"Buy land, they’re not making it anymore,” said the American author and humorist Mark Twain. Following Twain’s advice in a small country like Lebanon makes sense, as both the country’s geography and booming real estate sector have pushed quality plot prices to a premium.
That Lebanese can buy land in Lebanon is a fairly uncontentious issue; allowing or restricting foreign ownership in the country is, however, highly controversial. The issue has created a schism in the political arena between those who lobby for an open economy to attract investment, and those who want to fight speculation and preserve Lebanon’s identity.
The Maronite patriarchy, among the opponents of unfettered foreign ownership, recently issued a 175-page report entitled “Niyyel elli baad aandu marqad aanze bi Libnen,” which, roughly translated, means: “Anyone who has enough space in Lebanon for a goat to lay down should count themselves lucky.”
The report questions the accuracy of current land ownership data and proposes amendments to the current law. On the other hand, market experts Executive spoke to said that unless foreigners can pack their land in their luggage and head to the airport, there is nothing to worry about.
“A lot of people are making it sound a lot scarier than it is,” said Karim Makarem, director at Ramco real estate advisors. “I think it is very political and I think that what you will hear in general is a lot of scaremongers, depending on their political affiliations.”
The foreign ownership law was issued back in 1969 and last amended in 2001. It states that any individual without the nationality of an “internationally acknowledged country” is forbidden to own real estate in Lebanon, thus preventing Palestinian ownership.
Moreover, it says that no foreigner can own more than 3,000 square meters of land suitable for construction or of a built-up area — replacing the previous ceiling of 5,000 square meters — unless approved by a special decree signed by the Council of Ministers, Lebanon’s Cabinet.
Both Father Camille Zaidan, director general at the Maronite Center for Research and Development, and Mohamad Chamseddine, policy research analyst at research firm Information International, said that it was easy to obtain a special decree. However, due to political disagreements and rising awareness of the issue, the number of decrees granted has lately decreased.
“In the last five months, only two decrees have been issued,” said Zaidan.
Ramco’s Makarem added that “it is easy if you are somebody particularly important in the Arab world… It used to be more common pre-2005, but since then we have seen less.”
The law also stipulates that foreign ownership of land should not exceed 3 percent of the total area of each qadaa, or district. The current law also allows for 10 percent foreign ownership. The cap applies to land ownership by companies which are majority-owned by foreigners, in whose case only 50 percent of land owned by the firm is considered under the restriction. The General Directorate of Land Registry and Cadastre (GDLRC) is required by the law to update these numbers every six months and stop foreign land registration when the maximum is reached. As Executive went to print, the last time the figures were issued was July 2009.
The owner also has to develop the land within five years of the purchase, a deadline which can be extended once by the Council of Ministers. The Lebanese Company for the Development and Reconstruction of Beirut Central District (Solidere), a publicly traded company, is considered a special case and was allowed to freely purchase land for 25 years (starting 2001), but cannot sell to foreigners unless it is in accordance with the law.
The effectiveness of the law in controlling and monitoring foreign ownership of real estate in Lebanon is questionable. A major concern are large, unsurveyed swaths of Lebanon not recorded at the GDLRC. Paperwork for the sale of unsurveyed land is handled at the office of the local mokhtar (mayor or governor) and is not reported to the GDLRC. Consequently, there are no central recordings of sales to foreigners in these areas. Chamseddine explained that the largest unsurveyed areas are in the Bekaa Valley, Mount Lebanon and South Lebanon.
“Regardless of the restrictions and the laws we issue to limit foreign ownership, the numbers will not be specific since there are hundreds of areas which are yet to be surveyed,” said Zaidan.
The report issued by the Maronite research center includes numbers from the Ministry of Finance stating that in 2007, 51 percent of Lebanon had yet to be subject to a final survey. However, according to Chamseddine, around 30 percent of Lebanon is currently unsurveyed, as in recent years the government has hired private firms to conduct the surveys, which are expected to be finished within 4 years.
Also of concern, says Zaidan, are foreign-owned companies registered in Lebanon that own land and foreign-funded Lebanese who purchase real estate. In either case, effective control of the land is not in Lebanese hands. Quantifying these numbers is difficult however, as on paper at least, it is all Lebanese owned.
“A Lebanese came to negotiate with a close friend of mine in order to help him buy 600,000 square meters of land in Baabda for a foreigner,” said Zaidan as an example.
“There is a certain number [of people purchasing property in this way], but how much… no one knows,” said Georges Chehwane, chairman of Plus Properties.
Officially, when foreign land ownership in a qadaa hits its limit, foreigners will only be able to buy from each other. However, the concern is that the official numbers vastly understate the foreign ownership, given the unrecorded sales.
“After the research that we have done, I am convinced that in Baabda they’ve already trespassed the three percent, and Beirut is definitely more than 6.51 percent,” said Zaidan.
Does it really matter?
Opinions diverge on whether to implement stricter restrictions on foreign ownership, or allow the free market to exercise its power over the sector.
Zaidan says he is worried that high foreign demand is fueling speculation and inflation. He adds that middle class Lebanese can no longer afford property in Beirut and are being pushed out of the city, as wages are not rising in accordance with inflation. According to Ramco real estate advisor’s research department, residential property prices in Beirut have increased some 120 percent on the lower end and, on average, 150 percent for high-end property in the last five years.
“The main question is: Where are we heading?” Zaidan said. “We are entering into a social crisis that has no solution.”
He suggested that the foreign ownership issue should be monitored through better documentation, with more legal restrictions on the purchase of real estate by non-Lebanese.
On the other hand, advocates of a free market say that the foreign purchasing in Lebanon is still a very small percentage of the total, and is thus too insignificant to have an impact on the real estate sector.
Elie Harb, president of Coldwell Banker, said that the laws restricting foreign ownership should be repealed; arguing that it only represents some 2 percent of the real estate market. Both Harb and Makarem also said that many foreigners are currently selling their land or apartments, and sales to foreigners have gone down, mainly due to the financial crisis.
“The day we put up rules to ban foreign ownership we are going to scare many investors,” said Makarem. “So I think those consequences outweigh the consequences of allowing foreign ownership.”
George Sioufi, chief operating officer of GRE properties, said that he also encourages foreign ownership of properties. He is concerned that it might hurt the market if international owners start selling their properties.
“It is true that a year and a half has passed since the financial crisis started, but what if they are leaving Lebanon as their last resort?” he said.
As it stands, with some 30 percent of Lebanon not surveyed, a foreign ownership law that is easily skirted, in addition to politicization, has made it nearly impossible to ascertain exactly how much of the country is owned by foreigners.
In the future, it remains to be seen whether the Lebanese authorities will answer the conservative call to implement stricter control, or if they will adopt a more liberal approach which, some experts say, is healthier for the future of the real estate market and the economy as a whole.