Jordan is going through one of its periodic boom periods, which are always reflected by an upsurge in construction around Amman. This property boom could be the biggest ever as local and Gulf-based entrepreneurs see in Amman the potential holy grail of Middle East property investment – the prospect of the Jordanian capital becoming ‘the new Beirut’.

Observers of the Hashemite kingdom have seen too many false dawns to call the market this early on but there are promising indicators. With Iraq still so unstable, swathes of business involving Jordan’s big neighbour are being done from bases in Amman. Domestic political risk perceptions have improved since reformist prime minister Adnan Badran won his much-anticipated parliamentary vote of confidence this summer. But most important for the real estate market, Jordan is a beneficiary of Arab investors’ drive to place their money in familiar emerging markets, rather than the Western investment centres they favoured almost exclusively before the 9/11 attacks on the US.

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Investment rises

Senior officials of the Jordan Investment Board (JIB) report receiving a record number of investment applications in 2004/05. Many of the biggest applications are for real estate projects involving Gulf investors.

This trend is reflected in general investment data: according to the JIB, direct investment rose by 125% (year-on-year) in the first half of 2005, to Jd456m ($644m), with Jd215m of it coming from non-Jordanian sources. JIB chief executive Ma’an Nsour says that such was the upturn that investments in the first half of 2005 were 9% higher than the Jd418m recorded for the whole of 2004. But much more is still in the pipeline, led by more than $1bn of committed Gulf real estate investment.

The authorities have made big efforts to show flexibility to make projects work, one official told fDi. In the case of a scheme launched by Kuwait-based investors, the official says: “We changed the rules regarding the need for a minimum 50% Jordanian partner to accommodate them, but it was worth lifting the threshold to get such big investments.”

Ambitious projects

On July 24, partners Bahrain-based Islamic investment bank Gulf Finance House (GFH) and Kuwait Stock Exchange-listed Kuwait Finance and Investment Company announced the early closure of their Kd80m ($274m) private placement to fund their Kuwait-based vehicle, Bayan Holding Company’s Jordan Gate and Royal Village projects. These schemes, which are to be promoted by two Jordan-registered Bayan subsidiaries, form part of the hugely ambitious Royal Metropolis project, which will bring unprecedented Gulf investment to the Jordanian property market.

Phase one, the Jordan Gate, sited in Amman’s upmarket Sixth Circle neighbourhood, will include two high-rise towers – the new Hilton Amman hotel and an office tower – connected by a shopping mall and services area. The sponsors are bringing the sort of development now common in the Gulf to a historically turbulent corner of the Middle East.

Phase two, the Royal Village, will include “an exclusive boutique shopping mall”, situated adjacent to a gated residential community with about 400 villas and 600 apartments, at Marj Al-Hammam on the main road to the Dead Sea.

According to GFH’s chief executive Esam Janahi, who is a key player in projects such as Bahrain Financial Harbour, the over-subscription “endorses our confidence in the potential of Jordan’s economy and its prospects for investors… [and] reflects the rising appetite of regional investors for products of this nature linked to infrastructure and real estate development”.

Also in July, Saraya Aqaba Real Estate Development announced that its private placement – led by one of Amman’s more go-ahead institutions, Atlas Investment Group – had raised Jd85m, allowing it to increase its paid-up capital to Jd257m. Saraya Aqaba is led by Sheikh Saad Al-Hariri, son of the assassinated former Lebanese premier Rafiq Hariri. The company’s deputy chairman, Ali Kolaghassi, reported that subscriptions to help finance an estimated $600m project on the northern shores of the Gulf of Aqaba came from the UK, British Virgin Islands, Bermuda and the US, as well as from Iraq, Lebanon, Libya, Palestine, Saudi Arabia and the UAE.

Local entrepreneurs are active in schemes such as Muawia Zabian’s estimated $700m Beitna City development, which also offers new shopping malls and upmarket residential facilities in the capital.

Cheaper homes

Not all of the new investment companies are catering for the luxury end of the market. In late July, United Arab Investors Company general manager Younis Qawasmi announced the launch, with Jd60m capital, of a real estate company that will focus on building residential properties for limited income families. Cheaper accommodation is needed. Despite the massive build planned for Amman, prices continue to rise sharply, with land price increases averaging 50%-70% and Amman apartments rising by an estimated 50%-70% in the past year. A buy-to-let market is emerging, with local agents quoting returns in the 9%-15% range.

Jordan’s property boom seems likely to remain the domain of local and Gulf investors but that does not mean the market is not dynamic. Jordan is one to watch for the bolder investor.