Increased economic activity from the late 1960s, stimulated in part by the second five-year plan, resulted in a rapid growth of construction, including new urban and rural housing, commercial establishments, industrial facilities, tourist accommodations, and government infrastructure projects. The sector's growth rate averaged 17.5 percent per year in current terms between 1968 and 1972 and rose to 24.8 percent in 1973. Construction workers numbered 25,000 to 28,600 in the 1968-73 period and constituted about one-tenth of the island's gainfully employed work force.
The construction industry was hard hit by the Turkish invasion and occupation; construction by the private sector ceased almost completely. In 1975 the construction work force numbered only about 8,900, or 6.2 percent of persons gainfully employed in the south.
Commercial construction revived in 1976, when the industry, in response to government policy decisions and actions, began to build housing for nearly 200,000 refugees, many of whom were living in tents and makeshift shacks. This construction boom lasted until 1981. The boom was further energized by events in the Middle East, which caused many businesses to move their headquarters or offices from Lebanon to Cyprus. Rapidly expanding tourism also stimulated construction of new facilities, as did industrial plant construction. After the refugees were housed, the government began its program of building housing for low-income groups as part of a new, wider concept of government social responsibility. An especially strong year in the boom period was 1979, when the construction industry expanded 36.3 percent and made up 13.4 percent of the GDP in 1979.
The construction industry experienced much lower growth rates in the 1980s. In the 1985-87 period, it actually shrank in real terms, and some Cypriot contractors were obliged to go abroad to find work. The industry remained an important part of the economy, however, with regard to both its contribution to the GDP and the employment it provided. In 1987, a representative year, dwellings absorbed about half of total construction investment, nonresidential buildings about a quarter, and hotel infrastructure (such as roads, bridges, dams, irrigation works, and telecommunication and electrical transmissions lines) the rest.
Important spurs to the construction industry were the Housing Finance Corporation and the Land Development Corporation, government entities created to enable middle- and low-income people to acquire their own houses. During the late 1980s, these organizations provided low-cost loans and managed the construction of several hundred houses a year (in 1989 eighty-two housing units in Nicosia alone). The goal for 1990 was to construct 575 units in the whole of the Republic of Cyprus.
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