His Highness Sheikh Abdul Aziz bin Humaid Al Nuaimi, the Chairman of the Department of Land and Real Estate Regulation, while interacting with International Finance, noted the role of the wise leadership that stands behind this exceptional renaissance thanks to its unlimited support and comprehensive proactive vision that aims to develop all strategic and vital sectors and enhance the global position of the Emirate of Ajman as a prosperous modern city and a strategic hub for business and investment.

He explained that the Department of Land and Real Estate Regulation is keen to build its vision and plans according to innovative methods and visions based on the needs of its clients and addressing all their requirements, in addition to enhancing the culture of creativity and innovation and upgrading the government work system to keep pace with the rapid pace of development witnessed by the Emirate of Ajman, especially in the real estate sector, as it is a basic driver of the wheel of economic growth.

Ajman’s meteoric rise

The Chairman of the Department of Lands and Real Estate Regulation told International Finance that the Emirate of Ajman possesses all the global components and specifications that make it a fertile environment for real estate investment and a safe destination for investors of all categories and needs, due to the promising opportunities and exceptional competitive facilities it provides.

He also stressed that the strategic objectives of the Department of Lands and Real Estate Regulation revolve around improving the investment environment of the region’s property sector and contributing to economic growth by enhancing competitiveness in property registration. The Department’s goal is simple: to empower the real estate sector’s competencies as an important element, so that it can emerge as an effective partner in anticipating the region’s economic future and draw the features of the investment map as per that.

“The Department is doubling its efforts to highlight the tremendous investment components and capabilities that the Emirate possesses, especially in the real estate sector, and promoting promising projects and diverse investment opportunities that Ajman provides to investors,” HH Sheikh Abdul Aziz bin Humaid Al Nuaimi told the International Finance.

As of August 2024, Ajman’s real estate market has continued its upward trend, recording 1468 property transactions in July with a total value of over AED2 billion, a growth of 42.85% year-on-year. The Emirate is witnessing a strong momentum and a remarkable increase in the number and volume of transactions given the diversity of investment opportunities and the attractiveness of the business environment. As per His Excellency Eng. Omar bin Omair Al Muhairi, Director-General of Ajman’s Department of Land and Real Estate Regulation, the volume of transactions during July reached AED1.34 billion, with Al Rashidiya 1 neighbourhood recording the highest sales value of AED80 million.

As per the department, it recorded 280 mortgage transactions totalling AED489 million, with the highest mortgage value of AED75 million recorded in the Ajman Industrial 2 area. The Al Helio 2 area topped the list of most traded neighbourhoods, followed by Al Zaheya and Al Yasmeen, while Emirates City topped the list of most traded major projects, ahead of Ajman One and City Towers.

HH Sheikh Abdul Aziz bin Humaid Al Nuaimi informed the business publication that the Emirate has recorded major successes in various sectors, particularly real estate which is keeping pace with the comprehensive renaissance witnessed by the Emirate thanks to prudent insights of leaders like HH Humaid bin Rashid Al Nuaimi, Member of the Supreme Council, Ruler of Ajman, and HH Sheikh Ammar bin Humaid Al Nuaimi, Crown Prince of Ajman, Director of Executive Council. The strategic brilliance displayed by these personalities is paving an excellent future for the Emirate, apart from consolidating the region’s position as an attractive destination for real estate investment.

Important policy reforms

While talking about Ajman’s real estate success story, HH Sheikh Abdul Aziz bin Humaid Al Nuaimi cited the facilities and success factors provided by the emirate to investors and their projects, and its flexible legislative environment that is investment-friendly. Then there are elements like ease of registration procedures and swiftness completion of transactions, in addition to the advanced modern infrastructures provided by the Emirate.

For example, the Department of Land and Real Estate Regulation has begun a comprehensive building classification project across the Emirate from July 2024. This three-month initiative is assessing the compliance of buildings and real estate facilities with international standards and regulations.

A team of qualified professionals is conducting on-site inspections and assessments as part of the classification process. The department will develop an electronic programme to publish the findings transparently, which will further lay the groundwork for classifying the buildings according to international standards and specifications.

Given the critical role the real estate sector is playing in the Emirate’s economy, with a significant increase in commercial property investments in 2024, the requirement of the classification becomes crucial to uphold the quality of services, apart from assisting investors in making informed decisions when it comes to renting or purchasing properties in Ajman.

In May 2024, the Department of Land and Real Estate Regulation in Ajman completed 169 real estate valuation processes totalling over AED 729.5 million. Director of Real Estate Registration Ahmed Khalfan Al Shamsi highlighted that the valuation encompassed commercial, residential, industrial, and agricultural properties, with commercial properties leading the way at AED 437.2 million, marking a 197% increase from April 2024. Industrial properties followed with a total value of AED 148.45 million.

“The Emirate’s Real Estate Growth reflects the confidence of investors in Ajman as a leading investment destination, enhances the solidity of the Real Estate sector in it, and reflects the success of the strategy of the Land Department and Real Estate Regulation aiming at providing an integrated and distinguished business environment for investors of all categories,” HH Sheikh Abdul Aziz bin Humaid Al Nuaimi commented.

He explained that the Ajman Real Estate Investment Exhibition which was held last February, contributed directly and positively to stimulating the performance of the real estate market and high results of the first half of 2024, pointing out that the exhibition witnessed the conclusion of 336 property transactions with a total value of AED 195.8 Million, which reflects the confidence of investors and the attractiveness of the sector given the huge investment potential and potential possessed by the Emirate, its promising projects, the various opportunities it offers to investors, as well as Ajman’s distinguished and central location between the Emirates, and last but not the least, its flexible laws and legislations which contributes towards attracting investment, in addition to the diversity of models offered in the property market. The residential and commercial projects also provide easy financial access for foreigners to purchase and own properties by up to 100%.

While praising the efforts of his department, HH Sheikh Abdul Aziz bin Humaid Al Nuaimi stressed the need to continue working and concert efforts of everyone in order to preserve the gains achieved so far and improve the performance level to ensure sustainable excellence within the framework of an innovative and integrated work system centred on customer satisfaction and happiness.

He also appreciated the department for obtaining a five-star rating according to the international star system for service classification and winning the Ajman Award for Government Excellence in the category of the best comprehensive experience for government services, stating, “This achievement embodies the vision and ambition of the wise leadership keen to achieve leadership and excellence in various fields and promote and consolidate the culture of creativity and innovation to foresee the future and invest in building the human being for a more prosperous and stable tomorrow.”

HH Sheikh Abdul Aziz bin Humaid Al Nuaimi also pointed out the importance of adopting innovation to achieve breakthroughs supporting the department’s endeavours towards achieving sustainable excellence, and enhancing the levels of satisfaction and happiness of customers, with the need to adopt modern methods in dealing with customers’ feedback, hearing their opinions, and ensuring their effective involvement in improving the level of services, and building a strong and integrated relationship, in line with the Department’s objectives and plans.

On supporting young Emirati competencies and integrating them into the Real Estate field, he said, “As much as we are interested and keen to support investors and entrepreneurs, we attach utmost importance to the human element and believe in the need to invest in our young energies and empower them to be an effective element in our future development plans.”

HH Sheikh Abdul Aziz bin Humaid Al Nuaimi also spoke highly about the “National Broker” initiative, which is eyeing to enhance the performance of the Ajman real estate market, apart from upgrading the brokerage profession by adopting the best practices in this vital field, which the department attaches utmost importance to and strives to develop according to a well-studied scientific methodology that has been carefully developed to ensure high-quality results and outputs that reflect the department’s orientation towards empowering and qualifying Emirati youth, developing their skills and enhancing their culture related to real estate trading laws and procedures followed to practice property-related brokerage activities and supporting these individuals as entrepreneurs and investors, as they have the potential to help UAE in achieving its future economic goals.

HH Sheikh Abdul Aziz bin Humaid Al Nuaimi further stressed that the Land Department and Real Estate Regulation has harnessed all means and ingredients for success for most of its ambitious programmes and purposeful initiatives, which witnessed a turnout that exceeded expectations due to the number of registration applications received, as well as facilitating positive interaction by participants from different community and age groups.

He also pointed out that Emirati women also benefited from this initiative and had the opportunity to enter the real estate market and prove their efficiency and ability to contribute to the renaissance of this sector, stressing that the wise leadership succeeded in providing a supportive and encouraging environment for women and made them an active element in the process of renaissance and development and was keen to empower them and encourage them to shine and succeed in various fields and disciplines.

While stating that senior citizens received exceptional attention and treatment from the department for their special and important position in the UAE society, HH Sheikh Abdul Aziz bin Humaid Al Nuaimi noted that the achievements and successes registered so far will not be completed without ensuring the satisfaction and happiness of all customer segments, in line with the directives of the wise leadership of providing all the care and facilities they deserve, providing all facilities and simplifying the procedures for obtaining government services to ensure a better experience and enhance their comfort and happiness, and especially their quality of life.

He continued, “The initiative “Natanalak” is one of the most important initiatives launched by the Department, as it comes within an integrated package of services directed to the customers of the Department of various segments and the diversity of their requirements, the initiative has received a welcome and approval among senior citizens, which we saw during field tours and visits to those concerned at their residence, where these visits were a favourable opportunity to meet them and get to know their needs closely and write down their ideas and visions about the future of services, mechanisms and ways they prefer to complete their transactions.”

The chairman also expressed his happiness that the department obtained the classification of leadership in the field of maturity of institutional resilience, according to the assessment of the International Organisation for Institutional Resilience “ICOR,” dubbing it as the fruit of the directives issued by the wise leadership, while emphasising the excellence of the department and its continuation of the growth march in various aspects, especially strategic leadership, while setting the ability to respond and adapting to changes as a crucial success recipe.

The department has succeeded so far in applying the thumb rules of the global maturity model for institutional resilience, as it was able to strengthen its organisational infrastructure and proved its full readiness to manage risks effectively and innovatively, stressing the department’s keenness to develop its operations and raise the efficiency of institutional performance under the highest international standards and in line with the accelerated pace of the real estate sector in the Emirate of Ajman.

Future of Ajman’s real estate sector

Meanwhile, the Ajman administration has contracted the consultancy JLL to come up with a strategy to help make the emirate’s property market a highly competitive one. JLL, which has a longstanding presence in the UAE, will also help with creating new ways by which the region’s real estate can be both operationally successful and sustainable.

This is part of the emirate’s broader push to bring in more investments into its economy, particularly on the real estate side.

“The results of the study will contribute to drawing a roadmap for the future of Ajman’s real estate sector,” said a statement from the government’s Department of Economic Development.

“JLL’s research, expected to be completed by the end of the first half of this year, will provide a diagnostic vision of Ajman’s capabilities, and result in setting a development road map for the future of this pivotal sector,” said Saeed Humood Saeed, Director of the Ajman Competitiveness Office at the Department of Economic Development.

The JLL plan will also focus on the chances for Ajman to top its hospitality sector by way of new investments.

“We are committed to developing the potential of the tourism sector by enhancing competitiveness and creating innovative investment opportunities,” said Mahmoud Khalil Al Hashimi, Director-General of Ajman Tourism Development Department, as he continued, “We believe this partnership (with JLL) will contribute significantly to building a system that enhances the attractiveness of Ajman as a distinguished investment destination on the international scene.”

The post Ajman: Emirates’ new ‘Modern City’ appeared first on International Finance.

As the Kingdom’s urban landscape continues to evolve, ROSHN Group, Saudi Arabia’s leading national real estate developer and a PIF-owned giga-project, establishes itself as a visionary force.

With its vibrant developments seamlessly blending tradition with innovation, ROSHN Group is reshaping the future of the Kingdom’s urban living. Through its meticulous integration of residential, retail, commercial, and hospitality structures amongst vital green spaces, ROSHN Group has envisioned a new way of living in the Kingdom. The cover story of the March-April 2024 edition of the International Finance Magazine will talk about how the real estate venture is becoming a driving force behind Saudi’s urbanisation efforts.

A visionary mandate
As a key enabler of “Vision 2030”, ROSHN’s mandate goes beyond the conventional realms of real estate development. It has emerged as a national developer in the Saudi market, with the commitment to delivering a high standard of living and modern integrated communities to domestic customers.

The Group is building integrated developments that reflect both the Kingdom’s rich heritage and the aspirations of its people, with its residential, retail, educational, hospitality, and commercial spaces combining to establish a truly comprehensive and perhaps unmatched real estate portfolio.

As Saudi continues its emergence as one of the most dynamic and robust economies in the world, PIF-owned giga-projects have been strategically crafted to fulfil specific elements of the diversification agenda.

ROSHN has a geographic commitment as broad as Vision 2030’s goals to create a “thriving economy, a vibrant society, and an ambitious nation.” The Group is actively supporting the national vision by enhancing the quality of life and well-being of people across Saudi Arabia and using its scale to act as a catalyst for economic diversification, while working with the private sector to strengthen and localise the construction industry supply chains by working across the full gamut of real estate verticals.

With five projects having already been launched across three Saudi regions as of February 2024 and the latest sales tranche for its flagship Riyadh project SEDRA launched this month, demand for ROSHN projects continues to grow. By 2030, ROSHN seeks to enable Vision 2030’s key goals, by supporting the goal of 70% home ownership.

Building momentum
ROSHN already stands as the first PIF giga-project to deliver to customers since its flagship SEDRA community welcomed its first residents two years ahead of schedule in October 2022.

