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Jordan's Construction Sector Boom

Courtesy: MENAFN

DUBAI The real estate and construction sector accounted for 4.5 per cent of Jordan's gross domestic product (GDP) last year and is growing at a compounded annual growth rate (CAGR) of 11.6 per cent during 2001 to 2005, according to a recent report by Global Investment House.

The report said, the positive trend in the sector was also reflected in the increasing number of registered companies operating in the sector which stood at a total of 202 companies in 2005 compared to 82 companies in 2001.

The size of the companies' capital which increased from JD4.3 million to JD20.7 million is another indication of the sizable of investments in the sector. The year 2005 alone witnessed a whopping 188 per cent year on year increase in the size of companies capital operating in the sector.

Credit to the construction sector has expanded by 12.5 per cent during the period from 2001 to 2005, with the highest growth rate on a year on year basis registered in the year 2005.

Major growth drivers for the construction and real estate sector in Jordan include increasing population growth rates which grew at CAGR of 2.4 per cent during the period from 2001 to 2005.

A swelling young population where 44.8 per cent are between the age 0-20 and 35.6 per cent are between the age of 20-40, an abundance of credit facilities and attractive mortgage packages, and higher liquidity levels have helped the sector.

In addition, attractive foreign investments environment where capital gains from property investment are tax-free has also helped the property sector. In Jordan, foreigners are allowed to own properties or land provided they do not sell it for five years.

The year 2004 in particular was a turning point to the Jordan's real estate industry following the US-led war on Iraq in 2003 and the relocation of a considerable number of Iraq's population to Jordan. In addition, Jordan turned into a base for relief and international agencies involved in the re-construction of Iraq which led to a surge in the demand for properties. Total number of permits witnessed a 20 per cent year on year growth in the year 2004, while the total area under construction grew by 23 per cent.

According to the report, flourishing tourism has also sparked construction activity in Jordan with the presence of two hot spots in Jordan namely Aqaba, and Dead Sea. The boom in the Aqaba Special Economic Zone has also contributed to the boom with consistent development of the port area.

"Going forward, we expect that activity in tourism coupled with continuing high liquidity levels in the region will sustain activity in the sector," the report said.

The number of construction permits grew at a CAGR of 4.9 per cent in the period from 2001 to 2005, while the total area under construction grew at a CAGR of 19.1 per cent. The bulk of construction activity in Jordan's real estate market was concentrated in the residential segment which captured 90 per cent of total construction permits in the Kingdom, and 75 per cent of the total area under construction.

Among the Jordanian cities, the capital Amman accounted for 36 per cent of the total number of permits, and 65.2 per cent of the area under construction in the residential category. Amman also captured 60 per cent of the total number of permits, and 71 per cent of the area under construction in the others category.

The booming real estate market has attracted regional and international interest into the Kingdom with Kuwaiti investors topping the list. The $1 billion Royal Metropolis which is considered to be one of the icon projects coming up in Jordan is developed jointly by
Gulf Finance House of Bahrain and Kuwait Finance & Investment Company.

In addition, Kuwait International Investment Company has announced new projects to develop comprehensive industrial zones with a total area of 150,000 sqm on the outskirts of Aqaba. This project is the first of a series of projects ranging from $50-100 million to develop the city on the Red Sea. The total cost of major projects coming up in Jordan is estimated at $5.1 billion, which is almost 58 per cent of nominal GDP in 2005.



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