LONDON (Reuters) – Sharia-compliant investors are taking a renewed interest in commercial and residential real estate across the gulf region, trying to time any investments to catch a rebound in prices, Standard & Poor’s said on Wednesday.
“Despite the big hit that the real estate market has taken in the Middle East, there is interest coming back in to this space,” Alka Banerjee, vice president of global equity at S&P, told the Reuters Islamic Banking and Finance Summit.
“It’s still very tentative, but it (interest in investing in real estate) is definitely there,” Banerjee said. “We’re seeing all the signals.”
She said she has received several enquiries to create real estate sector indices that included companies in the Arabic-speaking and Gulf Cooperation Council (GCC) regions.
Commercial property prices plunged across the Gulf region as the global financial crisis took hold, with Dubai experiencing the worst of the falls as finance dried up, developers halted projects and investors stopped buying.
“The (Middle East Real Estate) market is at rock bottom, you should get in now and maybe you will have to be there for another 12 months before you see the returns, but this is the time to get in,” Banerjee said.
“This is being pitched as a long-term play, because you are really buying at the bottom (of the market).”
Banerjee also said she expected the S&P’s Islamic indices business to grow by 15-20 percent in 2010, although increased interest in real estate would not drive that. Even so, the business would still account for less than 5 percent of total, she added.
“The growth rate is based on the demand for our indices across the board,” Banerjee said, adding that the key risk to the predicted growth was a further economic meltdown in the region.
Investors were increasingly interested in so-called frontier countries — such as Kazakhstan, Bangladesh, and Cote d’Ivoire, — offering sharia-compliant products, she said.
“There’s an interest that these countries, being Islamic, would have more sharia-compliant companies available.”