Reclaiming Bahrain’s Real Estate Sector

photo for illustrative purpose only
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As Bahrain presses ahead with economic diversification, one key non-oil sector of the economy is the real estate sector. You don’t need to have been here for very long to be aware of the momentous development in Bahrain’s real estate sector, from signature commercial developments like the iconic Bahrain World Trade Center to the significant and ongoing investment in residential developments like Durrat al Bahrain to the south of the island and Amwaj to the north-east.

The establishment of the Real Estate Regulatory Authority (RERA) back in 2018 was an important sign of the government’s intention to professionalise the sector, align it with international leading practice and increase transparency. With an aim of delivering effective and fair regulation across the real estate sector and promoting investment and economic growth in the kingdom, RERA’s vision is – according to its website – to make Bahrain “the premier destination for real estate investment both regionally and globally”.

RERA’s success is in everybody’s interest – because almost all of us have some kind of a stake in real estate – whether as homeowners or apartment renters, investors or developers, property managers or engineers, lawyers or building contractors. What is happening in the sector has a direct impact on quality of life, investor confidence and ongoing investment. Dubai’s real estate model – carve out a space in the desert or reclaim land from the sea; build bigger, better, more luxurious residences; offer top-class amenities; and sit back as wealthy expatriates snap them up – no longer seems to be working as well as it did and that may have given some stakeholders here pause.

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Bahrain’s real estate market has its own strengths and weaknesses. A well-developed banking and financial sector, offering high-paying jobs to both nationals and expatriates, has helped establish an organic market for real estate, on top of ongoing demand from Saudi citizens and residents keen to have a weekend property that offers access to a more liberal social environment. Ongoing support – both financial and otherwise from other GCC states is helping to fund infrastructure developments, including Bahrain’s light rail system and a second causeway to Saudi Arabia. RERA’s introduction, in tandem with the new development law and the use of escrow accounts, is improving the regulatory infrastructure and aligning Bahrain with global leading practice.

Nevertheless, there are issues in certain areas. Certain sectors such as offices and residential apartments are currently oversupplied with extra capacity continuing to come online despite high vacancy rates and low rents. Some high-profile projects have failed. Higher utility bills are impacting rental markets. Threats including an extended slowdown in construction, potential labour shortages, the postponement of real estate projects and volatility in the oil price – could further hamper efforts to grow the sector.

However, these issues are clearly understood by regulators and the market. There is little value in simply sticking your head in the (reclaimed) sand. Infrastructure developments – not least the opportunities offered by the new airport terminal (with a soft opening now promised for March) and the second causeway – should positively impact demand for both commercial and residential property. Ongoing changes in Saudi Arabia, the source of much of the demand for Bahrain real estate, are aimed at growing Saudi’s private sector. Bahrain has the social infrastructure, not just hotels and restaurants but also high-profile schools, hospitals and universities – that an emerging middle-class aspires to. Bahrain also offers a level of financial sophistication – including conventional and Islamic real estate investment trusts (REITs) – that savvy investors increasingly expect.

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RERA-licenced propriety management, valuation, owner association management and real estate brokerage services are boosting levels of trust. As stakeholders across the real estate market – including professional firms like Basic Lines but also RERA and other government bodies as well as local and regional companies, financial institutions and high net-worth individuals – proactively work together, indications are that increased professionalism and transparency are going to make investing in Bahrain’s real estate sector an increasingly sensible choice.

 

Wajdi Al Jallad is the managing director of Basic Lines, a real estate advisory transactions firm established by Keypoint. RERA-licensed, Basic Lines offers a range of real estate services, including owners’ association management services, valuations, highest and best use studies and feasibility studies. All views expressed in this article are his own.

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