Construction & Real Estate
Lebanon: Taxing time for real estate
There are concerns that proposals made by the Lebanese government to introduce a capital gains tax on real estate transactions will further chill an already cooling property market. However, despite the marked fall in sales this year, finance ministry officials insist the plan is essential to help close the deficit in the state budget. In early October, Finance Minister Mohammad Safadi made public some of the key elements of the 2012 draft budget, which aims to increase state income by raising a number of taxes, such as the standard value-added tax (VAT) and by imposing a 3% tax on real estate transactions. The minister has sought to play down suggestions that the new taxes would put additional pressure on the economy, which the International Monetary Fund (IMF) forecasts will expand by a moderate 1.5% this year, well down on the 7.5% growth in GDP in 2010. “In the new draft budget,” Safadi explained, “we have tried to create a balance between the taxes imposed and the additional social security benefits offered to citizens.” However, while Safadi said the new taxes will not have a major impact on the real estate sector – to the extent that he has even floated the idea of a 15% tax on profits earned from property sales – property investors are less positive about the immediate outlook for the industry. Property sales have already experienced a steep downturn this year, with activity in the real estate sector well down compared to 2010. According to data issued by the Directorate of Real Estate, property transactions for the first six months of the year are 18.6% behind the pace set for the same period last year, with just 37,386 deals being secured. The fall in sales to foreigners was even more pronounced, with transactions down by 32.5%, while the overall value of sales also retreated, plummeting by 18.3% to $3.85 billion for the first half of 2011, the directorate’s report stated. While this spells bad news for estate agents and sellers, there were some positives for those in the property market. The easing in demand, for example, took the heat out of the price spiral, with the average value per property edging up by 0.4% over the first six months of 2011. The cooling of sales is also affecting the construction sector, with the number of building permits issued in the first eight months of 2011 down by 7.3% on last year. The rate of decrease is gathering momentum; in August, there was a 29% fall in the total of construction permits compared to the same month last year.
Source: Oxford Business Group
Saudi allocates $66bn for new homes
Saudi Arabia has set aside 250 billion riyals ($66.66 billion) from the 2011 budget surplus to fund one of the special projects, the construction of 500,000 homes. Announcing next year's state budget, the finance ministry said the kingdom will achieve a budget surplus of 306 billion riyals this year. It projected the budget surplus, which depends largely on oil revenues, would shrink to just 12 billion riyals next year. Saudi government plans to spend 690 billion riyals ($184 billion) in 2012, cutting expenditure from an estimated 804 billion riyals this year, when social spending was ramped up in an effort to ensure political stability. The ministry's 2012 spending plan showed authorities would continue to spend heavily on welfare. It included funds to build 742 schools and 137 hospitals, a 13% increase in education spending to 168 billion riyals, and 1.1 billion riyals earmarked for technical and vocational training, to help move more of the country's unemployed into jobs.
RAK: Handing over construction
During the first three quarters of 2011, the Ras Al Khaimah (RAK) construction industry has pressed on with scheduled mixed-use development projects. With fiscal uncertainty persisting in North America and Europe, and political unrest still lingering in the region, construction sectors across the Middle East and North Africa (MENA) region have faced mixed economic signals. Despite these external factors, however, specific regional circumstances – such as rising populations and increased demand in some segments – are still helping to boost the industry. During the first three quarters of 2011, several major mixed-use developments projects have been handed over in RAK. A number of these are products of RAK Properties, a government-backed real estate company charged with enhancing development in the emirate. The firm handed over three major projects in the first 11 months of 2011: Julfar Towers, Mina Al Arab and RAK Tower. The first two are located in RAK itself. Handover for the two 45-storey Julfar Towers began last summer. The project, which is completely within the RAK Free Trade Zone, consists of one tower with 468 offices and another with 349 residences. The company also started handing over units in another mixed-use development called Mina Al Arab. Unlike Julfar, however, this 3.25 million-square-meter residential community is predominantly low-rise and located on the coast. The Dh10 billion ($2.72 billion) project is set to include recreational facilities for residents, retail areas and six residential districts, as well as ecological preserves for wetlands and beaches. A third project, the RAK Tower, was also finished last summer. The building, located on Abu Dhabi’s Reem Island, includes 212 residences. Handover of units began on June 27, the company said. The initial sales and handovers of these mixed-use areas have offered a significant boost to RAK Properties’ revenues. In its Abu Dhabi Securities Exchange (ADX) Directors Report for the first nine months of this year, the company reported sales revenues of Dh267 million ($72.67 million), compared to Dh115 million ($31.3 million) for the same period in 2010. Despite rising revenues, however, the company reported in the ADX report that profit for the first nine months has slipped from Dh164 million ($44.64 million) to Dh99 million ($26.95 million), citing climbing impairment costs and expenses. Impairments arise when the value of properties not yet sold decreases, meaning that they will fetch less on the market than planned. But RAK is not alone in this: elsewhere in the region developers have also reported larger revenues but decreasing net profits, thanks to a combination of tighter credit and more properties coming online. For the third quarter of 2011, Union Properties, a developer in neighboring Dubai, reported a Dh1 billion ($272.19 million) loss alongside revenues that increased by 75%, from Dh545 million ($148.34 million) to Dh955 million ($259.94), the local daily The National reported.