SEDRA, situated in Riyadh, will eventually encompass eight phases with 30,000 homes. It has rapidly established itself as one of the capital’s most desirable districts, with every one of the three sales tranches launched so far being sold out rapidly. Building on the demand of the first three phases, the Group recently launched sales for the fourth phase of this flagship development eventually bringing a further 4,860 units over 1.9 million square metres to the community. ‘SEDRA 4’ will also notably include a world-class sports dome, offering year-round, all-weather recreation facilities through an agreement with Saudi Sports For All (SFA). SEDRA is also closely integrated with ROSHN Front, formerly known as Riyadh Front. The Group’s acquisition and rebranding of this popular retail and commercial destination epitomises ROSHN’s strategic ability to facilitate integrated lifestyles, as SEDRA residents now benefit from privileged access to one of Riyadh’s most popular zones.

ROSHN kept up the momentum and launched ALAROUS in the storied Red Sea city of Jeddah. As 2023 arrived, the venture launched WAREFA in Riyadh, a 2,000-plus unit project expanding and enhancing one of the capital city’s most promising neighbourhoods in the Janadriyyah district. They next turned east to the iconic Dakhna Mountain of the Eastern Province’s Hafouf. Here, ROSHN’s ALFULWA project will bring a new swathe of units to market in a “ Garden City” composed of 22% green public space. October 2023 saw the cornerstones for both WAREFA and ALFULWA laid in ceremonies attended by both ROSHN and regional governmental leaders.

Turning to 2024, in February ROSHN broke ground on Jeddah’s MARAFY, the Group’s most ambitious project to date. The project, which links distinct districts with a Red Sea-fed 11km long canal, has become the first of its kind in the Kingdom, apart from becoming an instantly iconic landmark for the city. MARAFY is ROSHN’s largest mixed-use project, and will feature the venture’s signature combination of residential, retail, hospitality, leisure, commercial, and educational spaces. With MARAFY now well underway, hints about the possible announcements of new multifunctional and mixed-use projects fill the air.

Uniquely Saudi
ROSHN is fashioning fully integrated developments that enable health, well-being, and fulfilment by combining multiple real estate verticals in a human-centric way. It’s a new way of living in Saudi Arabia, where communities and lives are living beyond walls in developments designed from the ground up to create a daily dialogue between a uniquely Saudi past, present, and future.

ROSHN has strived to create a real estate offering that is unique in the Kingdom with a range far wider than just homes. Interlinked facilities, including education, sports areas, shopping malls and commercial areas, cafes and restaurants, and healthcare centres, integrate and interact to encourage genuine community-focused lifestyles.

ROSHN’s master planning of its projects is creating open, green, and walkable neighbourhoods that will empower social interaction, revitalising a way of life that was once much more widespread in the Kingdom. Furthermore, a ROSHN street is a “Living Street”, with pedestrian priority, low-speed limits, and natural shade enabling 15-minute walkability through these green spaces to community amenities.

The Group is also committed to ensuring that its projects become an integral part of the Kingdom’s social, urban, and cultural fabric. Walk those living streets of SEDRA or look at the designs of any of ROSHN’s projects and you see exactly how this ambition manifests itself. In SEDRA and WAREFA, buildings hark back to the traditional architectural vernacular of the region, while in ALAROUS and MARAFY in Jeddah and the Eastern Province’s ALFULWA, different forms and colours speak to those regions’ historic buildings.

Meanwhile, the natural environment has become part of the projects as well with the design teams prioritising the preservation of habitats and drainage patterns in the communities, while also adding distinctive green public spaces coloured by native flora in these projects.

Sustainability and ethics at heart
Sustainability is at the core of ROSHN’s operations. It promotes walking and green micro-transport solutions to smart city projects that improve the efficiency of irrigation, street lighting, and waste management. Coupled with cutting-edge materials that cut water and electricity usage, a robust material and community recycling programme, and a wide-ranging planting programme, ROSHN is setting new standards in sustainable development.

ROSHN has achieved the “Diamond category” in the Kingdom’s Mostadam sustainability ratings as well as the internationally recognised “BSI Kitemark Certificate” for Saudi smart cities, which includes the “Smart City Operating Models” for “Sustainable Communities ISO”. Recently, ROSHN was presented with an award for the “Best Waste Diversion Initiative of the Year” by the “Saudi Arabia Cleaning, Waste Management & FM Awards” in recognition of its innovations in that area.

ROSHN GROUP also engages in a daily embrace of the same values it promotes: integrity, responsibility, empowerment, opportunity, trust, safety, and sustainability. These guide ROSHN’s internal operations, where employees are engaged in feedback processes, and offered regular opportunities to upskill their existing talents. The Group is playing its part in imbibing these values in the next generation of the Saudi workforce with its HIMAM graduate programme, which has seen over 70 graduates taken under the ROSHN wing so far.

ROSHN is also setting new standards for corporate conduct, apart from establishing itself as a partner of choice for suppliers. In 2023, ROSHN marked 35 million safe working hours and joined the “United Nations Global Compact” on responsible business practice, thereby becoming the first Saudi giga-project to do so.

The Group has also been recognised with awards as wide-ranging as “Best Developer in the GCC” by Construction Week, the “Best Place to Work in Saudi Arabia” for the second year running by the Best Places to Work organisation, certification as a Top Employer for the past two years, and for Corporate Social Responsibility (CSR) Initiative of the Year.

ROSHN also has numerous ISO certifications, becoming the first Gulf-based developer to secure ISO 9001 for Quality Management and the first company of any kind in the India, Middle East, Turkey, and Africa (IMETA) region to achieve the BSI Kitemark for Smart Cities, ISO 37106:2021.

Partnerships to deliver
As it quickly expanded across the country of Saudi Arabia, ROSHN recognised from the outset the critical importance of establishing strong and flexible supply networks rooted in resilient local and global collaborations. The year 2023 witnessed a significant shift through the establishment of numerous strategic business alliances and agreements with suppliers hailing from various regions in Saudi Arabia and beyond.

ROSHN has secured significant partnerships to enhance the development of essential and lifestyle facilities. Among these partnerships is a SAR 7.7 billion agreement with China Harbour Engineering Company. Additionally, ROSHN has entered into multi-million SAR agreements with key Saudi suppliers. These include PC Marine Services for canal and bridge construction in MARAFY, Abyat for the design and supply of approximately 12,000 kitchens in future ROSHN communities, and Saudi Pan Kingdom Company for primary and secondary infrastructure in upcoming western Saudi communities.

As ROSHN entered 2024, the venture took the game to the next level by hosting the “ROSHN Supply Chain Forum” during which it worked to enhance connections, highlight prospects, and forge fresh collaborations by convening a diverse group of private sector suppliers and contractors under one roof. The event proved to be highly successful, resulting in the signing of eight new agreements with private sector partners from Saudi Arabia and around the globe. These agreements aim to localise manufacturing, pioneer innovative materials, and enhance the efficacy of ROSHN’s partnership procedures.

A highlight of the “ROSHN Supply Chain Forum” was the venture’s agreement with Partanna, the world’s first carbon-negative concrete manufacturer. The collaboration will see the two entities establish the Middle East’s first carbon-negative concrete production facilities, ensuring the spread of this revolutionary technology across the region, apart from cementing ROSHN’s status as a global pioneer in sustainable development.

This approach has not only ensured minimal impact on ROSHN from supply chain disruption, but it has also allowed the venture to have as broad an impact on Vision 2030’s goals as it has on Saudi Arabia’s map, in particular economic diversification targets. This has been achieved through job creation, the expansion of emerging economic domains, and the localisation of manufacturing processes. This process is particularly serving as a catalyst for aspiring Saudi entrepreneurs and invigorating local economies. ROSHN envisions creating a substantial number of job opportunities in the Kingdom by 2030, thereby contributing significantly to the non-oil sector’s GDP and aligning closely with the overarching goals of Vision 2030.

A winning developer
Recently, ROSHN won International Finance’s “Best Community Residential Project Developer” award for their exceptional performance in 2023. SEDRA, ROSHN’s flagship development in Riyadh, stands as a testament to the company’s commitment to fostering sustainable, integrated lifestyles.

Comprising eight phases and over 30,000 residential units, SEDRA’s strategic location and traditional architecture make it a highly desirable living space. SEDRA is also a pioneer in sustainable design, as it boasts reductions in energy and water usage that are above and beyond the mandated “Saudi Building Code”.

ROSHN’s other projects, such as WAREFA, ALAROUS, MARAFY, and ALFULWA, also uphold sustainability as a core principle. Emphasising walkable thoroughfares, solar energy, advanced insulation technologies, and abundant natural lighting, these projects play a crucial role in achieving ROSHN’s sustainability objectives. The recent collaboration with EVIQ, Saudi Arabia’s pioneering electric vehicle charging network, marks a significant achievement in promoting electric vehicle adoption in a nation heavily dependent on cars. This partnership will result in the establishment of charging stations throughout ROSHN’s developments, contributing to a more sustainable future.

ROSHN’s Jeddah communities are continuing this legacy of innovation. ALAROUS, ROSHN’s first community in the Red Sea city, and now MARAFY, both showcase the Group’s signature integrated approach, emphasis on sustainable practices, and commitment to traditional architectural heritage, combining residences, amenities, and human-centric design.

The incorporation of classical Jeddah architectural elements pays tribute to the rich Saudi heritage, blending innovation with respect for tradition. Situated prominently as the primary residential area within the revolutionary MARAFY canal project, ALAROUS emerges as the premier destination in Jeddah, a city that ROSHN endeavours to elevate into the ranks of the world’s top 100 most livable cities by 2030.

ALFULWA, ROSHN’s first venture into the Eastern Province, has emerged as a harmonious blend of nature, history, and modern living, centred near the iconic Dakhna Mountain on the outskirts of Hofuf. With an abundance of native flora, and a design inspired by the region’s architectural heritage, ALFULWA is exemplifying ROSHN’s commitment to creating communities that immerse residents in the beauty of their surroundings.

ROSHN now foresees an evolutionary expedition through different sectors, extending beyond its premises. The Group is carefully designing multifaceted environments that foster centres of health, wellness, and a dynamic social fabric. ROSHN sees its role as shaping a new way of living where opulent regional architectural patterns intertwine with the pinnacle of contemporary design.

Cementing change in Saudi Arabia
ROSHN has assumed a responsibility that exceeds its construction sector activities. It has far-reaching implications for Vision 2030’s goals, a thriving economy, a vibrant society, and an ambitious nation. ROSHN’s developments act as a catalyst for entrepreneurial Saudis, apart from supporting domestic supply chains, generating jobs, and stimulating local economies. By 2030, ROSHN aims to create hundreds of thousands of jobs in the Kingdom, making them an important instrument of national development.

ROSHN’s ‘YUHYEEK’ CSR initiative uses its size and reach as a PIF-powered giga-project to extend its commitment to quality of life, sustainability, and community building beyond its projects, benefitting Saudis across the Kingdom through partnerships that uplift, empower, and inspire.

From inspiring the love of reading at Riyadh and Jeddah Book Fairs to supporting events like LIV Golf and the Zahra Breast Cancer Awareness Campaign, ROSHN has become a catalyst for a vibrant Saudi society.

Recognising the importance of local arts in the formation of the Kingdom’s emerging identity, ROSHN has also engaged in sponsorships of the Diriyah Biennale and the Tuwaiq Sculpture Symposium. YUHYEEK is continually seeking new partners to deliver benefits to Saudi society, demonstrated further by its partnership with the Tarmeem Charity to renovate homes for the needy.

ROSHN is dedicated to fostering ambition within the nation, boasting a commendable 72% Saudization rate alongside a 28% female employment rate. A groundbreaking initiative in Saudi Arabia, ROSHN’s RETURN Programme not only propels societal advancement but also symbolises inclusivity. By providing compensated training opportunities to women rejoining the workforce, this programme is intricately crafted to nurture, empower, educate, and instil confidence in those seeking to reignite their professional journeys.

Aiming to become one of the world’s most diversified real estate ventures, ROSHN continues to make long-term investments across Saudi Arabia, muscling up its presence across a range of verticals.

ROSHN is committed to elevating the quality of life, fostering economic diversification and prosperity, and contributing to the realisation of Vision 2030’s objectives by hosting top-tier events in the Kingdom to enhance global involvement.

ROSHN winning International Finance’s “Best Community Residential Project Developer” award is a testament to the venture’s transformative impact on Saudi Arabia’s real estate landscape. Standing tall, the venture truly symbolises the convergence of tradition and modernity, sustainability, and innovation.

The post ROSHN: Shaping Saudi’s Urban Vision appeared first on International Finance.

The group, which was established in 1991, currently operates in several sectors including construction, specialised contracting, water and power, facility management, manufacturing, MEP solutions, technology, and investment in public-private partnerships (PPPs). As the Kingdom sets its eyes towards the goal of ensuring a well-diversified economy by 2030, AlBawani Holding is set to play a crucial role in implementing the roadmap.

Knowing the venture in detail

“The past three decades have seen our business grow from a modest civil-works firm into a fully ledged general contracting corporation with a sizable portfolio, strong financial position, and a significant presence in a broad range of industries. Indeed, our construction division is now among the five largest operators in the country. What’s more, our unwavering focus on excellence has earned us a Class-1 business ranking in Saudi Arabia,” the venture told International Finance.

Till November 2023, the venture has completed over 260 projects, apart from building long-term partnerships and in that process, earning the trust and loyalty of its clients. AlBawani Holding currently has over SAR 9 billion worth of ongoing projects. The company has a 15,000-strong workforce, with each of them being a specialist in different industrial verticals.

The group believes in adhering to international standards and developing rigorous quality management systems in its business sectors. The company has also established rigorous procedures to ensure the safety of its personnel, minimise errors and deliver the projects within the time and budget.

At the core of AlBawani Holding’s business practises, resides world-class engineering, administrative, and technical practises, supported by cutting-edge technology and integrated support services.

