Squeezed between Israel and Palestine, Iraq and Syria, life is never easy for Jordan, but despite a slowdown in the economy, the real estate sector in Jordan can report a good year. Indeed, the property market is booming, not only in Amman, but also in the capital’s outer suburbs and the port city of Aqaba – previously largely ignored locations which are transforming into vibrant investment hubs.

The Hashemite Kingdom remains one of the most popular Middle East investment destinations, benefiting from positive perceptions of political stability under King Abdullah II, a pro-Western attitude, and an environment that is favourable to investors.

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Last November, King Abdullah appointed a reform-minded government to accelerate the process of modernisation and put prime minister Nader Dahabi in charge.

Mr Dahabi’s achievements to date include transforming the special economic zone (SEZ) in the Red Sea resort town of Aqaba into a hub for multi-billion dollar investments.

His challenges include rebooting the economy, which had been growing rapidly but is now slowing down. The economy is expected to expand by an average of 5.2% in 2008-09, a slowdown from the estimated growth rates of 5.7% in 2007 and 6.3% in 2006.

Critics say that economic policies so far have only sharpened the divide between rich and poor. The king has outlined the creation of a “social safety net” to protect the poor. Mid- to low-income housing, particularly apartments, remains heavily in demand.

Recent years have seen property prices in Jordan rise between 50% and 300%, depending on sector and location, according to one regional analyst, due to several factors. Refugees look to Jordan as a safe haven, and make up a large number of its 6 million residents. During the July 2006 war and May 2008 troubles in Lebanon, many Lebanese fled to the capital Amman. Jordan is also said to be housing 750,000 Iraqi refugees, and most inhabitants are of Palestinian origin.

Export enthusiasm

Gulf investors have shown tremendous enthusiasm for exporting the success of their business and tourism models, driven by the need to invest oil surpluses and diversify income. The new breed of Gulf-based property developers, many of whom are working aggressively to build global reputations, are taking on the contracts of some of Jordan’s biggest projects. Jordanians living abroad, many of whom have made their money in the Gulf, are also returning home to invest in both residential properties and commercial ventures.

The downside is that inflation is high. It averaged 6.3% in 2006, the highest level in a decade, and is expected to rise to an average of 7% in 2008 as the dollar remains weak, food prices continue to rise and the government moves to eliminate energy subsidies, before easing in 2009.

Regeneration nation

One of the most interesting real estate developments in Amman is the $3bn Abdali Urban Regeneration Project, which is redeveloping the central district. It is being developed on 4.1 million square feet of land and will comprise a built-up area of more than 18.2 million square feet, consisting of residential apartments, office space, commercial and retail outlets as well as entertainment venues. Phase one is due for completion in 2010.

Jamal Itani, chief executive of Abdali Investment and Development Company, says: “Downtown Abdali has more than 55% of planned projects under construction in the 2.7 million square-foot first phase, of which 60% is designated for buildings and 40% for public services, road networks and public gardens.”

Another important project in Zarqa, better known in the past as a rundown industrial town with a pro-Islamist population just outside Amman, is Madinat Al Sharq (City of the Orient). Much of the funding, which will build mid- to low-income housing, was donated by Saudi Arabia’s King Abdullah Bin Abdelaziz Al Saud. It is being led by the state-owned National Resources Investment and Development Corporation (Mawared), and is scheduled for completion in 2012.

The project will house more than 400,000 people in 70,000 residential units, as well as build a commercial district and prominent mosque.

South of the Queen Alia International Airport, Taameer Jordan, a local public real estate development company, is developing the $1bn Al Jiza residential city, also known as the Ahl Al Azim (The Great Family) project. Construction of the first phase has begun and includes 48 buildings consisting of 786 apartments out of 16,000 apartments and villas planned.

While mixed-use residential and commercial projects are abundant in and outside Amman, critics from the business community say Jordan lacks projects that cater exclusively for office space. Total office space in Amman was 1.5 million square feet at the end of 2006, which fell short of demand. But, according to Colliers International, supply is expected to increase to 3.5 million square feet by 2010.

Boom times

Aqaba is Jordan’s success story. Facing the marine life-rich Red Sea, it is developing itself into a tourism and commercial hub. Major projects under way include the port’s redevelopment, a financial harbour and numerous mixed-use property developments.

