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Currently, if you link to a folder which is not a git repository the operation will fail. Creating a new, bare repo is pretty easy, so we could provide an option (when linking) to create a repo in that location.
Gosia has already fixed it. Please note that this bug was about creating a new repo if it doesn't exist. This is a distinct issue from bug 334099 which is about false assumption that when a folder pointed to be a git repo exists it does contain a valid repo.