“We are now investing in the future so that we can introduce the latest technology and knowledge to the Kingdom. This will allow us to harmonise with the objectives of Vision 2030: a striving economy, a vibrant society, and an ambitious nation,” the venture stated further.

AlBawani’s mission is to provide the best innovative contracting and services in EPC (Engineering, Procurement and Construction), Energy, Water, Technology and Light Industry, apart from achieving sustainable growth through its investment arm. Keeping the ‘Vision 2030’ in mind, AlBawani will lead sustainable growth in the Kingdom by creating the best value for its clients, investors, employees and Saudi society, while sticking to the group’s core values such as quality, safety and health, innovation, ethics and culture, sustainability and people-centric relationships.

How the company works

AlBawani is known for bringing complex and logistically challenging projects from the drawing board to reality. Through the deployment of a 6000-employee-strong workforce across the infrastructure projects, the venture delivers its commitment towards ensuring quality and safety.

“Our global network of construction resources facilitates the effective mobilisation of skilled construction teams and advanced methodologies around the world. AlBawani has extensive experience with local considerations and managing culturally diverse workforces,” the venture commented further.

The company often engages clients to support start-up and commissioning activities. The group responds to the challenge by developing a detailed ‘Project Commissioning Manual’ early in the engineering phase that outlines the client’s and AlBawani’s approach and methodology to implementing continuous commissioning and turnover.

AlBawani’s specialists are veterans in the field of construction execution methods, including constructability, skill certification, industrial relations, modularisation, and welding services. These professionals deliver input into the construction range, enhancing manufacturing activities and proposing cost-saving ideas during all project phases.

AlBawani integrates complete construction competence during the various project implementation phases.

“When executed at the front end of a project, this expertise enhances performance throughout all project execution phases. Skilled planning and execution supports the efficient use of just-in-time inventory and can hasten the project schedule,” the venture noted.

AlBawani practises advanced construction approaches on its projects, apart from acquiring labour through carefully selected subcontractors with a verified history of safety performance, execution excellence and commercial success. The focus remains on constructability, performance engineering, welding, and software systems.

AlBawani also preserves a database of craft personnel with both local and global project experience. From this pool, craft personnel get assigned to the construction projects based on experience and availability. The company also supports the needs of construction projects for entry-level through the upgradation of craft and supervisory training and skill certification, while using the materials developed specifically for the construction industry.

Also, the venture maintains a deep assurance of the field employees’ health and safety, apart from safeguarding the environment. Its quality programme is ISO 9001:2008 certified. The programme applies to both self-perform and project administration construction work. A quality manager is assigned to each project and is accountable for the execution and coordination of the quality programme.

In addition to construction services, AlBawani implements a complete Health, Safety & Environmental (HSE) programme on every project it executes. Safety, be it that of the project or the field teams associated with it, occupies a significant chunk in AlBawani’s business practises, as it believes that “positive execution of complex projects can be achieved only with a healthy and safe workforce of employees, subcontractors and client personnel.”

“AlBawani’s engineering, procurement and construction projects are construction-focused. We confirm a smooth transition from process development and optimisation-driven execution defined by the study phases, to a construction and start-up-driven execution platform defined by engineering, procurement and construction phase,” the group remarked further.

“AlBawani thinks first and foremost about fulfilling project construction. Then we work backward, framing how to get materials to the various sites. After this, AlBawani determines how and where to drive engineering,” it added further.

AlBawani tailors its solutions as per the Clients’ requirements, while bringing ideas from engineering disciplines like civil, electrical, mechanical, piping and structural into the play, apart from onboarding advanced specialities such as simulation, enterprise integration and integrated automation processes.

The venture also collaborates with its client counterparts to develop integrated construction and project management solutions. From the earliest stages of project design, AlBawani involves the construction and commissioning teams to provide capital and schedule efficiencies.

“Our clients rely on AlBawani for accurate and timely design reviews. We conduct design reviews at key project stages to ensure consistent, efficient focus on the clients’ deliverables throughout the design process,” it added further.

AlBawani’s BMF Reviews (Buildability, Maintainability and Functionability Reviews) earned its fame for highlighting, addressing and resolving issues early in the design process for an efficient design and construction process, apart from minimising overall project cost.

Keeping the need to meet clients’ objectives for throughput capacity and quality of output as the primary project design goal, AlBawani, during the detailed engineering and design phase, develops plans to ensure that the designs reflect client requirements and facilitate the construction of facilities meeting the client’s strategic objectives.

Each project’s function, scope, cost and schedule get conceptually aligned with client objectives to optimise project success, while ensuring the improvement in the client’s return on investment.

During the design phase, AlBawani gets proactive, in terms of providing effective building solutions, and identifying challenges to mitigate design changes after construction commencement. This involves detailed pre-construction planning, which allows the client and AlBawani project team to form a clear roadmap for the bidding process, construction phase, and completion deadlines.

Diversification is the game here

Be it building a network of schools under the Kingdom’s ‘National Schools Programme’, completing terminal-related works under Riyadh Airports Company Private Aviation or implementing the ‘Red Sea Tourism Project’, you name any sector, AlBawani is there to turn the dream into a reality.

AlBawani has been bringing tailored engineering solutions to as many as 14 non-oil industrial verticals within the Kingdom. AlBawani is now expanding its network of affiliated companies in other fields like information technology and communication systems, trading, media and publishing, electro-mechanical, steel and metal fabrication, industrial and investments.

From water and power utilities, automation, avionics, defence technologies, specialised manufacturing services (like in-house precast, casework, ducting, steel fabrication, aluminium and woodworks factories), facility management or managing a diverse portfolio of highly profitable investments, AlBawani has been aggressively diversifying its company portfolio, while leading the Saudi’s diversification efforts with full vigour.

AlBawani has made a significant investment in new equipment, and the company now has over one thousand heavy assets in its fleet including heavy machinery, cranes, trailers, light vehicles, and power tools. Also, it is now expanding its operations in countries like China, Turkey and the UAE.

AlBawani’s growth plans

As part of its growth plans, the AlBawani group has adopted a wise expansion strategy covering energy and mining, apart from increasing investment in assets which will be offered through state funds, and governmental and private projects.

AlBawani’s board of directors is also considering selling a stake in the company through an initial public offering (IPO) in the coming years.

“Driven by a steadfast commitment to fostering sustainable growth, AlBawani Holding Group is actively considering an initial public offering (IPO) to make a portion of its shares available for public subscription in the near future. We are open to any strategic initiative that can further enhance the group’s value and propel its growth trajectory. As a leading national enterprise, AlBawani Holding Group is determined to play a pivotal role across diverse sectors and establish itself as a formidable competitor for global players,” AlBawani Holding CEO Eng. Fakher AlShawaf elaborated.

“Since its inception, AlBawani Holding Group has navigated a course through significant challenges, and has emerged as a firmly established entity – a testament to its unwavering determination, unflinching dedication, and tireless efforts. Moreover, the steadfast support of the Saudi government has been instrumental in empowering national companies to assume pivotal roles, thanks to the launch of numerous infrastructure projects and legislative reforms,” he added.

Eng. Fakher AlShawaf emphasised the transformative impact of Saudi Vision 2030 in propelling the kingdom to a prominent global position. He underscored AlBawani Holding

Group’s commitment to aligning its strategies with the successive short- and long-term growth plans outlined in the vision.

“This proactive approach has enabled the group to successfully execute a multitude of large-scale projects across the kingdom,” he stated further.

A partnership with the Saudi government-backed Public Investment Fund (PIF) also represents a unique opportunity for the AlBawani group to leverage the Fund’s vast expertise and the opportunities it presents, thereby elevating itself as a pioneering diversified conglomerate within the MENA (Middle East and North Africa) region and beyond, while consistently delivering exceptional services and value to its clients, employees, and the society at large.

Eng. AlShawaf also noted the PIF’s crucial role in the Kingdom’s construction sector, considering its paramount importance to the country’s economy. He also added that the Fund’s investments would play a pivotal role in the realisation of ‘Vision 2030’ and its ambitious projects.

He sees the construction sector’s significant role in the evolving dynamics of the Saudi economy.

As the Kingdom has the goal of becoming one of the global economic powerhouses by 2030, its construction sector is facing the challenge of executing diverse projects on a sheer scale never seen before. The answer lies in engaging companies possessing the necessary expertise, planning skills, preparedness, and effective leadership to navigate the complexities and deliver exceptional results. AlBawani perfectly sits in the bracket, as its construction division AlBawani Construction Company (ABCC) is consistently demonstrating its ability to complete large-scale projects in a cost-efficient manner, while meeting the highest quality standards.

Among the ongoing key development projects in the Kingdom, a majority of them are centred around real estate, Eng. AlShawaf said.

These include initiatives led by the Ministry of Housing and its affiliated companies, as well as flagship programmes like Neom, The Red Sea Project, and Qiddiya.

The Kingdom is poised to attract a plethora of construction and investment projects. Talking about a project as diverse as Neom, AlBawani has successfully executed the assignment given to it by the Saudi government.

These large-scale initiatives span various domains and position the kingdom as an attractive destination, Eng. AlShawaf elaborated, while stating that AlBawani, through its various company divisions, is getting involved in these projects.

In the investment sector, the venture is currently holding significant assets in partnership with the government. Eng. AlShawaf also talked about AlBawani’s successful operation of the Jubail III water treatment plant in collaboration with other Saudi investors.

“Furthermore, we have embarked on the first educational infrastructure project in conjunction with the Ministry of Finance, the National Centre for Privatisation (NCP), and Tatweer Buildings Company (TBC). The first phase of this project has already been completed in Jeddah, with assets affiliated with the educational buildings in Makkah set to be delivered by the year-end. We intend to enter into several long-term ownership agreements, extending up to 22 years, with various agencies, and in coordination and collaboration with various AlBawani group companies,” the official added further.

Talking about AlBawani’s involvement in health sector projects, Eng. AlShawaf noted that the privatisation of the sector will attract substantial investments. His venture, apart from completing projects in this realm, has emerged as one of the leading specialised companies in this field.

AlBawani, as of November 2023, has a big-ticket project in hand in the form of establishing American electric vehicle maker Lucid’s factory in the Kingdom, which is also one of the largest EV production facilities outside of the United States. AlBawani completed the construction of the first phase of the factory in a record time (in less than two years), as the facility was inaugurated on September 27, 2023.

The company began construction of the Lucid factory’s first phase in May 2022. The future phases will consist of many buildings across the EV venture’s 1.3-million-sq-m campus plot at the King Abdullah Economic City (KAEC).

AlBawani has also established the National Construction Academy (NCA), a non-profit national training institute. The facility has already commenced the training of 500 students, which will be increased to 1,000 in the upcoming session.

AlBawani, in collaboration with another technical institute, will expand the scope of training and introduce new specialisations that can cater to the needs of the 21st century construction and contracting industry.

The post The AlBawani way of redefining diversification appeared first on International Finance.

The largest real estate company in Germany, Vonovia, has reported losses and write-downs of multiple billions of euros, while the number of construction jobs has remained flat. As the crisis develops, consider the important enquiries mentioned below.

Decoding the ‘German Interest’

Although Sweden and the United States have also experienced real estate weakness, Germany stands out as the continent’s largest economy and real estate investment market.

According to the German Property Federation, the real estate industry accounts for one in ten jobs and around a fifth of economic output.

In contrast to the average of the previous two years, new construction in Germany fell dramatically over the first half of the year, falling 47%, while new building permits fell 27% during the first five months.

In the first quarter, home prices fell by 6.8% from a year earlier, the largest since the German statistics office started collecting data.

To break it down to simple stats, during the first half of 2023, German authorities approved the construction of 135,200 apartments, which were 50,600 fewer building permits issued during the same period in 2022.

Germany’s Federal Statistical Office (Destatis) numbers show that June 2023 alone showed an activity drop of 28.5% with only 21,800 approved dwellings when compared with the same month in 2022.

Between January to June of 2023, 111,500 dwellings were approved in new residential buildings, nearly 31% fewer than in the same period last year.

The number of building permits for single-family houses fell by 35.4%, while for two-family houses, the number of approved dwellings had fallen by 53.4%.

Data will be available in September and will provide information on the state of the construction jobs as well as how far along the trend is.

Sven Carstensen, CEO of the real estate consulting and analysis firm Bulwiengesa, predicted that the current crisis will last for a while.

What follows the slump?

The European Central Bank’s unexpected and swift increase in interest rates as it cracks down on the greatest inflation rates in decades has been the key contributing element, but there are other factors as well.

In addition, building expenses have increased, and since the COVID-19 pandemic, demand for offices and retail space has decreased. German real estate appears riskier to foreign investors as a result of the conflict in Ukraine.

“If you’re a Middle Eastern investor, Germany seems to be rather near to Ukraine. They claim that they prefer to shift funds to the United States and Asia rather than Germany,” according to Florian Schwalm, an EY consultant.

Judging the broader impact

Banks have benefited from higher interest rates since they have seen significant gains in interest income, but real estate lending also accounts for a sizable portion of their business.

Property corrections are a top concern, according to BaFin, the country’s financial authority, which is on high alert. It examines commercial and residential real estate bank financing.

The nation’s largest bank, Deutsche Bank, is downsizing its mortgage business in a move that would eliminate hundreds of jobs, while some insurers, who invest in real estate as part of their substantial holdings, are in the process of reevaluating their portfolios.

An uncertain future

Germany intends to build 400,000 dwellings a year but is having difficulty meeting its targets as millions of migrants and refugees from Ukraine flood the nation.

