Exclusive article by Bassam Kamashki, an Independent Real Estate Professional, in bizbahrain Magazine December 2015
This month’s edition is special since it is National day in the Kingdom of Bahrain. This month I will discuss why Bahrain should still be perceived as a right choice for real estate investment despite the tough time the Bahraini economy has been through in the past few years.
Like all other regional markets Bahrain has suffered from a noticeable economic slowdown, especially within the real estate sector. Having said that, it doesn’t mean that we should focus on other markets and shy away from Bahrain. Some other markets get promoted as “safe havens”, does this mean the Bahraini investors should look only at outward investing?
I have discussed in one of my previous articles (May 2015 issue) how to develop the right real estate project even within a highly competitive market such as Bahrain. In short, the main guidelines were:
1. Have an investment strategy, where to invest in Bahrain and what to invest in.
2. Buy at reasonable prices that generate feasible returns; the days of “unrealistic returns” are gone!
3. Develop with caution, i.e. develop a genuine project with no shortcuts, for example how many empty office buildings do we see around due to poor quality, not providing the right space or poor car parking space? There was a decision by the original developer to cut-down these valuable features in order to save cost, we can obviously see now how this mentality back-fired.
4. Listen carefully to the right consultants with the right “local knowledge.” Not every consultant can add true value to the project; the days of copy-paste approach are gone; listen to the consultants that can innovate a tailor-made solution to suit your inquiry.
5. Build at the right quality from construction point of view using the right and efficient design.
6. Appoint the right facility management company to professionally manage your property.
It is always interesting to talk to the large local individual investors who are considered the main derivers of the real estate sector in Bahrain, either directly developing it themselves or investing into the existing large development companies. The general impression I got is that the days are gone when investors used to earn 50% return on value by land flipping within only a few months; some even got to resell their land even before registration due to the short time frame of flipping cycle. Investors realize that those days are gone and now they have to be more realistic and cautious in what they invest into. I was told once by a senior member of a big business family who owns a sizeable real estate portfolio of over BD 80 million: “Instead of me getting 50-70% return in one land flip, now I have to make this figure by doing multiple smaller deals of lower return just in order to reach to those past figure, this means more work and effort but keeps me going”.
On the other hand, the government of Bahrain has been working constantly to reform the real estate sector from the regulation and implementation points of view. From what I see the real estate market is getting into a new phase where a Bahrain Real Estate Regulation Authority body will be launched very soon (such as Dubai’s RERA) plus the recently introduced laws such as Real Estate Development Framework and the Real Estate Brokerage Law. Moreover, the Distressed Projects Committee that is mandated to investigate and resolve distressed real estate projects have successfully resolved the issue of the Villamar Project located at the Bahrain Financial Harbor, a USD 650 million project, after a great effort of working with the owners of the project to financially restructure the project. I personally look forward to other projects seeing the light again which will definitely regain investors’ trust in Bahrain’s market.
Another example is the new initiative of Eskan Bank that supports the strategy of Ministry of Housing, in which Eskan Bank is currently developing multiple affordable housing projects, introducing unique design concept of the units, taking the affordable housing concept to an upper level. This serves the ultimate bank’s objective of injecting as much as affordable housing units in the market in order to first reduce the backlog of housing beneficiaries of Ministry of Housing and second to sell reasonably priced units to those who are classified just above the ceiling level of the Eskan Facilities and below the upper income layer of demographics. Also, with the very first Bahrain Bourse-listed real estate investment trust (REIT) has been announced by Eskan Bank with Securities & Investment Company (SICO) acting as lead arranger, investors are now able to invest their money into highly secured and monitored income generating real estate projects.
Besides main government bodies in particular Bahrain Economic Development Board “EDB”, Survey and Lan Registration Bureau “SLRB”, The Ministry of Works, Municipality and Urban Planning. In addition, there are other related associations/professional bodies working continuously side-by-side with the government in order to improve the real estate practice in Bahrain such as:
1. Bahrain Property Association
2. Bahrain Property Committee within the Chamber of Commerce “BCCI”
3. Bahrain Property Development Association “BaPDA”
Last but not least, I would like to take this opportunity to thank the leadership of Bahrain. Their vision made all of the above-mentioned possible by empowering several stakeholders in the system to preserve and sustain the real estate economy in Bahrain. Developers, consultants and all other players in the market should work on supporting the system to reintroduce Bahrain as a regional hub of choice for real estate investments.