A well-regulated, technology enabled Real Estate sector together with a robust mortgage finance market, play a fundamental role in developing economies. A solid real estate sector seeks to facilitate transition and consolidation of green economies with employment generation and growth. Moreover, sound real estate markets not only stimulate economic recovery in the short run, but also promote long-term sustainability.
Although governments in the Middle East have taken economic measures and launched incentive packages to support development of various sectors, including the Real Estate sector, certain fundamentals, such as legislative and regulatory frameworks, can still be improved in order to achieve long term sustainability and facilitate economic development.
In this point of view, we highlight six guiding principles that could help achieve social and economic objectives while providing long-term solutions for the Real Estate market across the Middle East.
An efficient and transparent real estate market should comprise of legal and voluntary regulations, international standards, ethical rules, and best practises. Our guiding principles provide real estate regulators, policy makers and other interested parties with a reference point for future developments in the sector.
We believe that addressing key aspects of these guiding principles could help overcome specific market challenges, such as the effects of market distortions, imperfect competition, asymmetric information and other externalities, leading to a more efficient and responsive real estate market.
The establishment of an integrated legal system for the Real Estate sector, harmonised with regional and international norms, is crucial for the control and legal protection of the rights of ownership and use of Real Estate. It is also the building block of an efficiently functioning Real Estate sector.
A sound legal framework can reduce the risks of imperfect competition in the market, speed up the time for resolving disputes, reduce the cost of owning, renting, and buying, and thus increase the overall demand for Real Estate products.
Comprehensive property protection rights and a dispute resolution framework increase people’s willingness to invest in the Real Estate sector and citizens’ overall satisfaction, and positively influence their decision to rent or buy new properties. Moreover, if people feel less stressed about disputes, the negotiation process could become easier and the relationship between the parties could improve through better communication.
The establishment of efficient cataloguing and classification systems, such as a centralised land and property register and a database for the Real Estate sector, will ensure easy access to property information and minimise the risk of fraud in transactions.
The introduction of land and property registration procedures could help speed up the process of acquiring land and property, which would lead to a reduction in the cost of buying and selling, thus positively affecting both supply and demand.
In addition, deregulation of Real Estate ownership could reduce the risk of imperfect competition by reducing barriers to entry and increasing the inflow of financial capital (including foreign direct investment FDI) to the Real Estate market, leading to an increase in overall demand.
Maintaining an effective inter-sectoral governance structure, such as centralised control of regulatory and monitoring activities, and establishing audit and enforcement policies promotes effective governance. Additionally, developing a clear communication framework can lead to better decision making and policy implementation.
Enhancing human capital and Real Estate sector capabilities by investing in technology and emphasising technical and professional expertise, could translate into higher levels of training for industry participants, improve labour productivity, and, over time, increase the production and supply of Real Estate products.
The development of sales and marketing policies promote ethical conduct and fair practises and help overcome information asymmetry in the market. This could in turn improve trust in the Real Estate ecosystem and increase investor confidence, thereby leading to an increase in overall demand and capital investment.
Countries around the world tend to design their monetary, financing and credit policies to meet common concerns of local consumers and investors. Access to financing, such as loans and mortgages, directly affects the dynamics of the Real Estate market. Competitive and affordable financing facilitates the development and sales of Real Estate and encourages private sector participation.
Real Estate data management and transparency influence investment decisions. A Real Estate database ensures easy access to property information and minimises the risk of fraud in transactions.
Transparency is also critical to market efficiency and attracting investment capital. Like capital markets, Real Estate markets need to move towards enhancing transparency to improve price fairness and competitiveness.
Dr. Martin Berlin
Partner, Real Estate, Hospitality & Leisure Leader, PwC Middle East
Tel: 971 4 304 3182
Director, Real Estate, Hospitality & Leisure, PwC Middle East
Tel: +971 4 304 3453
Senior Manager, Real Estate, Hospitality and Leisure Strategy, PwC Middle East
Tel: +971 56 676 1894