On September 25, politicians, ministries, and representatives from the real estate business will meet with Chancellor Olaf Scholz to try to identify solutions. Some are already vying with ideas to revitalise the industry.

Germany Housing Minister Klara Geywitz advocated for further tax credits to write off the expenses of constructing new homes last week.

To encourage new home construction, Andreas Mattner, the head of the German Property Federation, is pleading with the government to temporarily postpone a property sales tax.

The leader of the German Construction Industry Federation, Tim-Oliver Mueller, is advocating for a set of emergency measures, including the cheap sale of public land for building leases.

Current scenario of commercial property market

After a protracted period of market growth, during which the yearly number of transactions increased from EUR 10.45 billion in 2009 to EUR 68.3 billion in 2019, the volume of commercial real estate transactions in Germany has significantly reduced during the past 18 to 24 months.

In the COVID-affected year of 2020, the transaction volume decreased to EUR 59.2 billion, according to CBRE. Following that, the German market appeared to show signs of recovery in 2021 (EUR 62.1 billion), but in 2022, the transaction volume fell even more, to EUR 52.3 billion.

According to Cushman & Wakefield’s research, the number of transactions in the office sector decreased by almost 27% between 2021 and 2022, while it climbed by 4% for industrial and logistical properties.

According to the broker network German Property Partners (GPP), commercial real estate transactions for the seven largest German cities totalled about EUR 2.6 billion during the first quarter of 2023, a decline of 72% from the same period the year before.

Cushman & Wakefield’s additional research indicates that in the first quarter of 2023, the German commercial real estate investment market as a whole saw a transaction volume of EUR 5.1 billion.

In light of this, the first three months of 2023 were the year’s worst start since 2010. The strong increase in loan interest rates, as well as other political and economic factors like higher construction costs, supply shortages, higher energy costs, and political planning for climate protection measures on buildings, is leading to uncertainty and unforeseeable costs, as well as the effects of the COVID-19 pandemic and the ongoing Ukraine war, are considered to be the main causes of the current decline in transaction volumes in the real estate market.

This current shift in the real estate market comes with hazards, but it also presents several opportunities for prospective investors.

Leasable space is more readily accessible on the leasing market right now, and rents are rising more gradually. According to a report by the Institute of the German Economy from April 2, 2023, one out of every four listings for office buildings spends an average of 38 weeks on the market. Particularly, the demand for office space away from premium areas has decreased recently.

The drop in demand frequently has an impact on office properties in rural or suburban settings. The importance of being centrally located remains high, especially for commercial establishments. The Institute of the German Economy estimates that, overall, rentals for office and retail premises in 2022 fell short of the rate of inflation. The inflation rate in Germany for 2022 is 7.9%, even though office rents climbed by 5.9% and retail rentals by 6.2% in 2022 compared to the prior year.

The shift in many employees’ workdays since the onset of the pandemic, when they increasingly exploit the option of working from home offices, is another factor contributing to the demand in the office property market. To save money on office space, employers are choosing more frequently to replace it with new, innovative office concepts like multi-space offices and desk sharing, which provide a higher degree of variability and flexibility and are tailored to the specific needs of the tenant.

Germany, once propelled by a decade-long real estate boom fuelled by low-interest rates, now finds itself amid a substantial downturn. The landscape of the largest economy in Europe is transforming and the real estate sector grapples with a cascade of challenges. Vonovia’s staggering losses and construction job stagnation are stark reminders of the industry’s current predicament.

Amid this crisis, Germany’s significance in the global real estate market becomes even more pronounced. The country’s position as a major economic powerhouse and its substantial contribution to employment and economic output underscore the weight of the situation.

The severity of the situation is evident in the plummeting statistics. Drastic drops in new construction, building permits, and home prices in the first half of the year are emblematic of the challenges at hand. Predictions of a prolonged crisis by industry experts like Sven Carstensen hint at the enduring nature of the struggle.

The catalysts behind this slump are multi-faceted. The European Central Bank’s unexpected interest rate hikes, coupled with rising building costs and reduced demand for commercial spaces in the wake of the pandemic, have set the stage for this crisis. Geopolitical concerns further amplify the perception of risk, deterring foreign investment.

This slump resonates beyond the real estate sector, rippling into the financial landscape. Banks, while benefiting from increased interest rates, are now navigating concerns over their substantial real estate lending. Property corrections are at the forefront of regulatory attention, as BaFin scrutinises real estate bank financing. Even major institutions like Deutsche Bank are scaling back their mortgage businesses, and insurers are reassessing their portfolios.

As the nation strives to address the crisis, the challenge of accommodating millions of migrants and refugees from Ukraine adds to the complexity. High-level discussions scheduled with Chancellor Olaf Scholz and stakeholders from the real estate industry demonstrate the urgency of finding solutions. Various stakeholders, including Germany’s housing minister, real estate federation leaders, and industry advocates, are proactively offering ideas to stimulate the sector’s revitalisation.

In the commercial real estate transaction market, the downturn’s impact is tangible. A significant reduction in transaction volumes over the past 18 to 24 months, coupled with changes in interest rates and economic factors, has reshaped the playing field. This decline in transactions poses both risks and opportunities for prospective investors, as the market recalibrates and redefines its potential.

Regarding commercial real estate rents, the landscape is shifting as remote work practises alter demand dynamics. The availability of leasable space has increased, resulting in a more gradual rise in rents. A notable trend is the decreased demand for office spaces located away from premium areas, which has prompted a shift towards innovative office concepts that align with the evolving needs of tenants.

Germany’s real estate sector is undergoing a seismic shift, transitioning from a prolonged period of growth to a challenging downturn. The convergence of factors such as interest rate hikes, geopolitical tensions, changing work dynamics, and economic uncertainty has set the stage for this transformation. While presenting formidable challenges, this downturn also opens doors to innovative solutions and investment opportunities that could reshape the future of Germany’s real estate landscape.

The post Germany’s property downturn appeared first on International Finance.

COVID-19 impact and post-pandemic era

The COVID-19 pandemic irreparably altered the UK real estate market, producing upheavals and redefining industry norms. Property sales were momentarily halted by lockdowns and social restrictions, which left the market uneasy. Potential buyers and investors were less eager to enter into real estate deals as a result of the economic consequences.

But there were also major changes in demand on the market. Due to a demand for more roomy and private accommodations brought on by the expansion of remote work, there was an increase in interest in rural and suburban homes. On the other hand, as individuals sought out homes with more outside space, urban centres, particularly London, experienced a decline in the market for city apartments.

The UK government took action to reduce the economic effects of the pandemic by enacting policies like the stamp duty holiday to encourage home buying. As companies reevaluated their space needs, concerns about the future of office space emerged in the commercial real estate market.

While this was going on, lockdowns and the rise of online shopping presented difficulties for high-street shops and shopping malls. Lockdowns and supply chain issues caused construction projects to be delayed, which had an impact on the supply of new homes and perhaps affected home prices.

Despite the difficulties the pandemic brought, the UK real estate market has demonstrated adaptability and endurance in the post-pandemic age, particularly in the previous 12 months.

The dynamic UK rental market

The UK rental market is a diverse industry that is essential to the country’s housing landscape. It serves a broad spectrum of tenants, including young professionals, families, students, and seniors. The rental market in the UK is characterized by a number of significant trends and traits.

First of all, there is still a strong demand for rental apartments. Renting has been a popular choice due to issues with house affordability, changing lifestyles, and mobility. Particularly young professionals frequently decide to rent in urban areas in order to access work possibilities and active social scenes.

In the UK rental market, build-to-rent (BTR) has become a substantial trend. BTR complexes are specially designed rental homes that frequently include cutting-edge facilities and qualified management. These buildings provide a hassle-free living for their occupants, and they have grown in popularity because of their practicality and neighbourly amenities.

Another significant element of the UK rental industry is student housing. The top colleges in the country draw both domestic and foreign students, fueling a constant need for purpose-built student accommodations (PBSAs). These residences offer students secure, up-to-date living quarters that meet both their needs for academic and personal needs.

Rent affordability is still a serious challenge, particularly in big cities like London. Discussions concerning rent control measures to shield tenants from disproportionate rent increases have been sparked by high housing costs relative to salaries.

A greater emphasis has been placed in recent years on the calibre of rental homes. Renting accommodations must now adhere to rules and specifications to guarantee that they are safe, healthy, and energy efficient. The general standard of rental housing in the UK has improved as a result of this.

Sustainable real estate takes over the UK

In recent years, sustainable real estate in the UK has become a crucial factor, reflecting a growing awareness of social and environmental responsibility. This industry is being shaped by a number of significant trends and behaviours.

Building research establishment environmental assessment methods like BREEAM and LEED, as well as other green building certifications, have been gaining popularity. These accreditations serve to increase the appeal of certified properties to both investors and tenants by demonstrating a dedication to energy efficiency, minimal environmental impact, and sustainable construction methods.

In sustainable real estate projects, integrating energy-efficient technologies is now considered best practice. In addition to reducing environmental impact, features like solar panels, cutting-edge insulation, and energy-efficient heating and cooling systems also provide long-term financial savings for building owners and residents.

Sustainable real estate has been fueled by the switch to electric cars (EVs). As the use of electric vehicles increases, there is a high demand for real estate that has EV charging infrastructure. To fulfil this growing demand, many developers are now adding EV charging stations in their brand-new complexes.

In the real estate industry, there is a rising commitment to reaching net-zero carbon emissions. Through a combination of energy-efficient building design, renewable energy sources, and sustainable property management methods, investors and developers are vowing to lessen their carbon footprint.

Embracing property technology

The property industry in the UK has enthusiastically embraced technology and PropTech, or property technology. This adoption demonstrates the industry’s dedication to improving client experiences, reducing procedures, and maintaining its competitiveness in a setting that is changing quickly.

In the UK real estate industry, virtual property viewings have completely changed the game. Potential tenants and buyers can examine homes remotely using augmented reality (AR) and virtual reality (VR) technologies, which eliminates the need for in-person inspections. This offers a handy way to view homes while also saving time.

Online real estate search engines like Rightmove and Zoopla have become indispensable in the UK. These platforms provide a sizable database of property listings, comprehensive property details, and market analytics, arming buyers and renters with crucial information they can use to make wise choices.

With the help of smart home technology, homeowners can now control lighting, security, heating, and other features from their smartphones. As tech-savvy purchasers look for modern, connected homes, these technologies not only provide convenience but also raise the value of real estate.

The adoption of blockchain technology holds the promise of streamlining real estate transactions by delivering open and secure record-keeping systems. This might lessen fraud and simplify the frequently difficult process of buying and selling real estate.

The COVID-19 pandemic has expedited the use of PropTech for lease signing, tenant communication, and property management. More and more, landlords and property managers are using digital platforms to improve productivity, offer contactless services, and streamline business processes.

The adoption of technology and PropTech by the UK real estate sector has ushered in a new era of comfort, effectiveness, and creativity. The industry is set to offer even more customized and frictionless experiences for property buyers, sellers, renters, and investors while remaining at the forefront of technical breakthroughs as these technologies continue to develop.

Affordable housing: Still a concern

The lack of affordable housing supply, slow income growth, and rising property prices have all contributed to an ongoing problem with affordable housing in the United Kingdom. These difficulties have broad social and economic repercussions.

The high expense of property, especially in major cities like London and regional hotspots, is one of the main problems. Homeownership has become a distant dream for many due to skyrocketing property prices, pushing a sizable section of the population into the rental market, where affordability issues still exist. The issue is made worse by the vast disparity between availability and demand for affordable homes. In brand-new complexes, local authorities frequently fail to satisfy the necessary quotas for affordable housing. Although there are government incentives to promote the building of affordable dwellings, supply still does not meet demand.

Housing associations are essential to the provision of affordable housing because they fill the gap between the demand for and supply of cheap houses. However, there might be a long waitlist for these homes, placing many people and families in unstable living situations.

Rent that is priced affordably and shared ownership plans are two popular methods for achieving affordable housing. Low-cost rental properties are made available via affordable rent, and renters can gradually build up equity in their homes thanks to shared ownership. Although the availability of both choices and the eligibility requirements vary by region, both aim to increase housing accessibility.

Policymakers, developers, and housing associations are working to find creative solutions to the affordable housing shortage as the UK struggles with a continuous housing crisis. This will guarantee that more people have access to stable and cheap housing.

UK property sector: Attracting international investors

The real estate market in the United Kingdom has historically been significantly influenced by foreign investment, which has boosted its vibrancy and appeal on a global scale. International investors are still drawn to the UK because of its reputation for stability, an open legal system, and a broad real estate market. There are several important factors to consider when it comes to investing in real estate in the UK as a foreigner.

Historically, foreign investors have concentrated on coveted areas in large cities, particularly London. Luxury homes, exclusive locales, and well-known landmarks have all proven to be extremely alluring targets, frequently acting as long-term investments and value stores.

The UK commercial real estate market is dominated by institutional investors, notably sovereign wealth funds, pension funds, and real estate investment trusts (REITs). These organizations are looking for assets that would generate steady revenue, and the UK market’s durability appeals to them.

Brexit originally led to considerable ambiguity in the environment of foreign investment, with worries about changes to regulations and market access. However, as the post-Brexit landscape became more evident, the market showed resiliency, and investor confidence rose.

Beyond just residential and commercial properties, foreign investment in UK real estate also affects other areas. The country’s overall economic growth and infrastructural development are aided by the investments made in development, logistics, and infrastructure projects.

The diversity of international investors is noteworthy, with interest coming from the Middle East, Europe, Asia, and North America, among other places. Each area brings to the market its distinct investment preferences and methods.

Large-scale real estate developments have been financed with the help of foreign investment, which has also boosted the economy and produced jobs. The requests for more balanced investment have, however, been spurred by discussions about housing affordability and its possible effects on nearby towns.

