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Global promotional plans to stimulate demand and accelerate FDI inflows to GCC region

UAE seeks to draw $70 billion new investments in industrial sector by 2025

The real estate sector most affected by Saudi government’s incentive plans

Promising prospects for Saudi real estate market

Al Mazaya Holding, in its weekly real estate report, revealed plans of Gulf countries to promote and market real estate products globally this year to ensure accelerated foreign direct investment (FDI) inflows into local markets on a permanent basis. The report pointed to the need to follow the approach of international markets in attracting FDI, by providing all incentives needed, praising in this respect to the successful approach followed by real estate developers in the region during the past period. The report called for boosting synergy between government and private sectors to realise the aspired goals.

Needless to say that economies of the region enjoy an investment-friendly environment capable of attracting FDI, as they have an increasing number of investment opportunities that cater to the needs of different types and sizes of foreign companies, said the report. This is proved by the volume of foreign investments in the region despite the current challenges and pressures.  The report referred to the high growth levels secured across primary economic sectors, notably real estate, tourism and industry.

The report mentioned in this regard that the UAE real estate market is witnessing continuing promotion plans aimed at encouraging property investments and strengthening the UAE positioning on the world map. These plans also seek to attract world-class innovations, and ultimately ensure social welfare and happiness. The UAE’s successes are significant and tangible on all regional markets, said the report, noting that the UAE government takes into account the importance of identifying the components of real estate markets locally, to ensure their adaptability and diversification.

Al Mazaya added that the UAE real estate sector comes second in terms of momentum and investment attractiveness after the futures trade. The financial sector, insurance and process industries also occupy an advanced position, accounting for an 80% of FDI inflows to the UAE economy. Within the same context, plans to attract new investments to the industrial sector worth $70 billion by 2025 is part of the UAE government’s strategy to increase the contribution of the industrial sector to the country’s GDP to 25%. The UAE real estate sector is at the top of the list of positively affected sectors in this regard. In this respect, Al Mazaya said that the UAE has been the leading country in the region in attracting foreign investments to the real estate sector, noting that these investments have grown 34% in the Emirate of Dubai with a total value of 23 billion dollars during the first quarter last year. Gross FDI inflows to the UAE economy stands at $18 billion by the end of 2016. This is due to several factors, including the incentives provided to investors, the rapid population growth and high investment returns.

The Saudi real estate sector, says the report, is in need of increasing FDI inflows to all sectors. It is the most affected by the government’s plans aimed developing sustainable solutions to the challenges besetting the sector and bringing it back to its normal course so as to boost its contribution to GDP. The picture looks brighter if the expected pace of activity in the real estate sector is seen as part of the stimulus plans and the expected shift in the overall real estate market in the Kingdom, according to the report which added that the UAE and Saudi markets are vying for drawing the liquidity levels needed to continue launching more real estate and non-real estate projects over the coming period.

The real estate market in Saudi Arabia is witnessing a significant activity in supply and demand, but it registered a decline of about 40% in terms of transactions conducted. This comes at a time when the average YoY growth rate of the real estate sector reached 10%, with revenues hitting 12% per annum. In the meantime, FDIs in the Kingdom jumped to 1.18 trillion riyals, divided into three types of investment: currency, loans and other accounts payable and deposits, with the latter recording a remarkable rise of 38% at the end of 2016.

Al Mazaya’s report referred to the continual investment mobility in the Bahraini economy where new projects with investments amounting to $13 billion have been launched over the past few years, including infrastructure development projects. Allowing 10% foreign ownership of commercial businesses has motivated commercial and non-commercial sectors, which will ultimately lead to the development of Bahrain’s economic performance as a whole, in light of the fierce competition recorded in attracting foreign investments among the countries of the region.

Al Mazaya added that the investment movement recorded in the capital markets and indirect investment represent a real challenge to real estate markets in the region and the world during the current year, because the changes being implemented globally and the promotion of stock exchanges at the global indices are all but aimed at attracting foreign investments to capital markets. The success of these trends will positively affect the overall economic performance but will have its own bearing on liquidity on the real estate market and will control the levels of domestic and foreign demand, as property investment flourishes when investors are searching for safe havens in times of decline and when they look for exceptional returns in times of recovery.

Al Mazaya noted that the investment incentive plans being implemented by the region’s countries are primarily aimed at stimulating the performance of the financial services as well as the manufacturing and ICT sectors. In the meantime, tourism, logistics and transport services are attached with more importance in this regard, which means that the real estate sector will have an unlimited number of investment opportunities, as it significantly integrates with different sectors and economic fields.

The report highlighted the success of the region’s countries to attract more than 527 projects in 2016, with a total value of $31 billion, in addition to achieving the first position on the foreign investment competitiveness index for 2017.