Source: Oxford Business Group
Major drop in Bahrain construction tenders
The tenders for construction projects in Bahrain have dropped by more than 80 per cent when compared to last year, according to a report by Akhbar Al Khaleej. Thirty per cent of contracting companies are without any business at all, the report said, quoting sources in the contractors’ society. This is forcing contracting companies to sign on to projects at cost price, the report stated. Many of them are either pulling out of business or are forced to shy away from their commitments, it added.
Source: Akhbar Al Khaleej
$65m housing project launched in Bahrain
A BD24.4 million ($64.75 million) project that will provide about 5,000 homes to accommodate 25,000 people was launched on December 11th in Bahrain. Housing Minister Basem Al Hamer signed an agreement with Great Lakes Dredge and Dock Corporation chief executive Jonathan Berger and Nass Constructions chief executive Ghazi Abdulla Nass to begin the first phase of land reclamation for the East Hidd Housing Project. It covers 227 hectares and includes commercial areas, mosques and parks. Al Hamer said the project was part of a strategy to build modern cities, including the Northern and East Sitra ones. Al Hamer said the signing of the agreement represented a great step towards finding effective solutions for housing issues. The ministry is focusing on the project to clear the waitlist of applicants, especially in the Muharraq Governorate. Work on the project is expected to start soon.
Source: TradeArabia News Service
Al Futtaim wins key Dubai project
UAE-based Meraas has awarded Al-Futtaim Carillion a major contract to develop the first phase of its 350-meter retail strip - The Avenue - in Dubai. Part of a three-phase project spanning 1.1 kilometers at a prime location in Dubai, The Avenue includes a dynamic mix of top retail brands, as well as convenience stores and food and beverage outlets. Launched at Cityscape Dubai 2011, the first phase of the retail project will take shape at the crossroads of Al Wasl Road and Safa Road, the Gulf News reported. Dewan Architects and Engineers are the project consultants, it stated. The project's three phases will extend up to Sheikh Zayed Road upon completion in the third quarter of 2012.
Source: Gulf News
Egypt: Picking up
Continuing to attract international attention and investment, Egypt’s real estate sector is performing well in what has been a turbulent year for the country’s economy. Unsurprisingly, given the country’s massive population, recent reports have emphasized the potential of Egypt’s property market, particularly in the residential, leisure and office segments, in the wake of the country’s political revolution. A deal inked by Qatari Diar, one of the region’s larger real estate companies, worth around half a billion dollars serves as a clear testimonial to investor confidence in its long-term future. An October report by property firm Colliers noted that real estate investors were increasingly looking into Egypt, with the company noting, “cautious prospecting with an intention to buy”. While there are concerns over short-term volatility, as evidenced by the most recent round of violence in Tahrir Square in Cairo, Egypt’s strong economic fundamentals are likely to influence long-term investment decisions. The declarations of interest may come as a surprise to those familiar with the high levels of poverty that the country struggles with, as well as the ongoing uncertainty in the political sector, but the prospect of steadily recovering GDP growth after 2012, combined with the country’s young and growing population, should drive demand in the residential sector in particular. While the IMF estimates GDP growth at a modest rate of 1.8% in 2012, a survey of economists by Reuters saw signs of faster expansion – upwards of 3.6% -- for the fiscal year ending in 2013. While this is still some way off Egypt’s potential, it would represent a resumption of momentum after a period of political turmoil and global economic uncertainty. The country’s population is also growing – the World Bank estimated a rate of 1.8% in 2009, and almost half the population is under age 19. The young are expected to contribute to core housing demand over the coming decades as they take jobs, marry and move out of family homes and onto the housing ladder. The growing middle class is expected increasingly to use mortgages – currently a marginal practice in Egypt, accounting for less than 1% of GDP – to acquire property, thereby continuing to support market expansion. “There is about a 1 million room shortage in Egypt and the number increases every year,” said Hassan M Hassan, the chairman of business development at the Dorra Group, one of the country’s largest construction companies. “With about 500,000 weddings each year this number continues to grow as married couples need their own housing.” There is also cause for optimism in the leisure sector. Egypt’s tourism industry, which has suffered since the political unrest earlier this year and has seen visitor numbers drop, has proved robust in the past, often returning to growth after other significant political upheaval, and the country’s appeal to a wide range of visitors remains strong.