The COVID-19 pandemic, the Russia-Ukraine war, demographic changes, and sustainability concerns are just a few of the many factors that have an impact on the UK real estate market. Understanding these trends and insights is crucial for everybody involved in the UK real estate industry, including buyers, sellers, investors, and developers. The UK real estate market will continue to be a fascinating and lucrative industry for years to come, even as the market adjusts to the changing circumstances.

Recently, International Finance caught up with GMS Kumar, CEO of MAI (Myproject.ai) and Work-tops.

GMS Kumar embarked on his journey in the construction industry at Work-tops.com in the UK, where he put to use his 10+ years of experience in the Stone Industry, and eight years in Recruitment and Education consulting. He is also set to venture into the world of marketplace with MAI (Myproject.ai), a platform catering to diverse construction needs for the people of the UK through mobile application.

His track record includes pioneering Microsoft Dynamic CRM in international student recruitment, implementing SAP at a prestigious Solicitor Firm, launching a PHP-based Stone Industry marketplace, and integrating cutting-edge Artificial Intelligence into Work-tops.com.

During his interview with International Finance, GMS Kumar sheds light on various aspects of the UK real estate market. He talks about the application of blockchain and AI in the property market and how real estate professionals are adapting to the digital era. Additionally, he discusses the key factors that influence real estate prices in the UK and provides further insights into the market.

Q) How has the UK real estate market evolved in response to changing economic conditions in 2023, and what trends can we expect in 2024?

A) In my opinion, in the UK, the construction industry is embracing sustainability. The UK has reduced its reliance on raw materials and is increasingly using reusable products. Moreover, the industry is integrating technology into property construction to lower energy consumption and electricity usage.

We anticipate a shift towards using more local raw materials, supported by the government’s initiatives to reduce carbon footprints. Expect the emergence of innovative recycling methods for raw materials through government schemes and support.

Q) How can one determine the current market value of his/her property?

A) In the UK, property owners can easily determine their property’s value through the England Land Registry, where data is submitted and third-party companies evaluate market property values. The UK is also promoting individual builders and self-building activities, emphasising the use of leftover materials to increase property value. Proper maintenance of the property is crucial, and various communities provide guidance on enhancing property value through sustainability. Having a property that has incorporated more sustainable methodologies will increase its value in the current trend. Contests for people who build with sustainability are being held. The best ones get financial aid, awards, etc. This encourages people to move more towards sustainability.

Q) How are blockchain and AI used in real estate and property management in the UK?

A) Blockchain and AI are being integrated into the real estate sector. For instance, my soon-to-be-launched startup, MAI (Myproject.ai), aligns with the UK Prime Minister’s zero-carbon scheme by helping property owners and traders list leftover construction materials on our platform, reducing carbon footprints and maximising value. MAI also serves as a platform for homeowners and construction-related service providers to find solutions to construction-related challenges. This technology is set to play a significant role in property management in 2024, backed by years of industry research and insights.

Q) What are the key factors influencing real estate prices in the UK?

A) The United Kingdom’s real estate prices are influenced by several factors like the location of the property, condition of the property, and age of the property. Notably, properties older than 75 years cannot have even one brick removed/repaired without proper approval in order to preserve heritage. The government provides financial support to maintain such legacy properties and offers funds for repairs or purchases.

Q) How are rising construction costs and supply chain disruptions affecting new development projects in 2024?

A) Rising construction costs and supply chain disruptions have had a significant impact on new development projects in 2024. Events such as China’s container backlog, the pandemic, the Russia-Ukraine war, and the Suez Canal blockage have driven up container costs from around $1500 in 2021 to $7000 to $8000. Despite these challenges, the construction industry remains robust due to increased interest from migrants and buyers, even after the UK government scaled back some policies for first-time property buyers.

Q) What are the current trends in urban vs. suburban vs. rural real estate markets, and how are they expected to evolve in the coming days?

A) Currently, urban areas are expanding rapidly, with London now encompassing a larger area. Rural areas, on the other hand, are primarily inhabited by retirees seeking a peaceful environment, subject to strict government approval for property construction or repairs. The population influx is leading to the urbanisation of suburban areas. Rural areas may remain largely unchanged for the next few decades due to regulatory hurdles. To rent a property in London, people are waiting in lines for hours just to take a look at the property. So, there’s a property crisis in the UK and it could increase in the near future.

Q) How can an individual effectively stage his/her home for sale to attract buyers?

A) In the UK, selling a property is relatively straightforward, with most properties selling within 15-90 days, thanks to online availability of property data. To attract buyers, it’s essential to maintain the property well, consider renovations to enhance its appeal, and prioritise sustainability features. Sustainable properties tend to sell faster. Additionally, legal transactions involving property sales are handled by lawyers, ensuring a secure and trustworthy process.

Q) What is the outlook for mortgage rates in 2024, and how might they influence homebuying decisions?

A) UK interest rates have experienced a rapid ascent since December 2021. Initially, these rates reached historically low levels in August 2020, when the Bank of England (BoE) reduced the base rate from 0.25% to 0.10% as a response to the COVID-19 pandemic. However, recent months have witnessed significant shifts in market expectations regarding the trajectory of UK interest rates.

As of the end of 2022, projections indicated that interest rates in the UK could climb to approximately 4.5% within the next 12 months. This estimate saw a substantial revision upward following data revealing that UK inflation displayed greater resilience than initially anticipated. As a result, there were predictions that rates could peak at 6.5% by the first quarter of 2024.

Nevertheless, an unexpected decrease in UK core inflation occurred in August. Consequently, it is now reasonable to anticipate that interest rates might settle within the range of 5.25% to 5.50% by the end of 2023.

Q) In light of climate change concerns, what sustainability and energy-efficient features are becoming more important to homebuyers and property investors?

A) Homebuyers and property investors are placing greater importance on sustainability and energy-efficient features in response to climate change concerns. Advanced technologies like wall cladding are being adopted to protect the interior from external weather conditions. Properties with energy ratings above the C level are favoured, reflecting the country’s energy-conscious stance. Smart devices like motion sensor lights are also gaining popularity for their energy-saving benefits.

Q) How are real estate professionals adapting to the changing landscape of marketing, sales, and property management in the digital age?

A) Real estate professionals are gradually adapting to the digital age, but trust-based transactions remain prevalent. Positive word-of-mouth reviews still drive success in the industry, with traditional methods valued. While digital marketing is growing, property management is largely handled through traditional channels. Real estate agents play a vital role, as around 90-95% of property transactions involve their expertise. Collaborative communication among existing brands and professionals is essential for effective property management and sales.

The post The ever-adapting face of UK real estate appeared first on International Finance.

The recent financial crisis, sparked by the failure of three prominent American regional banks, has resulted in a slowdown in commercial real estate as borrowers worry that these lenders will reduce their capital supplies. Analysts and real estate professionals warned this could slow the sector’s further growth.

In the same week, both Silicon Valley Bank and Signature Bank failed. First Republic Bank followed the same direction soon. Large lenders to developers and owners of office buildings, rental apartments, shopping centres, and other commercial properties had accounts at Signature and First Republic.

Small banks own 4.4 times more exposure to US CRE loans than their larger counterparts as compared to big banks. CRE loans account for 28.7% of assets at those small banks, compared to only 6.5% at big banks. A sizable portion of those loans will need to be refinanced, further compounding problems for borrowers in the context of rising interest rates.

The office sector has a unique set of difficulties. Stronger fundamentals exist in several other CRE industries. Additionally, we don’t think prospective losses in the office sector will jeopardize the stability of nearby banks. The office sector is a minor portion of the economy in terms of GDP and wealth.

Nevertheless, the small bank lending channel more broadly does provide a macro risk, as tighter lending requirements and issues with profitability in the banking industry might limit the amount of financing available and drive up the cost for small and medium-sized firms. However, it is challenging to estimate this risk properly and there is a lot of uncertainty regarding potential offsets.

The struggling office sector is under increasing strain due to rising rates. Early on in the COVID phase, vacancies surged, and they have continued to rise ever since. The office vacancy rate, 12.5% as of 2023, is comparable to 2010, one year after the global financial crisis. The volume of office sales is currently getting close to its post-GFC lows.

The increase in remote work is the main cause of these difficulties. Even though more workers started returning to their workplaces in 2022, the overall amount of remote work is still seven times more than before the COVID period. Moreover, it’s not difficult to imagine the pain in the office sector getting worse given the Federal Reserve’s historically quick pace of interest rate increases over the past year, as well as the acceleration of layoffs in professional and business services and the obsolescence of older office buildings.

However, investors must keep in mind that there are two parts to the office market. Geographically specific challenges are arising and differently affecting property vintages, with Chicago and San Francisco facing far greater challenges than Miami, Raleigh, and Columbus. Newer office construction especially that completed after 2010 is experiencing significantly higher net absorption rates than earlier construction.

Increasing rates and limiting credit availability will inevitably cause problems for some borrowers. Although the sector’s current liquidation rate is low, we anticipate that over the next ten years, the total number of commercial mortgage-backed securities (CMBS) liquidations for the office sector will climb to about 20% (with total losses anticipated to be about 8.5%).

The figure below shows that this level of hardship is comparable to the sector’s levels in the years following the GFC, but, more importantly, it will likely take many years to manifest. Borrowers will probably make use of loan extension options shortly. Looking further out, it is anticipated that in 2025–2027, CMBS loan maturities will become increasingly difficult.

According to Trepp, a commercial real estate data company, First Republic had the ninth-largest loan portfolio in that market in the United States. Similarly, Signature had the tenth-largest loan portfolio before it failed.

In addition to offering most commercial real estate loans to businesses, midsize and regional banks are also part of a much larger market. Typically, banks package their loans into intricate financial products and sell them to investors to acquire additional funds to make new loans.

This implies that a reduction in lending may change how investors behave. An industry body estimates that commercial real estate made $2.3 trillion in economic contributions to the United States in 2022. However, analysts worry about a new recession because the industry hasn’t fully recovered from the pandemic’s damage.

“It’s a perfect storm right now,” declared Varuna Bhattacharyya, a real estate attorney with Bryan Cave Leighton Paisner in New York who primarily represents banks.

“We were already in a place with a much lower rate of originations,” Varuna Bhattacharyya said about the new loan applications that banks handle. So it’s challenging to avoid experiencing some worry and panic.

According to Varuna Bhattacharyya, lenders will be even more careful when approving loans for brand-new building projects other than the most high-profile “trophy deals.”

Borrowers now worry that banks will become more cautious about making loans. Even though the panic has generally subsided for now, regional banks may still be plagued for months by the possibility of another operational failure.

When new loan applications nearly reached a standstill in the fourth quarter of 2020, commercial real estate lending had started to recover from the depths of the COVID lockdowns for much of the previous year. In contrast, according to Trepp, the annual rate of commercial real estate loan origination by dollar volume increased by 18% in the fourth quarter of 2022.

Lending to the commercial real estate sector started to slow in January 2023, even before the Federal Deposit Insurance Corporation intervened to take over Silicon Valley and Signature.

According to Matthew Anderson, a managing director at Trepp, the commercial real estate loan growth rate in 2023 has already decreased by 50% compared to 2022 on an annual basis. He claimed that the Federal Reserve’s interest rate increases, which were beginning to impact the commercial real estate market, were partially to blame for the downturn. Moreover, since Silicon Valley and Signature’s failures, lending has likely decreased even further, according to Matthew Anderson. However, he added that the impact’s duration and depth are still uncertain.

Commercial real estate encompasses mortgages, building loans, and loans designed expressly for operating apartment complexes with multiple dwelling units. Commercial mortgage-backed securities, a market worth over $72 billion in 2022, are the so-called securitized products that include bank loans. It’s a different situation in 2023, though, as issuance of such bonds has decreased by 78% from 2022.

Daniel Klein, the president of Klein Enterprises, a Maryland-based company that manages commercial real estate, had recently discussed a construction loan for a new project with several banks. He claimed that one of the banks abruptly withdrew a term sheet for a loan after the banks failed.

Daniel Klein, whose family-owned company oversees around 60 office, retail, and apartment buildings, claimed that the bank had yet to justify its choice and was unsure whether the recent troubles in the banking industry had played a role. In the coming months, he predicted, as midsize banks become wary following the failures of Silicon Valley Bank and the Signature, loan terms from lenders will become more onerous.

“Banks are generally being more conservative than they were six or nine months ago. However, we’ve had good fortune. We have a lot of established local banking links.” he said.

According to Michael E. Lefkowitz, a real estate attorney with Rosenberg & Estis in New York, regional banks are an essential component of the commercial real estate ecosystem because their bankers spend a lot of time building connections with real estate developers and managers. However, large banks typically do not offer such “high-level service” to middle-market real estate companies.

When the FDIC revealed that it had sold virtually all of the remaining deposits at Signature Bank to a subsidiary of a peer, New York Community Bancorp, which is also a significant commercial real estate lender, some of the worries of real estate lenders eased a little bit. Following money withdrawals from the bank by corporate clients, including real estate companies and cryptocurrency investors, the banking authority took control of Signature on March 12, 2023.

One of the largest commercial real estate lenders in the New York metropolitan area before its bankruptcy was Signature.

A sign of precisely how many customers fled the bank before authorities intervened on March 12 to stop the flow was the $34 billion in client deposits that New York Community Bancorp acquired upon purchasing some of Signature’s assets, down from the $88 billion that Signature held before the bank ran.

There are concerns about whether other banks will step forward to fill the hole created by the demise of Signature, even with the selling of banking deposits to New York Community Bancorp.

