A twofold investment opportunity

Building new homes and new lives abroad

While the current slump in the domestic real estate market is largely seen as temporary rather than structural, some astute real estate players are turning to international markets for revenues. Intermediaries have been advertising home buying opportunities in Cyprus or jumping into promotion of properties in Spain to well-heeled clientele. Now, developers with a bent for regional activities have a new iron in the fire that looks ever hotter as local demand is cooling; Erbil, the capital city of Iraqi Kurdistan and the latest boomtown of the Middle East. 

Geographic diversification has long been a natural path for Lebanese real estate players seeking to mitigate domestic risks or expand beyond the confines of a small territory. In 2013, this became extra relevant as business potentials in southern European property sales and Kurdish developments expanded while local demand kept contracting.  

Recent examples are Lebanese intermediaries Plus Properties, with a Cypriot venture, and Prime Consult, whose owner Massaad Fares told Executive that he has reactivated an operation in Spain where he has an experience base. 

Investment-grade properties in Spain turned up as an important new opportunity in October, after the Spanish Parliament in September adopted legislation that grants residency privileges to investors with a commitment of half a million euros, (around $675,000).  

Overseas nationals with clean personal records and the prerequisite wealth can look forward to the right of free movement in the Schengen Area and later to European citizenship for themselves and their immediate family members, if they spend more than half of each year at their Spanish residency during the multi-year process.   

Money to be made

Portugal, which has had a similar law in place for about a year, reported in November that it has issued 318 such investor visas, with estimates that the number might increase to 400 by the end of the year. Adopters consist mainly of wealthy Chinese and Russian families, who acquired 78 percent and 5 percent of the visas respectively.  

Prime Consult’s Fares suggested that interested foreigners should jump on the new real estate opportunity because the visa wagon might only be accessible for a short time. However, the number of European countries that offer similar options has been increasing in recent years, and there seems to be no great risk of a policy reversal as the investor visa is unlikely to impact the population balance in countries as large as Spain. 

While investor visas are unlikely to rescue the Spanish economy in 2014, providing brokerage services to willing investors can be a good business. As Fares put it, “there is money to be made in each market,” which he expects in the case of Spain’s new investor visa option will come, not from the Lebanese, but rather via Dubai from an Indian and other Asian client base.

Aimed at flush Lebanese property buyers, the Cypriot concept of Plus Brokers is a unit in Beirut-based Plus Group. According to Amanda Hajjar, the group’s marketing manager, Plus Brokers dashed into the action in May 2013, based on a spur-of-the-moment inspiration from group chairman Georges Chehwane. 

The rationale was again to exploit the opportunity where a cash-strapped European Union country offers non-Europeans a road to residency in exchange for a substantial property investment; in the case of Cyprus the financial threshold is lower than in Spain or Portugal. “For a property investment of 300,000 euros plus VAT you can get access to your permanent visa and you can apply starting two months after you settle a minimum amount of 200,000 euros,” Hajjar told Executive.

Cyprus was an easy choice for Plus Brokers, due to its geographic and cultural proximity, and also because many Lebanese have experience with relocating to the island during past domestic crises. “We went to Cyprus and chose trustworthy developers with no financial problems, and we figured it was a really good investment opportunity for Lebanese who are looking to get their permanent resident visa outside of the country, considering the circumstances here,” she said. 

Since launching its first promotions of Cypriot properties in the middle of 2013, Plus Properties has moved around 20 units, although not all in the residency-giving price range of above 300,000 euros. According to Hajjar, commissions on the deals are less than 5 percent per transaction and paid by the developer in Cyprus, not by the Lebanese client.

But before too long, the company found a domestic fly in the ointment as it was confronted with competitors who were making even bigger promises for supposedly much lower cost. In the case of residence options these competitors, clearly untrustworthy in Hajjar’s eyes, advertised that their clients could get permanent Cypriot residency visas along with the purchase of an 80,000 euro apartment. 

“This is a very false statement,” Hajjar said. “For 80,000 euros you can buy an apartment but you get only a renewable multiple-entry visa, not a residency visa.” 

Plus Brokers and other reputable intermediaries take active roles in any transaction they arrange in Cyprus, following the documents and providing on-the-ground assistance. As to the prospective market size of the Cypriot and other brokerage opportunities, Hajjar said that people are not yet accustomed to and comfortable with the idea but called the potential “not bad”, adding that “whenever anything bad happens, like a bomb, you get more clients.”

The seesaw effect of unfortunate events in Lebanon pushing up business outside constitutes an element of unease for Plus Brokers, but a bearable one. In the big picture of intermediation, after all, the Spanish and Cypriot ventures of Prime Consult and Plus Brokers appear to be focused on the short term. “It is not a strategic long-term move, because we expect that the crisis [in Lebanon] will be fixed within three to five years. It is a tactical approach,” Hajjar said.

Boom in erbil 

Benefitting from the boom of Erbil when compounded with the immediacy of the brokerage business, the current engagement of Lebanese developers in Iraqi Kurdistan will endure for at least the next five years. Given the sizes of the three largest Lebanese developments in Erbil, it could even last longer, as the economic and social growth of the Kurdistan region has many needs that Lebanon can meet. 

