Real Estate Investment Outpacing GDP Growth In Syria

The growth of the Syrian real estate sector outpaced GDP growth in four out of the last five years, according to data from the Syrian Central Bureau of Statistics. The trend began in 2005, when several Gulf developers (UAE’s Emmar and Majid al-Futtaim, Kuwait’s Aref Investment Group and al-Aqeelah, as well as Qatari Diar) announced that they planned to launch major residential, commercial and office compounds in Syria, with a focus on the areas surrounding Damascus, according to The Syria Report 2009, which adds that in three out of these four years, real estate grew between two and seven times as quickly as the country’s GDP.

Syria’s Gross Domestic Product, Real Estate Investment At Constant 2000 Prices (Mn S£)

2003

2004

2005

2006

2007

GDP

1,017,619

1,085,991

1,151,462

1,211,339

1,288,001

Real Estate

39,213

32,508

36,438

50,593

55,101

% of GDP

3.8

2.99

3.16

4.17

4.27

Source:Central Bureau of Statistics. Reproduced from The Syria Report 2009.

Forex: Currently at $1= S£47.0. In previous years Syria had a range of exchange rates.

Opportunities And Significance Of Syrian Real Estate

The Syrian real estate sector is considered by Gulf investors as generating high returns and carries relatively low risks. Moreover, the report says that Syria’s relatively new openness to private capital, long-entrenched bureaucratic habits and contradictory legislation have prevented Syria from attracting the size of capital that is directed, for instance, at regional competitors, such as Jordan, Lebanon and Egypt. Indeed, these countries have already seen billions of dollars in Gulf money going towards the construction of a large portfolio of developments in the residential, commercial and office sectors. In comparison, except for the landmark Eighth Gate project by Emmar, which will host the future venue of the Damascus Securities Exchange, the number of projects financed by foreign investors that have got off the ground in Syria still remains limited.

The real estate sector has not only alleviated the shortage of dwellings and office space in the country, but has also eased the chronic unemployment problem. The real estate and construction sectors employed together a total of 735,931 people in 2007 out of a total active population of 4,945,977, or 15% of the Syrian workforce. In other words, the size of the workforce in real estate is around three times the size of the sector’s share of Syria’s GDP (4.27%). Beyond economics, the importance of the real estate industry derives from the strong impact it has on the social and border development spheres. “This is obvious, for instance,  in the development of the large areas of informal housing around Syria’s cities that generate a wide range of economic, environmental and health problems. As a consequence of strong imbalance between supply and demand and decades of poor state planning, close to 38% of the Syrian population is now estimated to live in these areas,” according to the report.

Obstacles And Impediments

The financial crisis impacted negatively the Syrian real estate sector, similar in a sense to what happened globally. Remittances from expatriates in the Gulf region, which constitute the main sources of demand in the market, declined substantially. Similarly, transfers from Gulf investors allotted to finance new projects almost came to a halt. Hence, according to the report, “several developments had reportedly been delayed and others cancelled.” However, the report cautions that “in spite of this gloomy picture, one should not underestimate the significant opportunities of the Syrian real estate industry, which, to this day, remains largely unfulfilled.”

One of the main problems encountered in Syria is the weak regulatory framework. The report points out that “2008 saw a series of new pieces of legislation that have helped improve the legal framework. Covering areas as wide as the reorganization of the informal housing areas, the right of property for foreign individuals and the establishment of a new regulator for the industry, these bills have helped clarify the path for developers, investors and homeowners alike.” But it adds “much remains to be done, as developers continue to complain about a relatively weak regulatory framework, although a number of other steps are expected before the end of 2009, including the enactment of a mortgage finance law, which will help ease access to finance and thus increase demand.”

The real challenge to the sector, however, will be to make sure that the existing imbalances are not replaced by new ones, according to the report. “Most construction activity in Syria continues to take place in the quasi-absence of proper state planning and with very little knowledge of the country’s overall needs. The lack of available office space in the central districts of Syria’s cities, for instance, or the exponential increase in prices witnessed in the years 2004-07, are only two symptoms among many others.”

Copyright MEES 2009.