According to the FDIC, New York Community Bancorp purchased loans totalling around $12.9 billion from Signature, most of which were business loans to healthcare organizations and wasn’t a part of Signature’s sizable commercial real estate portfolio. Therefore, the FDIC must still find a buyer for Signature’s primary portfolio of commercial real estate loans.

The FDIC official stated that the company “has not characterised the types of loans left behind” and that they will be “disposed of at a later date.”

Matthew Anderson of Trepp said, “I believe this indicates that Signature’s commercial real estate portfolio is still in limbo.”

First Republic’s home base in San Francisco, where Trepp utilizes an indicator to gauge the likelihood of default on bank-owned office complex loans, had the most trouble.

In anticipation of more Federal Reserve interest rate hikes and renewed calls for regulators to become more rigorous in monitoring bank risk-taking, banks are likely to reduce lending to retain capital and improve their balance sheets. Any reduction in new credit could delay the beginning of commercial construction and bring the economy closer to a recession.

Bank regulators will need to monitor banks keeping too many commercial real estate loans in their portfolios as they attempt to stabilize the financial system. This can lead to its own set of issues in a slowing economy.

The credit rating firm Moody’s Investors Service reported in 2022 that 27 regional banks already have significant concentrations of these loans on their balance sheets. According to the paper, the problem might become severe for banks if the economy enters a recession.

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The Chinese real-estate crisis

It is already taking place in China. The second-largest economy in the world has ordered banks to provide financial assistance to real estate developers so they may finish unfinished projects. People are increasingly refusing to pay their mortgages because they understandably find it unfair to be required to do so for homes they cannot inhabit.

Compared to pre-pandemic levels, new home sales have plummeted, and housing starts have nearly halved. It will cause issues for heavily indebted real estate corporations, the banks they borrowed from, and the economy. The real estate industry accounts for about 20% of China’s GDP. However, rising housing costs have already disappeared.

The China Banking and Insurance Regulatory Commission (CBIRC) have advised banks to accommodate developers’ funding requirements when required.

Despite the regulator’s intervention, Chinese bank shares rose briefly due to optimism that Beijing will have enough policy tools at its disposal to contain the crisis.

It was unclear, meanwhile, if the banks could bear the mortgage strike’s expense, which might be affecting 100 projects across 50 locations.

According to data provided by the banks, the connected mortgages have a total value of 2 billion yuan ($300 million). However, some analysts believe the actual number is much greater. For instance, Guangdong-based GF Securities estimated that the sum might reach 2 trillion yuan ($300 billion).

Since the creeping demise of Evergrande, China’s second-largest developer, started in 2021, the country’s real estate market, which contributes up to 30% of economic production, has been in turmoil.

Since then, the economy has begun to feel the adverse effects of its default on a sizable portion of its $300 billion debt pile.

The real estate market in America

In the three months leading up to June, the US economy shrank for the second consecutive quarter, with the slumping property market among the contributing factors. American home prices have skyrocketed in the two years since the coronavirus outbreak began in the spring of 2020, soaring by 20 percent in the year ending in May. However, the market is rapidly cooling, as seen by the steep decline in the average price of new houses in June.

In 2022, real estate market has disappointed many homebuyers. Already at record highs, home prices and mortgage rates continue to grow.

Others have put their property search on hold or given up because of escalating costs. The property market is declining as recession fears grow. New house sales are down, and development has slowed. Existing-home sales are below 2019 levels. As mortgage rates remain above 5%, applications have plummeted.

According to experts, home prices and mortgage rates will fall, so affording a home will remain challenging. Year-over-year home price growth is still in double digits. The Fed rate move will keep mortgage rates fluctuating. “Affordability is the biggest concern in the home market, and rising rates will make that worse monthly,” said Zillow’s senior economist.

June’s median home price was $416,000. Price increases have slowed. NAR reports that median home prices for existing homes rose 13.4% year-over-year in June, compared to a 23% increase in June 2021.

New-home prices are decreasing. According to the US Census Bureau and HUD, the median price of a new house fell to $402,400 in June from $444,500 in May.

Navy Federal Credit Union’s Robert Frick called it “the biggest break in home-price inflation.” If existing home prices follow suit, annual surges that have driven millions of Americans out of the market may end.
New homes make up 10% of transactions and older homes 90%. Most market prices aren’t decreasing. The 2011 housing prices will rise by 11%. It is less than the 16.9% year-over-year growth expected at the start of the year.

As higher mortgage rates reduce buyer demand, inventory and sales will rise, helping to lower prices in 2022. As a result, homes may lie on the market longer, and there will be more price cuts. Buyers who conduct more research may find a home with a price cut or better price negotiation.

David M. Dworkin and Bill McBride wrote at the National Housing Conference that home affordability is the worst since 1989, excluding the housing bubble of 2004-2008.

During the housing bubble, low teaser interest rates reset to levels homeowners couldn’t afford. For example, in the 1980s, 30-year fixed-rate mortgage rates ranged from 9% to 18%, making homes unaffordable.

Researchers said today’s market is different. Soaring housing costs are fueled by underproduction between 2008 and 2020, supply chain breakdowns since 2020, and rising demand since 2020.

The British crisis

The United Kingdom seems to be defying the trend. Instead, property prices are rising at 13% annually, the most in over two decades, according to data from Halifax, the nation’s largest mortgage provider. But, similar to other countries, the situation here, too, is evolving.

The Office for National Statistics released data on housing affordability based on home prices to average salaries. The ratios in Scotland and Wales, which fell short of the peaks recorded during the global financial crisis of 2007–2009, were 5.5 and 6.0, respectively. The ratio in England was 8.7, the highest since the data gathering began in 1999.

There were regional variances within England. The average cost of a home in Newcastle upon Tyne was 12 times the annual income of someone in the bottom 10% of the income distribution. It was 40 times greater in London, which is undoubtedly higher now. The ONS data only extends through March 2021; housing prices have comfortably outpaced salaries since then.

Last month, UK house prices climbed at the quickest annual rate in 18 years as demand for larger homes outpaced supply.

Halifax, a part of Lloyds Banking Group, reported prices rose 13 percent in June since late 2004. Prices climbed 1.8% from May, the most since early 2007.

A typical residence costs £294,845- a record high despite the cost of living problem. House prices rose every month in 2021 and 6.8% in 2022, or £18,849 in cash terms.

Halifax’s CEO Russell Galley claimed that the supply-demand imbalance drives house prices. Demand is still high but has reduced to pre-Covid rates, and inventory is meager.

So far, property prices seem protected from the cost of living crunch. It is because those with lesser incomes are less active in purchasing and selling residences when the cost of living rises. Higher earners can employ their pandemic savings to spend during a crisis.

The housing market won’t always be immune to the recession. But it’s being supported by a “dramatic shift” in demand toward more extensive properties, with detached house prices rising almost twice as fast as flats over the past year (13.9 percent versus 7.6 percent).

Inflation and higher interest rates will put a strain on household budgets, which will affect property affordability. A slowdown in house price rise is still forecasted for the coming months, but it might arrive later than expected.

According to Halifax, Northern Ireland has the highest yearly house price gain, up 15.2% to £187,833. Wales follows with a 14.3% annual growth to £219,281. A Scottish property now costs an average of £201,549, surpassing £200,000 for the first time and up 9.9% from June last year.

London lags behind other regions with yearly price growth of 7.1%, but at £547,031, it remains the most expensive place to buy a home in the UK.

There comes a time when a house is just out of reach for prospective purchasers. Still, the market has not crossed this reality checkpoint because of the protracted era of extremely cheap borrowing rates. Central banks have made the exorbitant affordable by ensuring that monthly mortgage payments remain low.

It has been the case worldwide, which explains why the trend in housing prices has been steadily higher from New York to Vancouver, Zurich to Sydney, and Stockholm to Paris.

At least till now. Western central banks are rapidly boosting interest rates, increasing the cost of mortgages. A new borrower taking out a 30-year fixed home mortgage was paying a rate of roughly 5.5% even before the US Federal Reserve announced a second consecutive 0.75-point increase in official borrowing costs. It is double what they were paying in 2021. This rise explains both the decline in American home purchases and the decline in home prices.

At the beginning of the pandemic, the Bank of England in the UK cut interest rates to 0.1 percent and kept them there for almost two years. Due to this, homebuyers could obtain fixed-term mortgages at incredibly cheap rates that peaked at 1.4% in the fall of 2016. However, since December in 2021, the Bank has been tightening its policy, so those mortgages will increase once the fixed terms expire. As a result, today’s average interest rate on a house loan is 2.9%.

The IMF’s gloomy forecast

According to central banks, the highest inflation in decades forces them to tighten monetary policy; nevertheless, they are doing so while major economies either enter or are about to enter a recession. Increased unemployment, declining GDP, and rising interest rates are deadly for home prices. Only the last of those is absent, but if the winter is as bleak as policymakers anticipate, it won’t be long until dole lines grow longer.

The International Monetary Fund released gloomy predictions for the world economy last week. The fund claimed risks were significantly skewed to the downside and pointed out that all three of the world’s major economic engines—the US, China, and the eurozone—were stagnating.

The IMF claims that only five years in the last 50 years had a global economic growth of less than 2 percent: 1974, 1981, 1982, 2009, and 2020. A complete halt in Russian gas exports to Europe, persistently rising inflation, or a debt crisis are a few potential reasons why 2023 might end up on that list. A worldwide housing crash would make it inevitable.

That is not to suggest that there aren’t valid arguments in favor of removing excess from the real estate market. The young and the poor are disadvantaged by skyrocketing housing costs. It also causes capital to be misallocated into unproductive investments, increasing demographic pressures by deterring couples from having children.

Nevertheless, central banks are attempting to engineer a soft landing in which the downturn is brief and shallow. The increase in unemployment is just enough to reduce upward pressure on wages while remaining small. Moreover, a decline in home values is unintentional because plummeting property prices would guarantee a hard landing.

There is no desire for another subprime mortgage crisis like the one that nearly brought down the global banking system in 2007 and created the last significant recession before the epidemic. Because of this, the Chinese government is working to support real estate investors. Western central banks may stop raising interest rates earlier than anticipated by the financial markets. Again, this place is familiar to us.

The post Housing prices plummet as central banks hike rates appeared first on International Finance.

Many have already quit making mortgage payments, an extreme step in China, where dissent is rarely accepted.

According to a young couple who just relocated to Zhengzhou in central China, the developer withdrew from the project after receiving the down payment last year, which froze the project and their dreams.

A woman, who wished to remain anonymous, added, “I had dreamt many times, the thrill of living in a new home, but now it all feels ludicrous.”

Another female homeowner in her late-20s from Zhengzhou is prepared to quit making mortgage payments: “I will begin the repayment when the project resumes,” she added.

Contrary to the US subprime mortgage crisis of 2007, when banks provided money to high-risk borrowers who later failed to repay, many home buyers in China are capable of paying but choose not to.

A crowdsourced estimate on Github, where homeowners discuss their woes and choices, reveals that members have bought homes in about 320 projects in China. But no one knows how many stopped making mortgage payments.

S&P Global rating estimates indicate that the purposefully defaulted home loans might amount to $145 billion (£120 billion). But, according to some observers, it might be higher.

The uprising rattled the authorities, bringing attention to an already strained market in a faltering economy severely short on cash.

More concerningly, it has indicated a loss of faith in one of the cornerstones of the world’s second-largest economy.

In a recent paper, the think tank Oxford Economics stated that “mortgage boycotts, driven by deteriorating attitude about property are a grave danger to the financial condition of the sector.”

Why is China’s real estate crisis significant?

A third of China’s economic production comes from the real estate industry. It comprises businesses that manufacture white goods for apartments, rental and brokerage services, housing, and companies that provide building supplies.

However, China’s economy has been slowing down; in the most recent quarter, it expanded by just 0.4% over the same period in 2021. As a result, some economists predict that in 2021 will see no growth.

Beijing’s zero-COVID approach is primarily to blame for this; repeated lockdowns and ongoing restrictions have impacted incomes, which has thwarted savings and investments.

Because of the scale of China’s economy, a disruption in a critical area, like real estate, can impact the international financial system.

According to experts, the current concern is contagious as banks won’t lend if they think the industry is failing.

According to Ding Shuang, head of Standard Chartered’s Greater China Economic Research, “it will all depend on the policy.”

“This is government-inflicted, unlike other countries where property booms burst due to the markets.”

Thirty real estate firms have previously failed to make international debt payments. The most well-known victim was Evergrande, which missed payments on a $300 billion loan last year. If sales do not increase, other companies may follow, according to S&P.

As China experiences a demographic shift due to slower population growth and urbanization, demand for housing is also not increasing.

According to Julian Evans-Pritchard, a senior economist from Capital Economics specializing in China, “the basic issue is that we have reached a tipping point in the Chinese housing market.”

Where did it begin?

In China, real estate makes up over 70% of individual wealth, and property buyers frequently make upfront payments for unfinished construction.

According to Mr. Evans-Pritchard, these “pre-sales” account for 70% to 80% of all new home sales in China, and developers want that cash since they utilize it to fund numerous projects simultaneously.

However, many young and middle-class Chinese are no longer investing in real estate due to a failing economy, job losses, salary cuts, and, more recently, the worry that developers may not finish projects.

Developers depended on new revenue, and those recent sales are no longer occurring, which is part of the issue, according to Mr. Evans-Pritchard.

According to the financial organization ANZ, incomplete projects may account for loans totaling more than $220 billion. In addition, credit, a significant funding source during the boom years, has also dried up.

The “three red lines” are accounting standards China’s government implemented in 2020 to restrict how much developers might borrow. Banks’ readiness to lend to real estate companies has also declined due to the funding cutoff and the subsequent loss of market confidence.

