The halal sector, which covers food, pharmaceuticals, cosmetics, finance and tourism, is on the cusp of exponential growth in the Middle East and worldwide. Valued at $1.5 trillion globally, the sector has been growing by 10 to 20 percent per year, even during the financial crisis, according to Ramez Shehadi, senior partner at consultancy firm Booz & Company.

Other estimates put the sector at more than $2.1 trillion, and it is set to rise even further as companies start cottoning on to the potential of a sector that directly appeals to some 1.5 billion Muslims.

But what has been holding back the success of the halal sector is the labeling and certification of products as halal. With no global certification body, there is minimal standardization and coordination between national certifying bodies, such as in Australia, Malaysia, the US, Britain and Brazil.

It is the same story in the Middle East, with separate bodies in every country, and the problem further compounded by the GCC importing an estimated 80 percent of halal food from Brazil, Argentina and Australia. The halal food market in the GCC was estimated at $9 billion in 2007, according to Canada’s Agriculture and Agri-Food Trade Service.

Getting everyone on the same page

“Halal is one of the last industries to have a common standard that producers and governments can abide by, and also a logo that consumers can look to,” said Jamaatun Azmi, managing director of Kashedia in Malaysia, and the creator and founder of the World Halal Forum.

With globalization resulting in products composed of ingredients from numerous sources, the need for certification is even more pressing. As a result, the non-profit International Halal Integrity Alliance was established last year to create a global halal standard, later endorsed by the Organization of the Islamic Conference.

“The whole idea of standards is that they are voluntary but of benefit to manufacturers,” said Azmi. “You can compare this to the growth of the organic food sector, which has become quite established, although it took decades to achieve.”

In early May, the Fourth World Halal Forum will be held in Kuala Lumpur to hammer out a global certification. But it will not be easy given the technical and scientific issues involved, such as whether mechanical fodder is considered halal or not.

“We have to have something 100 percent halal that no one can debate. If we had waited for Muslims to come to an agreement we wouldn’t be where we are now,” said Saleh Abdullah Lootah, CEO of UAE-based Al Islami, the largest producer of halal food products in the Middle East through franchises Al Islami Foods, Al Islami Cart, Al Islami Meat Shop, and fastfood chain Al Farooj Fresh.

“We went back to the book, to the Quran, and adapted to that,” he said. “There is a gray area, such as machine slaughtering of animals, but for us that is not acceptable.”

To halal or not halal

Lootah draws a line between what some say is halal and ‘real halal,’ which is meat that is hand slaughtered without stunning, as according to Islamic sharia law.

He added that while multinational companies and others may want to get into the halal sector, they should go all the way, as having some operations that are halal and others that are not can result in confusion for consumers.

“The new generation of Muslim consumers are very sophisticated and more demanding, like it used to be with our grandfathers,” said Lootah. “With halal it is about trust and integrity; this doesn’t take days but years — it’s not easy for companies to portray the message we have.”

Indeed, part of the need for certification on products — which could be as simple as a logo of H for halal — is that there have been a number of causes of fraudulent claims by companies marketing their products as halal.

“We have examples of pork having halal certification, and it’s pork!” said Azmi. “We also found halal certification on knives, so there is clearly no education among manufacturers of what is actually halal.”

Just last month the Indonesian Agency of Drug and Food Control reported that five of out of every 35 meat flosses sold in the country contained shredded dried pork.

But it is not just in food, whether meat, processed food or in the restaurant sector, that halal certification has potential. Cosmetics and pharmaceuticals are multi-billion dollar industries that manufacturers can tap into as Muslim consumers start to demand halal sourced products. For cosmetics this could be big money, with the sector in the Middle East valued at $2.1 billion a year, according to trade experts Epoc Messe Frankfurt.

Sparking such potential growth is the fact that certain cosmetics have ingredients derived from pig fat and alcohol, while in pharmaceuticals, gelatin capsules also come from swine.

“It opens a Pandora’s box and a wealth of opportunity for generating demand by simple awareness in the Muslim world that this is really the case,” said Shehadi.

Interestingly, while halal certifying bodies and governments in majority Muslim countries are aware of the non-halal ingredients of products, a halal gelatin has not yet been developed, which poses a quandary: inform the public or keep the matter quiet as people’s health could be jeopardized if they stop taking certain drugs.

