When in September last year Erbil was hit by a series of terrorist attacks, fears over political instability in the Kurdish capital, among Iraq’s safest regions, might have scared foreign investors away from the city’s booming real estate market. Fortunately this did not happen, and Lebanese investors, accustomed to a little instability in the Middle East, continue to look at the city as a prime location to consider in their investment diversification strategies.
“Unlike many areas of Iraq, the Kurdistan region in the north is safe in terms of investments, business and personal security,” says Jacques Jean Sarraf, chief executive officer and chairman of Lebanon’s Malia Group, which is leading a $52 million real estate development project in Erbil’s city center.
The Arjaan by Rotana is a mixed-use development due for delivery by the beginning of 2016 and will be the second property to be managed by the group in the Kurdish capital through a partnership between Malia and Italian investor DIVA.
Both the Erbil Rotana Hotel, inaugurated in 2011, and the Arjaan project are managed by Middle East hotel group Rotana. Although both Rotana and Malia have businesses in the entire MENA region, the collaboration between them will remain focused on Kurdistan.
“Our partnership currently focuses on luxury hotel projects in Erbil,” explains Sarraf, who also told Executive that Iraqi Kurdistan’s laws play an important role in attracting investors to its capital city. “Erbil has become a business hub in the region thanks to its versatile investment law,” he said, referring to a 2006 law aimed at promoting foreign investment in the region.
Kurdistan’s investment law established equal treatment for local and foreign investors, who are entitled to own the full capital of their projects in the area. Foreign real estate investors can buy and own land just as their domestic counterparts, and they can even obtain it for free or at a reduced price from the government. In addition, foreign investors who start producing goods or providing services in the region are exempted from customs taxes for ten years. These advantages, as Malia’s chairman points out, are likely to continue to attract foreign investors to Kurdish Iraq as they diversify their ownership in the Middle East. “Our roadmap in the coming years is one of strategic growth and diversification where investment in Kurdistan and other countries in the region will feature prominently,” Sarraf says.
Unlike the group’s first property in Erbil, the Arjaan project will be both residential and commercial. According to Sarraf, this will be an advantage for the group, as mixed-use assets can adapt more easily to changes in market demand. “Mixed-use projects tend to be profitable for both investors and end users,” Sarraf says. “From an investor’s perspective, the primary benefit of mixed-use projects is that they capture all three segments of real estate: residential, office and retail. On the other hand, there is always the possibility of a partial restructuring of the project based on demand.”
According to the CEO, the Arjaan by Rotana will benefit from a symbiotic link between Erbil’s residential and office real estate markets. “The demand for residential and commercial spaces feed each other,” he says. “On top of that, the Erbil Arjaan by Rotana is the first branded furnished apartment project in Kurdistan, which further decreases the risk exposure.”
Arjaan is 60 percent owned by Malia Investment Holding and 10 percent controlled by its Italian partner DIVA through the subsidiary company Towerline Touristic. The remaining 30 percent of the project’s capital belongs to the offshore company Roza.
Office spaces in the complex will be available for rent, but not for sale, according to Sarraf.