According to reports citing the Lebanese-Kurdish Friendship Association, close to 100 Lebanese companies are registered with the Kurdish authorities, and real estate companies contribute the largest share of an estimated Lebanese investment activity of over $3 billion in the region. The city of Erbil, the Arab tourism capital of 2014, is a sure bet to claim a significant share of regional business and investment in the near future. 

In October last year the global Dubai based developer Emaar Properties unveiled a $3 billion masterplan for a new 134-acre “Downtown Erbil” at the Project Iraq construction fair, which was organized in the Kurdish city by Beirut based company, International Fairs and Promotions. 

With some 15,000 planned residential units, three luxury hotels, a big shopping mall and significant office space, the mixed-use development aims to bring Dubai-type urban lifestyle to Erbil. Another extra-large project under the moniker “Empire World” is also under progress with local ownership involving Falcon Group, an Iraqi conglomerate. Projected at $2.3 billion, the 185-acre Empire World will entail 88 towers and 300 villas, one luxury hotel complex and value-added facilities ranging from a medical clinic to a mosque.

These mega-projects, with designs based on optimistic economic growth projections by the Kurdistan Regional Government (KRG), are each several times larger than the projects which Lebanese companies are developing in Erbil. However, the underlying ambitious thinking suggests a bright future for the Lebanese projects in the city, according to Makram Zard. Zard is chief executive of Beirut-based developer Zardman, itself working on a $200 million mixed-use project named Aura and located not far from Empire World. 

 “Even though there are very big projects happening now in Erbil, it still is not enough to meet the government’s demand forecast for 2020. This is good for our project since its timing coincides with the timing of the expected need,” Zard said, citing KRG-sponsored studies that Erbil will need 80,000 to 100,000 units by the end of the decade.

Zardman entered negotiations on the project two years ago and was waiting for its final building permit at the time of the interview with Executive. Having obtained the deed for the plot in February 2013, the company has done all the work, including part of the excavations, which it was able to execute without the final permits.

Some changes to the project were made necessary by a change in road planning and resultant redrawing of the project’s property line. However, by Zard’s assessment, the KRG is very supportive and professional and has streamlined the permit procedures in the two years since his company came to Erbil. 

The plans for Aura were also internally updated during this period, to adjust apartment sizes downward by about 20 percent to 160, 200, and 240 square meters (sqm) for three available unit types. The design for the commercial areas was changed from an underground shopping mall to a concept with an emphasis on open-air features. 

Construction costs for developments in Erbil have an economies-of-scale advantage over those in Lebanon, Zard said, due to the larger project sizes. End user prices of apartments are affordable when compared with cramped conditions between Beirut and the Metn region. Units in a new project in the low-to-middle quality range would be offered at $1,000 to $1,300 per sqm, reflecting price increases in the recent years. 

“Erbil today has mainly middle to low class units and we are putting Aura on the map as middle to high. We are thus a bit more expensive than the actual market, aiming to position ourselves at $1,300 to $1,700 [per sqm],” Zard said. 

“Prices are developing exactly as per our expectation but the market change is also a change in demand where higher quality is demanded.  Generally, the market used to be oriented toward villas and is now moving more toward apartments,” he said. 

Lebanese forays into the Erbil real estate market were pioneered by industralist Jacques Sarraf’s Malia Group, which demonstrated the Kurdish city’s strong potential with two projects. 

Newer projects currently under development with Lebanese involvement are the Lebanese Village by Hariri Construction and Contracting Compay (Harco), headed by Mohammed Hariri, and Mass City, a joint venture between Mass Group Holding (MGH) — an Iraqi industrial group — and Beirut-based developer Trillium Holding. 

According to Harco, the Lebanese Village is being constructed on a 55 acre plot and comprises three office buildings, a 17,000 sqm mall and a 200 room low-rise motel and chalets complex next to 55 residential towers and 140 villas. 

The Mass City project was announced in June 2013 by MGH and Trillium. Project images and models show it as a greenfield development on a sprawling expanse of land, and material on both companies’ websites says it will consist of around 1,750 villas and town houses and also include commercial, retail, hospitality, religious, social and recreational spaces.            

No information on the project’s targeted total value and the size of Trillium’s stake in the joint venture were provided on their corporate website.


Erbil is a center of economic potential in the recovery of Iraq but it is not for everyone. Several real estate players in Beirut told Executive that they had inquired about venturing into Kurdistan but decided against it because of factors ranging from business risk, to an immature marketing culture and not wanting    to develop projects in a city where they themselves would not be excited to live. 

On the other hand, the Lebanese involvement in Erbil developments, and the activity of real estate intermediaries in Cyprus, creates follow-on business opportunities for Beirut-based banks and companies. 

In providing brokerage services and consulting to Lebanese people who purchase units in Cyprus either as entry points to European residency or simply as second homes, Plus Brokers have been talking to Lebanese banks about extending their home finance to such properties, Hajjar said. Zardman is looking to base Lebanese retail and hospitality outlets in the Aura development. The company also has strong expectations that Lebanese banks with affiliates or subsidiaries in Iraq will play a positive role in advancing the ease of home finance, as the market for such loans from Iraqi banks is rather restrictive, Zard said. “We are seeing a lot of interest from Lebanese banks and we are hoping that two to three years onward we will have the financing options available that we have in Lebanon.”

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years.