“Some governments are looking at this carefully to try and not to create panic or chaos,” Azmi said. “If we know the extent of non-halal medicine it is not going to be good.”

But while Malaysia is taking the lead in certifying halal, Shehadi said the Middle East must get its act together.

“It is counter-intuitive that the home of Islam is not leading in halal,” he said. “The region should be a beacon, developing halal standards and products suitable for the world. And by investing in halal it can generate online content, entrepreneurism, small and medium-sized enterprises, tourism, education and healthcare, which will have a snowball effect for development.”

At Cityscape Abu Dhabi this year, everything was different. The long queues at the registration desk were gone, so too were investors rushing with drawn checkbooks to buy newly-launched properties. The first day of the exhibition was alarmingly quiet and calm.

“It is different now compared to last year and the year before,” Omair Al Dhaheri, chairman of Midein Holding, told Executive on the showcase’s first day.

Ian Albert, regional director of Colliers International, said previous Cityscapes were so packed with people it made walking difficult. Despite this year’s toned down exhibition, he felt a “general mood of optimism.”

“Whether that will translate in the next couple of days we can wait and see,” Albert said.

This year’s traffic has been reduced due to the global financial crisis. Investors and end-users are less keen on spending their money on properties, and the mood was more or less expected.

“I think the general atmosphere is more positive than what we thought it would be,” said Gurjit Singh, chief property development officer at Sorouh Real Estate P.J.S.C.

Who is visiting?

Less traffic is not always a bad thing, since the speculators and flippers who were driving the market are now mostly out of the picture. Even though sales at the exhibition were not significant, developers were satisfied by seeing more serious investors and end-users approaching them and showing interest.

“I would rather have five serious investors than 100 speculators,” said Hazem Al Nowais, COO of Waha Land, the wholly-owned real estate arm of Waha Capital P.J.S.C. Other developers agreed.

“When you talk about a speculator’s market, it is like going to Las Vegas, it is like gambling. A lot of people gain and a lot of people lose” said Aaraf Herjes, CEO of Diyar Al Moharraq Company W.L.L. in Bahrain.

As the quality of buyers has changed, so has their approach. In good days, units were quickly sold. Buyers had to rush in order to buy just about any property. Now, they are more cautious.

Buyers are looking for the best opportunity, knowing that better deals can be obtained in the current market conditions.

Sorouh Real Estate’s Singh thinks that “people that you see at Cityscape now are those who are asking a lot of questions. They really want to know what exactly they will be buying and what kind of different packages are available for them. They are not making the decisions straight away. They are rethinking, and perhaps comparing this with other developers and then making an informed decision.”

“Location, pricing, and proper need” is what buyers are looking for, according to Ahmad Armouch, chairman of the Jordanian real estate, investment and development company Madaen Al Nour.

“It is not like someone is coming and buying 10 villas or 20 flats anymore” he said.

Basel Saeed, general manager of the Land Real Estate and Investment Company in Jordan, thinks that hunters of good deals and bargains come when the market is bottoming out, which might be the case in the market right now.

“It is a sign that would tell you that we are very close to the bottoming process [because] these people usually buy at the bottom. That is why we are seeing it as a good sign,” said Saeed. “[Reaching] the bottom is not a one day event; it would take a few months. But at least we are seeing the process right now at Cityscape,” he added.

Why participate?

Although most UAE-based developers like RAK properties, Aldar, Sorouh, Al Qudra Holding and others are not launching any new projects for sale, they all consider their presence at Cityscape essential and very important. The showcase, for them and others, is a chance to prove the market is still solid.

“We are here to show our commitment and to show the progress in our projects,” said Rashed Sultan Al Khatri, director of marketing at RAK properties.

A similar statement came from other exhibitors.

“We are not launching any new projects,” remarked Singh. “Our emphasis here has been the customer. We are ready to [offer] personal servicing [to] our existing customers and our new customers.”

Herjes noted that “we believe that Cityscape is one of the most important and biggest exhibitions for any real estate company… Our participation here is just to create awareness [and] to show that we exist.” Diyar al Muharraq is showcasing at Cityscape the “Diyar Al Muharraq” city, a fully-planned city for people in Bahrain that includes a mix of residential and commercial properties.

Real estate professionals weren’t the only ones who thought the conference important to attend. Brokers, consultants, and engineers were also there. Andera Lazzari, general manager of Ai Engineering’s branch in Abu Dhabi, was one.