There is much to attract the investor. Aqaba makes up one-third of Jordan’s tourism triangle, which also includes Wadi Rum and the ancient city of Petra. It is also Jordan’s only sea access located strategically between north Africa and west Asia. Although its critics say that it has yet to provide all necessary amenities suitable for living, such as private schools or universities, it is undoubtedly booming. Seafront property prices have risen dramatically in the past few years to JD9m ($12.7m) for 1076 square feet on average, from JD2m to JD23m.

The area has attracted so much investment that the part of Aqaba that is designated as a free zone is being expanded. Imad Fakhoury, chief executive of state-owned Aqaba Development Corporation (ADC), says: “We are expanding the SEZ to the Jordan Valley, which reaches the southern part of the Dead Sea. The boundary as it stands now means half the zone is being used, but after expansion there will be more than 4000 square feet of available land.”

The SEZ is a liberalised, low-tax, and duty-free area for companies to set up in, and is run by the Aqaba Special Economic Zone Authority (ASEZA). ADC was set up four years ago to accelerate its development by maximising public-private sector partnerships. Since its inception it has attracted $11bn-worth of investments, and is targeting $20bn by 2020.

Investment has come mainly from the Gulf, representing half of total investment, but Jordanian and non-Arab investors are also present. Aqaba has traditionally been the location of second holiday homes for wealthy Jordanians. Mr Fakhoury says: “I attribute this success to our model of long-term planning for land use, as well as ADC’s mandate to make quick decisions and ASEZA’s function as a one-stop shop for investors.”

Seafront properties

It was revealed last year that Aqaba’s port would be moving from the north to the south, and in doing so would make available space that is now better suited to waterfront property development. Al Maabar International Investments Company, a joint venture of Abu Dhabi’s largest real estate developers Sorouh Real Estate, Al Dar Properties, Al Qudra Real Estate and Reem Investments, has won the contract for redeveloping this area and is preparing a master plan for the JD3.5bn real estate project on a total area of 34.4 million square feet. This will create residential as well as commercial districts, including the financial harbour.

Tala Bay and Ayla Oasis are mixed-use projects being developed by Saudi and Bahraini investors. Ayla will create new seafront space from an 820-foot strip on the Gulf of Aqaba. It is expected to provide about 3000 residential units based on the ‘Arabian Venice’ theme, as well as 1700 rooms in four- to five-star hotels to be constructed over nine years. The cost is estimated at JD1bn with a space of 46.2 million square feet.

Saraya Aqaba is being developed by Saraya Holdings Company, which is owned by Sheikh Saad Hariri, son of the late Lebanese prime minister Rafiq Hariri. It will comprise an area of 6.6 million square feet and cost more than JD700m. Earth works for the project began in 2006 with a target completion date of late 2009. It will include six five-star hotels, a water park and residential developments.

Yemeniya Heights is a two-phased project being developed over 129.1 million square feet of land in an environmentally sensitive area close to the coral reefs of Aqaba. Phase one will develop three residential compounds, and phase two will include an education village, media city and more residences. Total spending commitments exceed JD200m.

Looking ahead

 

Real estate development on the grand scale seen in recent years is relatively new for the region. So while developers have proven they can deliver on time, and governments are creating the right environment to attract investment, there are several hurdles yet to be overcome.

Mr Fakhoury says: “Regulators and developers are on a learning curve.” Many countries in the region have yet to develop a real estate regulatory authority, including Jordan. Dubai, which has led the region’s real estate bonanza, has only recently created one.

There is also the need to ensure Jordan has the necessary infrastructure to support development. Many complain that Amman has become too congested. “Adopting sustainable development models is also important. We want to build for quality in a short space of time, but not at the expense of the environment,” adds Mr Fakhoury.

The ADC has a zero-discharge policy into the sea and plans to maintain this with the development of the new port. With scarce water resources in the region, due to become even more stressed as the climate gets warmer, the ADC takes waste water management seriously and reuses all its water for landscaping or industrial use. Then there is lack of capable human resources, which is a regional issue. But providing Jordan can overcome these hurdles as well as its economic challenges, the future looks bright.