What is the government doing?

One way Beijing is stabilizing the situation is by placing the responsibility on local governments; they are providing reduced down payments, tax breaks, cash subsidies to homebuyers, and relief funds to developers. However, the local economy will suffer due to a lack of land purchased by real estate developers. Therefore, this comes at a price.

The time, according to Mr. Ding, “is right for the central government and regulators to move in.” “It will eventually intervene to ring-fence some corporations’ issues. The industry is too crucial to the economy.”

According to recent reports from The Financial Times and Bloomberg, mortgage holders may be allowed a payment holiday without negatively affecting their credit score. Moreover, China recently provided $148 billion in loans to support real estate developers.

However, Oxford Economics recently stated that while any government intervention in real estate and infrastructure may boost growth in the short term, it is “not ideal for China’s longer-term growth.” It is because it “forces the government and the financial sector to support an unproductive (and failing) real estate industry.”

Additionally, this goes beyond a financial crisis. Mr. Ding warned that the boycott of mortgages could become a significant social problem.

And it could cause issues for President Xi Jinping as he starts his third term as the Country’s supreme leader.

What will follow?

Analysts believe the reported $148 billion bailout may not be sufficient. According to Capital Economics, businesses need $444 billion to finish the stalled projects.

Furthermore, it’s unclear whether banks, particularly smaller ones in rural areas, can afford the price tag of the mortgage strike.

Even if development picks back up, many developers might not make it because house sales might not boost confidence. The China Real Estate Information Corp (CRIC) estimates that the revenue of China’s top 100 developers fell by 39.7% in July 2022 compared to 2021.

The Chinese economy is at a crossroads, and this crisis is the clearest sign of impending trouble.

The government is making every effort to find new sources of growth. Still, it won’t be easy given how heavily the economy has relied on exports, infrastructure investment, and real estate over the past three decades, according to Mr. Evans-Pritchard.

“The period of very high expansion in China is gone now… and this is most evident in the housing industry,” he added.

What does it mean for the world?

Real estate developers all around China are in a desperate position and trying everything in their power to sell houses, even accepting down payments from farmers in the form of wheat, garlic, watermelons, and peaches.

A problem that began with the Evergrande Group is now threatening to engulf some of the largest developers in the nation, its lenders, and a middle class with substantial wealth invested in the real estate market.

According to Pantheon Macroeconomics, property accounts for around 70% of the nation’s household wealth, 30% to 40% of bank loan books, and 30% to 40% of local government revenue from land sales.

The National Bureau of Economic Research working paper estimated that from 2020, China’s real estate industry generated $4 trillion out of the $14 trillion in GDP, or 29% of the total.

Evergrande is a troubled organization. Many debt-ridden real estate companies, including Fantasia Holdings, Sinic Holdings Group, and Modern Land, have defaulted or are about to do so. Sunco, the third-largest developer in China, Sunac, has also seen a significant reduction in credit ratings as concerns about loan repayment mount.

Triple-red lines

The “three red lines” are a set of regulations that Chinese regulators adopted in August 2020 to regulate the highly leveraged sector better and restrict real estate companies’ borrowing. Developers are required to adhere to the following three red lines: A debt-to-asset ratio of 70% or below, enough cash on hand to cover short-term borrowing, debts, and liabilities, and a ceiling of 100% on net debt to equity.

Each red line decreased a company’s capacity to take on more debt. As a result, a company that crosses these lines can no longer take on debt.

To comply with the “three red lines,” companies were adopting various strategies to move loans and projects off the balance sheet or pass off debt as equity, according to a Reuters report.

China’s local government debt was $4 trillion as of 2020. According to Goldman Sachs Global impact, more than half the nation’s GDP, or $8 trillion, is thought to be held in “shadow” or “hidden” debt.

Because of China’s sinking real estate market, alarm bells are going out worldwide. However, it remains the global center for manufacturing, so if its economy deteriorates, exports from other nations will be slower and more expensive.

Due to supply bottlenecks caused by Covid, several industries like the auto, consumer electronics, and others have already seen a slowdown. China is a global leader in contract electronics and semiconductor production. In the event of an economic downturn, this would only increase.

China is also the developing world’s primary global creditor. So if China falls, developing nations depending on China for infrastructural projects would be hard hit.

The Belt and Road Initiative includes many projects the Xi government has funded. However, B&RI projects worth over $1 trillion in 139 different nations, including construction sites, roads, power plants, and other infrastructure projects, might also be left unfinished.

Despite the oppression of the Uighur community, zero-covid policies, and other human rights violations, the people supported the Chinese government because of the seemingly never-ending growth it catalyzed. It is also possible that a failing economy might create resentment against the government, forcing the CCP to take extreme measures to quell dissent or distract the public. The Tiananmen Square massacre was not so long ago, and fears of war in Taiwan are now palpable.

The post Why are Chinese homeowners boycotting mortgages? appeared first on International Finance.

Similar threats have been made — and in some cases carried out — across 328 property developments in nearly 100 cities. Some of the messages have appeared briefly on Chinese social media platforms before being scrubbed by censors. But their echoes remain — the letters have been preserved on a crowdsourced website titled WeNeedHome — as does the fury. The mortgage boycotts are posing a fresh challenge for the government in a country where widespread dissent is uncommon and other economic troubles loom large.

What prompted people to speak out?

The short answer is that construction has stalled at apartment complexes across the country — apartments that have eaten up many people’s life savings. The long answer traces to deep-seated problems in China’s real estate sector that have been brewing for decades and laid bare over the past two years.

China’s property boom has been a huge driver of the country’s economic growth — the sector is responsible for around one-quarter of GDP. But now a pair of factors has brought developers to their knees: China’s economic headwinds — due primarily to its strict ‘zero-COVID’ policy that has locked down entire cities — and a government effort to rein in the real estate industry’s soaring debt.

“We are in the midst of a slow-motion crisis. I would view the property sector’s distress as absolutely central to China’s current economic slowdown,” Logan Wright, a partner at Rhodium Group who leads the firm’s China markets research said.

Roots of the crisis

Logan Wright says that the ‘slow-motion crisis’ has many roots. To some extent, it was planned: The government explicitly wanted to cool down the red-hot property sector. For years, apartment buildings shot up across China as people moved from the countryside to cities and developers had easy access to credit. But it soon became clear that real estate investors — not actual home buyers — were the ones driving up demand in a speculative frenzy that left vast expanses of apartments empty. Property prices soared, and home ownership became increasingly unaffordable for China’s middle class. At the same time, another problem was brewing: The developers who were benefiting from those high prices amassed a mountain of debt to keep building at a breakneck pace.

“They have taken on too many loans to build too many buildings that no one really wants to live in,” Jeremy Wallace, an associate professor at Cornell University who has studied urbanization in China said.

In recent years, government officials have begun to see the underbelly of risk in that property-fueled economic growth model. President Xi Jinping has taken to repeating the exhortation that ‘houses are built to be inhabited, not for speculation.

In August 2020, the Chinese government decided to intervene to deflate the housing bubble before it burst. The housing ministry and the People’s Bank of China announced a ‘three red lines’ policy, laying out three benchmarks to evaluate the level of debt developers had taken on. If regulators found that a developer had exceeded any of the benchmarks, they would place limits on the developer’s ability to borrow further.

It turned out that many of China’s biggest developers had blown past the thresholds — and all of them now had to start re-balancing their lopsided balance sheets. That left these companies short on cash needed to complete the apartments they would promise to people all over the country. The early seeds of the boycott movement were planted.

“It is no surprise if you have this extensive distress that you are seeing within the property sector, that eventually, this issue would have come to a head,” Jeremy Wallace said.

Real estate bombshell

In the wake of the ‘three red lines’ policy, China appeared to come close to its own Lehman Brothers moment last year. As in a moment when one company’s troubles nearly cratered the country’s economy. Evergrande is the poster child for China’s real estate craze. It is a privately owned company that became China’s largest real estate developer, and as it grew, it took on an enormous amount of debt: more than $300 billion as of last year.

Even before the three red lines policy, Evergrande was facing pressure as China’s economic growth slowed, cooling demand for the company’s often lavish properties. But the new policy pushed it over the edge. Because it could no longer borrow as easily under the new government rules, Evergrande had to begin rapidly selling off pieces of its diverse business empire. But it still couldn’t keep up with its debt payment schedule. In December 2021, Evergrande failed to make payments to international bondholders, thereby officially crossing over into default territory.

Evergrande’s fall immediately set off concerns that China’s whole real estate sector would collapse. But instead, Evergrande’s troubles and China’s response have been a part of that slow-motion crisis. The government decided to intervene and has worked with Evergrande to develop a plan to restore the company to solvency. For now, a full collapse has been averted, but Evergrande’s path forward remains uncertain. It recently missed a July deadline to release a plan for restructuring its debts.

Meanwhile, the same story has played out for other large developers in China. The new rules have hit their ability to borrow from banks, and Evergrande’s high-profile struggles have made it harder for all these companies to access capital from foreign markets.

Experts say that some of this fallout from the red line policy was inevitable, but it was made worse because of a “perfect storm” of other economic factors.

“I think they were trying to do something that was very difficult — to deflate something in its real estate sector that looked very bubble-ish. To do this in 2020, 2021, it seemed reasonable that maybe they would be able to pull it off, but with zero-COVID really destroying other economic activity, it’s really made things a lot more difficult,” said Jeremy Wallace.

Summer wave of mortgage protests

The downfall of Evergrande and other behemoth developers leads back to all those angry mortgage holders. Evergrande is now the target of the largest number of mortgage boycotts. According to WeNeedHome, of the 328 developments where homeowners are threatening to withhold their mortgage payments, 52 are Evergrande properties.

Government policy certainly contributed to the problems, but they are magnified by China’s unusual, and problematic, property sales model. China’s real estate developers typically use a “presales” tactic in which buyers — or the banks that hold their mortgages — must pay in full for homes that have yet to be built. So even before many Chinese people move into their apartments, they are already making mortgage payments.

That model worked well enough while developers were able to build at a rapid pace and hand over apartments, but the recent setbacks have thrown wrenches into that process. In the past, developers were able to illegally tap into the cash they collected from presales to build other projects in their portfolios. But with zero-COVID hitting the economy, people have been less willing to buy apartments, so these sales have fallen. That in turn has left developers short on cash for construction.

Meanwhile, the three red lines policy has prevented the developers from borrowing more to compensate. All this has produced a vicious cycle, as Michael Pettis, a professor of finance at Peking University, wrote in a recent blog. The news about the liquidity crisis has also scared people off from buying presale apartments because they fear developers won’t be able to complete them. That, in turn, cuts further into developers’ cash.

“What you’re seeing is the unwinding of confidence that developers are still going to have sufficient resources to complete houses out there. It’s a significant change in credit conditions more broadly for developers,” said Logan Wright.

With no money in hand, developers started to push the pause button on their construction projects, leaving hundreds of thousands of people paying mortgages with no idea when they will actually move into their apartments. That’s why so many mortgage holders have banded together and threatened to stop paying.

What comes next?

Chinese government officials are working hard to contain the boycotts and keep the property market from going farther off the rails. It’s a delicate balancing act; the government wanted to reduce debt in the sector, but it’s now being forced to intervene to stop the crisis from spreading into other parts of the economy.

So far, authorities have largely allowed the boycotters to pause their payments without penalty. And the government isn’t leaving developers entirely in the lurch. Central government officials are trying to help speed the completion of projects, initially by appointing local governments to oversee the work. Chinese financial outlet Caixin reported that local state-owned companies might even be tasked with purchasing stalled developments and completing them on their own.

But local governments alone can’t fix the problem, in part because they are already highly indebted from implementing the costly zero-COVID policy, and the central government seems to realize as much. Bloomberg reported that the central bank will provide nearly $30 billion in special loans to developers to help them finish the delayed projects.

Even that is likely to be far from sufficient. Given how much revenue the sector is currently losing, the $30 billion “doesn’t seem large enough to help developers significantly at all,” said Logan Wright.

One thing is clear, from Jeremy Wallace’s perspective: Given the political sensitivities, the mortgage boycotters won’t be left to bear the full cost. “It’s a very compelling population. The family that has saved up in order to buy something that they never get because of some billionaire developer — that is a political fight that they will always win. And I think that’s really a dangerous potential problem that the government won’t let or can’t let sit forever,” he ad

Meanwhile, even if the government ultimately manages to get developers to deliver most of the apartments to the boycotters, the broader distress in the property sector still threatens the country. Sales across China’s top hundred property developers dropped by half in the first six months of the year, according to the New York Times. Home prices have also been falling, and more developers are still expected to default this year. In some ways, this is what the government was aiming for, but the real estate sector has plunged too quickly due to zero-COVID. Where will this downward spiral leave China? It is likely to stick to a path of reining in the property sector to a large extent, even if it continues to come at an economic cost.

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Mr. Mazen Issam Hawwa became URC Vice Chairman and Group Chief Executive Officer in 2020. He had served as the senior management of Kuwait Projects Company-Holding (KIPCO Group) for 19 years.

Mr. Hawwa has extensive experience across many KIPCO Group verticals, including finance and real estate. In addition, he has been associated with numerous operating companies as part of the KIPCO Group’s strategy, contributing thought leadership and counsel on governance, financial planning, and strategic directives.

The URC Vice Chairman and Group Chief Executive Officer, an alumnus of the Lebanese American University, holds an Executive MBA from HEC Paris. He has participated in several executive education courses such as the General Management Program at Harvard Business School.

In an interview with the International Finance Magazine, Mr. Mazen Hawwa shares his insights on URC, commercial real estate, business strategies, and other factors influencing the real estate sector in Kuwait.

