F OR B E S M ID D L E E A S T // TH E IN V ESTOR FOR SECU RITIES

The Kingdom Tower stands in the night

above the Saudi capital Riyadh

GCC REAL ESTATE:

REALIZING POTENTIAL

The above-average growth in GCC real estate investment

opportunities is attracting foreign investors to diversify and venture
into the Arabian Gulf, especially Saudi Arabia.
Investment bankers (IB) in the GCC are
yet to reveal their potential and target
the real estate sector in a way that will
increase global responsiveness. Bankers
in the region must take initiative to draw
the attention of global investors towards
the emerging real estate sector and its
bright prospects.
The investment banking industry can lead
the regions economic growth by focusing

on the importance of transparency which

will increase the Arabian Gulf s presence
with competence and integrity. Moreover,
focusing on the regions entrepreneurial
drive, enhancing global relationship management, and engaging in reliable and
quality research, will strengthen the credibility of the GCC investment banking sector and create a strong foothold in the
largely untapped and sophisticated inves-

tors pool world-wide.

Enjoying a dominant position on a global
scale, the GCC, and more specifically, the
Kingdom of Saudi Arabia, has a great opportunity to become the prominent and
respected leader in social and economic
development. We believe that launching
an international Shariah-compliant GCC
real estate investment fund will not only
attract foreign investment but can also be

Mohamed El-Masri is Corporate Finance Advisor & Jitendra Garg is Senior Financial Analyst at The Investor for Securities.

IMAGE FROM REUTERS

By Mohamed El-Masri and Jitendra Garg

F OR B E S MID D L E E AST // TH E IN V ESTOR FOR SECU RITIES

used as a benchmark for other real estate

investment funds in the GCC.
The fund will focus initial investment activities in Saudi Arabia, due to the kingdoms
high potential and the fact that it constitutes the largest economy in the region.
If executed successfully, the fund will help
to increase investor confidence and build
trust between GCC investment banks
and sophisticated global investors. Furthermore, by using Saudi Arabia as the
entrance to this fund, we can build on the
idea of attracting foreign direct investment
(FDI) into a more promising and transparent ecosystem.
In addition, we, in the Arabian Gulf,
should be conducting more reliable research and analysis on the decision-making strategies adopted by global real estate investors when venturing into strong
emerging markets such as those of the
GCC. According to data extracted from
Property Funds Research, global real estate investors are determined to invest
in different parts of the region, particularly, in Saudi Arabia. However, the decision is adversely affected by various factors including but not limited to lack of
transparency, the inability to find a local
partner and the lack of knowledge and
research in GCC markets.

That said, we must be reminded that we

are the first generation to connect and
communicate instantaneously on a global scale. With the power of enhanced
technology, we now have the capabilities to reach and meet with people on
a scale unimaginable 20 years ago. Research by Shnke M. Bartram & Gunter Dufey shows that in recent years,
national economies in all parts of the
world have become more closely linked
through growing volume of cross-border
transactions, not only in terms of goods
and services, but with respect to investments of all kinds.
Due to the globalization of investments
and the necessity to diversify investment
portfolios, investors and fund managers
alike are trying to find alternatives to
their existing strategies by paying closer
consideration to emerging markets. This
presents an opportunity to GCC investment banks. Research by JLL showed
that GCC markets demonstrated a
tripling and quadrupling in investment
volume during last few years. Other
publications by McKinsey showed that
real estate markets in GCC region are
estimated to be the fastest growing in
the world.
With this in mind, it is important to ex-

plore the attractiveness of the GCC real

estate markets to global investors, as well
as the key cross-border barriers that influence investor decisions.
However, the limited availability of reliable property market indices is currently
a major constraint where the transparency of the GCC real estate markets is
concerned. The lack of transparency in
parts of the region is indeed a central
obstacle to attracting global investors and
funds into the region. Further research
may assist in the development of a better
understanding of the GCC local property
markets and encourage investors to start
including GCC (Shariah-compliant) investments in their portfolios.
In conclusion, further research must be
conducted regarding tactical approaches
towards attracting global investments in
the GCC region. We believe that there
has to be a Shariah-compliant international GCC real estate investment fund
that uses Saudi Arabia as the initial entrance for foreign investors. By diversifying their wealth into this Shariah-compliant GCC fund, which uses Saudi Arabias
REIFs as the entry point into the GCC,
global investors and GCC investment
bankers will benefit from the above-average growth in GCC real estate.

Here are four key drivers for

international investments
into the GCC region:
Higher Return: acquiring higher
returns as the most cited driver

IMAGE FROM SHUTTERSTOCK

Diversification: this can be

achieved through portfolio risk
reduction
Cross-Border Service: having
higher standard of cross-border
service through investment
managers operating in many regions
around the globe
Rising Transparency: the crossborder investors analysis of
new markets raises the level of
transparency as well as raising the
level of financial/market reporting.