In this interview with The Worldfolio, Mr. Aaref Hejres, Chairman of BaPDA, discusses the performance of the real estate sector in Bahrain, the investment climate, and the role of BaPDA in leading the property development industry.
Despite the challenges in the region including low oil prices and economic slowdown, Bahrain’s real estate sector has witnessed rapid expansion due to growth in demand for residential and retail development, and continues to play a vital role in the development of Bahrain’s economy. How do you assess the real estate sector growth in recent years and what is your outlook for the coming years?
Real Estate is one of the most important sectors in Bahrain and continues to move in the right direction in a steady way, and the demand is there. I think what makes Bahrain's market different than others in the region is the real demand and the real projects.
We see how even with a slow down in the region, Bahrain still has major opportunities with new projects coming up. There are many opportunities in the sector, and Bahrain needs to create more awareness amongst international markets, especially with the US, to capitalize on the FTA and take full advantage of these opportunities. If we talk about real estate in Bahrain, I think it has the highest return-on-investment in the region. Here, in terms of ROI, in the sector we are talking between minimum 6% and maximum 15% so an average you have 8% to 10% which you don't get in Europe or America.
In previous years maybe people were not comfortable because unfortunately we did not have laws and regulations in place to protect investors. Bit in March this year, we established the Real Estate Regulatory Authority (RERA), which is the authority that will be in charge of protecting the interests of all stakeholders in the real estate market, and ensuring that everything is done professionally. So, I think Bahrain is now ready for international investors to enter the market and is ready to become a leading real estate investment destination for both regional and international buyers.
Taking into account that BapDA is an association that serves also as a bridge of dialogue between its members and the government. How are you looking forward to interacting with the newly created RERA to ensure the private sector has a voice?
For the first time, the government has made a board in partnership between the public and the private sector. And I think that that's a very successful movement and we thank the government for it. So when they put through new laws and regulations, we are part of that decision making, and I think this makes RERA one of the most successful authorities today. We started right, we ended right and they took our opinion when they wrote these new laws and regulations and that is why I believe it was successful. I think this sets a perfect example of partnership between the both public and private sectors.
Another challenge faced by the Bahrain RE market is in housing, where there is a backlog of 50,000 units. How can the private Bahraini developers get more involved in public housing projects?
This sector is a top priority for His Majesty the King, the Prime Minister and His Royal Highness the Crown Prince. Housing has been a serious issues and I think they have a perfect plan that they have been working on for the past couple of years to solve this issue and they made a plan for forty thousand units. They are working very hard and they have a time frame, and they have successfully been completing the program.
But not every Bahraini is entitled to that program, which is focused on the affordable housing sector. We also have the mid-priced and high-end, luxury sectors. So investors have the opportunity here now to partner with the government on affordable and social housing, or on medium and high-end projects.
This doesn’t end on the residential side. We have other opportunities in sectors like tourism for developing new hotels, beachfront hotels, desert hotels, island hotels, etc. We have some islands that are not being utilized and I have always been thinking, why can’t we have our own small Maldives here in these islands?
I think the government does have a plan but it has not been marketed; they did not create awareness. With my role now in Chamber of Commerce I think I have a duty of packaging this to investors.
Real estate developments totalling $26 billion are planned or under construction, according to the Bahrain Economic Development Board (EDB). Can you outline some of the major projects? What investment opportunities would you highlight in the sector for foreign investors?
As former CEO and managing director of Diyar Al Muharraq, I injected my blood in Diyar for nine and a half years and it is one of the biggest projects in Bahrain which has mixed-use. It has all the ingredients for a beautiful dish. For example, in the residential side, there is affordable, medium, high and luxury. You have marinas, you have schools, you have offices, you have hospitals, logistics – you name it. Diyar Al Muharraq has the biggest variety of all. The appetite is there and the demand is there.
Then we have the investment gateway of Bahrain, which also has a lot of opportunities in it. We have Durrat, we have the one south Hasabi which is a beautiful waterfall community.
So, why would tthe US invest in Bahrain? Simple reason... it’s a safe environment with a high return and there is real demand here.