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$2.3t private liquidity fuels real estate boom


(MENAFN - Bahrain Tribune) The $2.3 trillion private liquidity in the Middle East and North Africa, out of which $1.5 trillion in the GCC, has fuelled the investments in the real estate sector across the region.

The contribution of the real estate sector to GDP in the GCC totalled $27.3 billion in 2004, some 5.8 per cent of GDP. Of this, Saudi Arabia accounted for $12.8 billion followed by the UAE with $8.049 billion. Gulf investment in the commercial property market has increased from 4 per cent in 2004 to 11 per cent last year and this trend is projected to increase over the next few years.

The market capitalisation of listed real estate companies in the region totalled $74.89 billion (in February last year), some 6.7 per cent of the total market capitalisation in the GCC. Of this, the UAE contributed $41.5 billion and Saudi Arabia $17.7 billion. This accounted for 2.7 per cent of total GDP. Saudi Arabian capital accounts for the vast majority of this investment in the UAE as well as in Bahrain.

But is real estate an over-rated investment asset class as opposed to equities and government bonds? What are the current market trends and developments, and the immediate future investment opportunities in this sector especially in the GCC region and countries such as Jordan? What are the latest regulatory, legal and policy dynamics in the Middle East which are impacting on investment in the real estate sector?

These are some of the issues that will be discussed by experts at the IREF Jordan 2007 conference titled 'Emerging Opportunities in Global Real Estate Markets' to be held in Jordan on February 14-15. The conference is being organised by London-based conference group, ICG, in co-operation with Jordan Islamic Bank and in association with Islamic Banker magazine.

A major feature of the real estate market is Islamic real estate financing and investment, which over the last few years has emerged as an exciting new component of the regional and global realty sector. This has driven cutting edge innovations in real estate structures in sukuk (Islamic bonds or trust certificates); asset securitisation, construction finance such as parallel istisna, social housing, mortgages and REITs.

The real estate market boom in the Middle East is not only confined to the GCC states but also to emerging markets such as Jordan and Turkey. In Jordan, for instance real estate constituted 4.5 per cent of GDP in 2005, and has attracted a growing portfolio of regional and international investments over the last few years.

The Gulf region has seen a real estate boom in the last few years perhaps unparalleled elsewhere in the world. Some of the large FDI tourism projects involve Islamic financial institutions, in many respects using innovative Islamic real estate financing structures including Sukuk, Istisna and Musharaka. Islamic real estate finance as highlighted by the phenomenal growth in the GCC countries is now a major component of the overall real estate market.
Some of the major developments include the Jordan Gate and the Royal Village Projects promoted by Bayan Holding and the Bahrain based Gulf Finance House; Saraya Aqaba Real Estate Development; Aqaba Tourism Development; Tala Bay and Ayla Oasis.

The involvement of major Gulf institutions such as Arcapita Bank, Gulf Finance House, Kuwait Finance House, Albayan and Kuwait International Investment Company is a testimony to the potential and the favourable investment markets conditions of the Jordanian Real Estate sector.

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