills surrounding Yerevan made it resemble an amphitheater and the main inspiration of Tamanian's general plan was to turn this "amphitheater" into an urban center, defining the locations of the main squares and parks and the direction of several main highways, one leading towards Mount Aragats, another to Mount Ararat. The city was planned to accommodate some 150,000 people.

"After Tamanian, there were many talented architects who created the city we see now," Mutafian says. "When people say 'Yerevan's image,' they mean the buildings of the 1950s and 1960s, the socialist style coming not from Europe but from Russia with its five-story tufa buildings. That was a period when many songs were written in praise of Yerevan's fresh air, nice views and cool parks."

But Yerevan faced another challenge in the 1960s when the Soviet leadership decided to expand its population to 1 million. A ban on immigration by Diaspora Armenians was lifted and thousands of families came to the city. Soviet leader Nikita Khrushchev's goal was to provide housing for the whole population, which proved beneficial for the people but bad for design. Several hundred buildings went up in Armenia within a few years, including the Yerevan districts of Achapnyak and Nor Nork.

"Now Yerevan looks as it should have looked, reflecting its history," said Mutafian. "The black stone buildings show the period of the Russian empire, the five-story red tufa buildings and the many standard-design nine- and 12-story blocks reflect the socialist period. The buildings blackened by smoke recall the energy crisis of the 1990s and now the new construction presents a modern face to the world for a capital of a country that has 16 years of independence."

Mutafian compares Yerevan today to a newborn child, adding, "It is hard to say how it will look in several years. It can become beautiful or ugly."

The boom has changed the outlook for the architectural profession in Armenia, he says, offering today's students the prospect of a satisfying and rewarding career in their motherland.

"We must hope that this young generation of Armenian architects will manage to reclaim the city by introducing new styles and architectural solutions," Mutafian says.

Meanwhile, a descendant of Alexander Tamanian is encouraging a fresh assessment of the revered architect's achievements in Yerevan. Architect Hayk Tamanian has solicited photographers to submit photos for an exhibition called "Tamanian's Legacy." (Selection of works was being completed in October.)

The city planner's great-grandson, who directs the Tamanian Museum, is concerned that Yerevan is losing its image in all the reconstruction, becoming a place of chaotic and spontaneous development.

"Tamanian did not only plan the city, he made an architectural ensemble, where each construction and street was created for a reason. His purpose was to design a non-industrial city of high culture and a small population," he said.

"Some people say now that Tamanian's architectural school is out of date. But they reject it while offering nothing in its place. This exhibition is an appeal to those who have the power to prevent the further depersonalization of the city. We can still find a compromise."

Originally published in the November 2007 ​issue of AGBU Magazine. Archived content may appear distorted on your screen. end character

About the AGBU Magazine

AGBU Magazine is one of the most widely circulated English language Armenian magazines in the world, available in print and digital format. Each issue delivers insights and perspective on subjects and themes relating to the Armenian world, accompanied by original photography, exclusive high-profile interviews, fun facts and more.