“We are at Cityscape because, despite of the crisis, we are convinced that advertising during this period is important,” he said. “It is [also] important to show the clients [developers] that even in this crisis we are here and they can count on us.”

For other developers, Cityscape was an opportunity to showcase their planned projects.

“We are launching but we are not selling,” said Waha Land’s Al Nowais. Waha Land is launching a one billion dollar project in Abu Dhabi called Al Marquaz. The project includes warehouses, light and small industry complexes and accommodation for 32,000 people.

“We are here to gather as much information on the market [as possible]. We are here to meet strategic partners, to make some alliances. We are really here to let the property market know that there is company called Waha Land and there is a project called Al Marquaz,” said Al Nowais.

Foreign markets

Although sales were slow, there seemed to be significant interest in developments outside the UAE, where economies are faring better.  The Lebanese company Dolmen launched three new projects at Cityscape.

“We have sold 50 percent of our ‘Janat Falougha’ development,” said Walid Diab, the manager of Dolmen in Lebanon. ‘Janat Falougha’ in Mount Lebanon consists of luxury villas sold for $2,500 per square meter. Interest was also significant for the other two projects — ‘Falougha Homes’ and ‘Ain Shalta’ — both in Mount Lebanon.

In Southeast Asia, the Malaysian company Iskandar Investment Berhad launched ‘One Madini’ at Cityscape, which is the first residential development of Al Madini in Malaysia — launched at Cityscape Dubai in 2008. “On the first day, we have already seen 15 sign-ups and registrations for our One Madini project, which was more than anticipated,” said Arlida Ardiff, managing director of the company.

New approaches

Most developers are not launching new projects, but they are trying to offer customers new and better services in order to increase interest in the property market.

The Abu Dhabi-based real estate company Tamouh has changed its sales strategy. In the last few years, the company would sell a whole building to investors who would then sell it to end-buyers. Now, Tamouh will handle sales directly to customers through a new subsidiary, called “Three Sixty.”

“End-buyers want to be assured that they are buying from the developer himself,” said Dr. Daniele Seraphim, CEO of Tamouh and general manager of Three Sixty.

“Payments will be linked to the progress of the project’s construction. Buyers will not have to pay anything unless a certain percentage of the construction is done,” she said. “So there is a direct link between the payment and the actual construction on site, which is excellent.”

Tight liquidity

The major problem facing the real estate market is the lack of financing. Home buyers and investors are obliged to beg banks to help secure financing to purchase new properties.

Experts agree that for the market to pick up, lending has to come back. Consequently, developers have been very active in trying to secure financing for their customers, mainly by signing agreements with different banks and financial institutions.

“We have almost 20 [financial institutions] working with us,” said Gurjit Singh from Sorouh. “We have a special financing unit that would go out there and match financing packages with our existing customers.”

“Currently we have been approached by a number of banks and financial institutions and we are negotiating with them,” said Seraphim from Tamouh. “We have not finalized any deals with anyone because we want first to check what was the outcome of Cityscape and what end-users really want.”

To function, the market needs loans, and this has made mortgage providers more important. Indeed, the newly launched mortgage lender Abu Dhabi Finance was present at Cityscape in an attempt to fulfill its role in revitalizing the mortgage market.

“We let you take your loan up to the age of 70; we let you borrow up to 85 percent of the property value. We are one of the few who would go that far,” said Philip Ward, CEO of Abu Dhabi Finance at Cityscape. The company was formed in 2008 by a consortium of banks, development and real estate companies. Abu Dhabi Finance operates exclusively in Abu Dhabi and aims to support home-buyers and investors with its new lending policies and customer service.

“We want to support as many home-buyers and long-term investors in Abu Dhabi as we are able to,” said Ward.

Five-day stretch

In what many saw as an attempt to stimulate Abu Dhabi’s slowing real estate market, Cityscape was extended to an unprecedented fifth day. Exhibitors had one more day to unveil their new schemes and try to revitalize the market which is suffering tremendously as a result of the global turmoil.

“The world has changed a lot, the region has changed a lot, and Abu Dhabi was affected by it,” said David Dudley Mrics, head of the Abu Dhabi branch at Jones Lang Lasalle. “I think developers will be slowing down on selling units but [Cityscape] is still a good opportunity for [them] to speak to their customers and to show their future projects.”