(Q) How is this economic rebound spread across the different activities of URC (shopping-rentals, hospitality sector, and real estate services)?

(A) The year 2021 also saw strict restrictions being imposed to ensure public health and safety from the COVID-19 pandemic in Kuwait and abroad. By Q2 of 2021, our market operations witnessed an easing of regulations, and business resumed gradually. The last two quarters were positive, and re-normalization improved somewhat. Further, URC’s business verticals saw considerable operational recovery after governments lifted the partial and complete lockdowns.

During these difficult times, we ensured that we stayed close to our tenants and customers, which helped us maintain and improve our occupancy. We engaged effectively and ensured that the occupancy did not drop. On the contrary, occupancy started growing and improving during the rebound.

On a local retail level, Marina Mall, Kuwait’s ultimate shopping destination and home to 137 international multi-category mix brands spanning over 225,945 square meters, thrived with increased consumer spending power on luxury and essential goods. As a result, it attracted more footfalls and good trade performance in the retail outlets.

As for the real estate sector, URC also noticed that our residential sales in Hessah Towers and Byout Hessah continued as planned.

(Q) Has demand for commercial real estate and hospitality picked up?

(A) Demand for commercial real estate and hospitality have seen growth in 2022. This was mainly due to the easing of health restrictions by the government. Hence, as a leading real estate developer and investor in Kuwait and the MENA region, we constantly ensure that our offerings are well placed and meet the market’s needs.

We also expect further growth in the tourism sector in the State of Kuwait. By 2025, we expect spending on travel and tourism in Kuwait to increase to USD 1.13 billion at a compound annual growth rate of approximately 21%.

(Q) What are your expectations for the year ahead?

(A) Over the past six months, we have taken time as a company to develop customer-centric strategies for enduring growth. We created a formula that combines customer-centricity with innovation. The objective is to build sustainable communities. Although there have been factors that led to noticeable changes in the overall market and consumer needs and preferences, we were able to adapt to these changes, deliver and meet the emerging demands for unique experiences.

Our vision goes beyond improving the company’s operational and financial performance; we aim to build sustainable communities. Our vision aligns with Kuwait’s 2035 vision, “New Kuwait,” aiming to transform Kuwait into a regional financial and trade hub and make it more attractive to investors.

I remain optimistic and confident in the Kuwaiti market and our capability to achieve excellence in real estate projects that cater to changing consumer preferences and the latest trends. As an innovative real estate developer, I believe we will have noticeable growth.

(Q) In March this year, URC announced the merger of United Towers Holding Company and AlDhiyafa Holding Company. What are your goals with this merger?

(A) True, in March 2022, URC decided to merge with Al Dhiyafa Holding Company (DHC) and United Towers Holding Company (UTHC). These two companies had already signed a Memorandum of Understanding (MoU) in which URC is the merging entity while both companies become the merged entities.

In July 2022, URC further announced that its board of directors has approved the asset valuation report and the independent investment advisor’s fairness opinion report related to the merger of DHC and UTHC with URC.

In August 2022, URC announced that it has obtained the approval of the Capital Markets Authority (CMA) to merge by amalgamation with DHC and UTHC. The merger is a non-cash transaction, and the share swap ratio has been set at 0.64 URC share for every UTHC share, and 0.58 URC shares for every DHC share.

We took this step that goes in line with our objective of increasing our portfolio of income-generating assets. In addition, as these two entities (United Towers Holding and AlDhiyafa Holding Company) have common synergies, we want to capitalize on those synergies.

Such a merger will increase the focus of our operations, and the expertise of the acquired firms will be at our disposal. It will also strengthen URC’s position as a leader in the real estate sector, increase the company’s financial competitiveness, and expand the firm’s ability to deliver projects that meet the requirements and demands of current and future clients.

We are confident that this transaction will create a unified entity that achieves synergy between the merged companies in order to expand and diversify investment and assure growth.

(Q) How will it impact URC activities and business performance?

(A) This step will impact URC by increasing revenues and improving the bottom line and focus. We want to describe to our readers the reach and operations of the group through its geographical presence. So, let’s analyse the completed operations, the ones in the process, and the ones to come. Let’s start with Kuwait. Here the company has developed the Kipco Tower, the Marina World, and the Saleh Shehab Resort and has the Hassah Towers and BYOUT Hessah, which are under development.

(Q) What are URC’S short-term plans?

(A) Our focus remains on creating value for our shareholders, building sustainable communities, and delivering high-quality projects. URC’s continued development engine ensures timely delivery in the states of Kuwait, Egypt, and Morocco. When it comes to Kuwait, we are continuing with the development of our residential components in the “Hessah District.” Hence, the “Hessah District” residential units are expected to be completed and ready for handover in 2023. In addition, we aim to finalize the development of the commercial district and negotiate with several retailers of all kinds—medical clinics, restaurants, cafes, malls, and hospitals.

For the shopping sector, we will keep creating a unique customer experience and a pleasant journey for Marina World. Set along Kuwait’s coastline, Marina World is a landmark mixed-use development located on the Arabian Gulf Road in Salmiya, one of the country’s most bustling areas. Marina World was first completed in 2003 and launched in phases to create six components: Marina Mall, Marina Crescent, Marina Yacht Club, Marina Waves, Marina Walk, and Marina Hotel.

URC works efficiently and effectively to uplift the living conditions in Kuwait, promote well-being for all, and promote sustained, inclusive, and sustainable economic growth full of productive employment and decent work for all. In addition, we foster innovation, increase the quality of life, and make cities and human settlements inclusive, safe, resilient, and sustainable—in line with the sustainable development goals (SDGs).

(Q) Of particular interest is the “Hessah District” development. When will it be fully operational?

(A) Completion of construction works at Hessah Towers will take place in Q1 2023. And Byout Hessah will be completed and ready for delivery in Q3 2023. In Egypt, the company has completed one project – Aswar Residences – and one project is in the making.

(Q) What are your expectations for Egypt properties?

(A) After the sale of Aswar Residence, a gated residential community comprised of 75 three-story villas located on the eastern side of New Cairo, we are preparing for the sale launch of our residential project in Cairo, along with the possibility of resort development in Sharm el-Sheikh. Avaris is a high-end residential community developing in the heart of New Cairo, Egypt.

The project spans a 108,000 square meter plot and comprises six clusters. We have divided the clusters into 61 apartment buildings, including 468 apartments with various flats and duplexes, retail complexes, and office units.

The hospitality sector in Egypt has also seen a considerable improvement due to the easing of restrictions and specific economic measures taken by the government. Furthermore, Egypt’s new capital city, currently under development, will be a source of contract opportunities in the coming years. As a result, our Egypt market has seen considerable growth in 2022, and we hope to launch Manazel apartments soon.

Since Egypt’s real estate market is seeing high demand, the country has begun to develop new cities with the scope for large-scale real estate projects. The ongoing development and construction of new cities, in addition to the development of the existing new towns, present attractive investment opportunities in Egypt.

The excellent macroeconomic stability in Egypt will result in leveraging international investment into the country’s non-residential sector. Due to the high population, residential development will remain the domain of the state, as they must construct affordable housing for the average Egyptian.

(Q) What are the plans for development as the economy continues to boom?

(A) Our plans include developing a world-class all-inclusive resort in Sharm Al Sheikh. In Morocco, the Assoufid is of particular significance. The first phase included a golf club, and now it is developing its second phase with a five-star hotel and a residential component.

(Q) When will this second phase be fully operational?

(A) The five-star hotel, St. Regis Marrakech, is expected to commence construction in Q3 of 2022 and will be completed in Q1 of 2025.

In Morocco, we transcend the status quo for the local tourism industry by creating a new wave of branded luxury living in the Assoufid project. With infrastructure works completed, we anticipate this year’s construction of its award-winning five-star hotel, The St. Regis Marrakech Resort, alongside branded villas, premium residences, and a retail hub. In addition to our world-class golf course, these high-end components will be part of our success story in creating valuable experiences.

‘Morocco’s Best Golf Course 2021’ and ‘Africa’s Best Golf Course 2021’ at the World Golf Awards went to Assoufid Golf Club.

Spanning a total area of 2.5 million square meters, Assoufid is a luxury mixed-use integrated tourism and residential resort situated in the vibrant Marrakech, Kingdom of Morocco.

The first phase of the Assoufid development consists of a multiple award-winning 18-hole high-end golf club. The golf course lies on naturally undulating terrain, with the beautiful, snow-capped Atlas Mountains providing a stunning backdrop. In addition, this phase includes a signature restaurant, pro shop, member’s lounge, and several luxury residential villas.

The second phase of the Assoufid development will introduce the iconic five-star hotel brand, The St. Regis Marrakech Resort, operated by Marriott International, Inc. The hotel will consist of 80 keys (60 rooms and 20 villas) equipped with exclusive amenities such as a world-class spa, a swimming pool, a state-of-the-art fitness center, and three specialty restaurants for a world-class culinary experience.
The second phase includes 22 branded residences, 28 real estate residences of tourist promotion (RIPT), 25 residential villas, 120 apartments, and a retail area of 2,312 square meters. At the same time, the third phase of the Assoufid development will introduce additional premium villas and apartments.

(Q) What is the company’s position for the future in Morocco? Do you see enormous potential in real estate?

(A) The real estate market in Morocco has always been attractive due to its geographic position, and we expect good growth on the completion of the residential project Assoufid.

Our main objective is to position Assoufid as the first exclusive St. Regis branded residence in Morocco that provides a variety of premium offerings and services—in addition to assuming an authentic experience for a unique lifestyle for the residents.

Marrakech in Morocco is one of the most luxurious destinations for international stars, and many actors and singers choose it as their usual holiday destination.

Analysts project a robust but moderating industrial performance and a noticeable recovery for the tourism sector at a fast pace for Morocco’s economy. In addition, the ongoing reforms might enhance potential growth over the medium term.

As the country’s economy is healing from the pandemic, and as I look ahead, I believe Morocco’s tourism sector will be performing better this year.

In the first eleven months of 2021, the number of people staying in hotels, Airbnbs, and Riads increased by 30%. Riads are the most quintessentially Moroccan accommodation. Many traditional riads have been converted into guesthouses, allowing visitors to live like a local while in Morocco.

At the crossroads of Africa and Europe, Morocco is a destination that offers endless possibilities for travel lovers. Morocco has everything for discovery, nature, culture, gastronomy, or luxury stays. It is open again for all visitors to discover, explore, and enjoy the many facets of the Moroccan experience.

(Q) In Oman, you started operations with the Salalah Gardens Mall, and other projects are waiting for the green light. What are your expectations for your Omani properties?

(A) Oman’s residential real estate market could register a CAGR of more than 13% during the forecast period (2022-2027). However, due to COVID-19, Oman’s real estate sector has felt the consequences of slower economic growth in 2020.

Oman’s commercial real estate market could also register a CAGR of more than 11% during the forecast period. In addition, it is experiencing significant growth in the hospitality and travel sectors.

Our project in Oman, the Salalah Gardens Mall & Residences, is fully operational and self-reliant—it has become self-sustainable to meet its obligations. Hence, the properties comprise a leasable retail area of 28,810 sq.m and 166 serviced rooms.

(Q) What are the long-term development plans for Oman?

(A) Currently, our focus is on the operational improvement of our existing assets.

(Q) Your development in Lebanon, Raouche View, has been praised locally as one of the top residential developments in the country. Could you share your strategy or plans for Lebanon?

(A) Despite the challenging economic situation in Lebanon, we managed to rent out the majority of our apartments in Raouche View 1090 in Beirut in particular. Hence, the occupancy rate (by area) is 75.5%. Raouche View 1090 has 42 apartments, including two penthouses. We have sold twelve apartments, while out of the remaining 30 apartments; we leased 24. We are currently not pursuing further development projects in the country.

(Q) How do you plan to maximize URC’s performance during your tenure?

(A) Maximizing URC’s performance is to be achieved by enhancing the capabilities of our internal team, product innovation, and digitalizing our operations. We accomplish this by responsible digital transformation, which increasingly promises enormous growth opportunities. In addition, we aim to continue engaging with our customers, ensuring operational excellence on all our operating assets, and exiting certain targeted assets and investments.

(Q) How does URC’s overall strategy fit into KIPCO’s?

(A) KIPCO is our biggest shareholder, and URC is the real estate arm of KIPCO and fits with the overall strategy of safeguarding and improving the stakeholders’ interests.

(Q) As a corporate leader in Kuwait with a US academic background, you have the authority to explain the challenges Kuwaiti entrepreneurs and corporate leaders face as the country passes the torch of economic leadership to the private sector and makes a big push for economic diversification. Could you please summarize these challenges?

(A) Kuwait’s long-term challenges are related to the economy’s heavy dependence on oil and domestic consumption and slow progress in implementing diversification plans.

Non-oil growth is stalling due to short-term challenges related to the fallout from the coronavirus pandemic and structural problems such as the lack of a dynamic private sector, compounded by political barriers to structural reform. Additionally, Kuwaiti authorities still need to balance containing mounting fiscal pressures while supporting citizens and businesses disrupted by the pandemic. As a result, capital spending and development projects have stalled; fiscal outturns show a 27.5% reduction in capital spending in FY20 and FY21.

As I look ahead, I remain optimistic about the Kuwaiti market as it actively seeks to create new business sectors within the economy. The Kuwaiti government’s policy to diversify the economy recognizes the value of SMEs and, consequently, has instituted schemes to provide entrepreneurs with funding, advice, and support to encourage the growth of the SME sector.

The post URC working to uplift Kuwait’s living conditions: Group CEO Mazen appeared first on International Finance.