Source: Oxford Business Group
$15m park to opens in Bahrain
The BD6 million ($15.9 million) Prince Khalifa bin Salman Park opened on December 26 in Bahrain. The 78,000-square meter park is located on the Hidd side of the Prince Khalifa bin Salman Causeway. Boy wonder Mohammed Tamimi and Hind will perform at the celebrations which begin at 7pm. The opening has been timed to coincide with National Day and Accession Day celebrations. The park is also the first facility in Bahrain that houses a boat jetty, which acts as a jet ski station. The artificial lake inside the park sprawls over 5,225-square meter. The park has a skating rink and fitness equipment along the walkway.
Source: TradeArabia News Service
Bahrain: Homing in on construction growth
The construction sector looks set to receive a welcome boost, with Bahrain’s state and private developers planning to increase investments in residential projects to meet growing demand for affordable housing. According to a recent report by the Economic Development Board (EDB), almost 350,000 new residential units will need to be added to existing stock by 2030 to keep up with the growing demand for affordable housing in the Kingdom. Currently, the report said, there is a deficit of 40,000 units, a figure set to swell in coming years if the state and private developers do not move quickly. “Total housing demand is expected to increase to 263,536 housing units in 2020 and then to 346,718 in 2030 from the current stock of 145,181,” the EDB forecast in its report, which was released in late November. To clear this backlog and meet the new calls for affordable housing units, at least $1.1 billion will have to be spent every year up to 2020, and then $242 million annually up to 2030, the EDB stated. Two factors contributing to the increasing gap between supply and demand are the slowing of activity in the building industry and the growing population. The EDB has reported that demand for more homes is due to the expected rapid growth in the number of Bahrainis, compounded by a slow-down in the residential construction sector”. The extent of this slowdown was shown in a report issued by the Economic Planning and Development Department, a unit of the EDB, in mid November. Though the study found that much of the Kingdom’s economy was gaining momentum, with a number of key sectors performing strongly, the construction industry was still in decline. The sector posted 7% negative growth year-on-year in the second quarter, a marked contrast with the utilities sector, which expanded by 17%, or transport and communication, which expanded by 8.6%. This contraction may soon be overcome though, with the state committed to resolving housing shortages by bringing in private sector involvement. At a recent conference discussing the housing and social infrastructure needs of the Middle East and North Africa (MENA) region, Bahrain was identified as an example of flexibility in meeting building challenges. Though Bahrain’s housing shortfall is far less than that of larger countries such as Saudi Arabia, it poses a major challenge for a relatively small state, said Stephen Watson, an executive director with Ernst & Young. One of the answers found by the government and the local construction industry is public-private partnerships (PPP). “What we can learn from Bahrain is its application of a variety of procurement methods, as it understands that using a single method like design-and-build is insufficient to meet its total needs,” said Watson. “The key aspect of PPP in Bahrain is that the private sector is bringing very innovative solutions to bear that also take into account community development.”
Source: Oxford Business Group
Qatar to award $106bn projects by 2022
Qatar is set to award projects worth more than $106 billion between now and 2022 in line with its plan to develop a world-class infrastructure ahead of the Fifa World Cup Finals, according to a new report. The Gulf state will be making significant investments in the oil and gas, heavy industry, electricity generation and water desalination, social infrastructure and transportation links, the Meed said in its '2011/12 Qatar Projects' report. Qatar’s ambitious development plans over the next decade and beyond will be put under the spotlight once again at the annual 'Qatar Projects 2012' conference to be hosted by Meed Events in Doha next year. The summit will showcase the growing number of opportunities emerging in Qatar, the world’s fastest-growing economy, said the organizers. It is being held under the patronage of Dr. Mohammed bin Saleh al-Sada, Minister of Energy & Industry and chairman & managing director, Qatar Petroleum from February 5 to 8 at the Grand Hyatt Hotel, Doha.
Source: TradeArabia News Service