DUBAI: Gulf Arab developers continue to position themselves in North Africa to tap growing demand for real estate, but companies will be more cautious in expanding there after the global economic crisis. I definitely see expansion continuing ... but it will be rationalized and focused as opposed to let s go out there as fast as we can , Jalil Mekouar, head of Middle East and Africa at Jones Lang LaSalle Hotels, told Reuters at the Cityscape property exhibition in Dubai this week. Developers such as Qatar s Barwa Real Estate, which in August announced a $9 billion Cairo project, are targeting the region to help offset troubles closer to home, and to tap a region that lacks an appropriate infrastructure to serve a large, rapidly growing population. Gulf real estate has suffered from the economic downturn, with Dubai hit hard, as projects are scrapped or slowed. Property prices, which have fallen some 50 percent from their peaks last year, are forecast to shed a further 10 percent in 2009 and have a 20 percent chance of picking up before 2011, a Reuters poll showed. In contrast, house prices in Egypt, have declined by up to 15 percent and are set to stabilize at current levels for the rest of the year, according to EFG-Hermes in Cairo. It s not only the collapse of Dubai s once-booming property sector that will encourage developers to look at Egypt, but also the opportunity to tap an underserved market. In Egypt you have three of four big developers and a 80-million population. In the UAE, more than a dozen large companies are addressing a population that is barely 5 million, said Saud Masud, UBS real estate head of research. Encouraging investment Egypt has introduced a raft of economic reforms over the last few years, such as slashing taxes and seeking to streamline its customs to boost investment, while Morocco, another key target for Gulf firms, is also taking steps to help investors. In Morocco, there is still a lack of transparency in many areas such as legal, financing and administrative, said Karim Beqqali, managing director at CB Richard Ellis for Morocco. Local authorities are aware of these problems ... and there have been concrete actions put in place, he said at the show. But while North Africa offers plenty of opportunities for Gulf firms, the effect of the crisis at home may limit progress abroad, and some major North African real estate projects have been delayed or quietly abandoned as the crisis took hold. Emaar Properties, the builder of the world s largest tower in Dubai, this year closed its office in Algeria due to a lack of progress on projects there. North Africa is a great opportunity for Gulf investors, but if they are struggling in their local markets, they will have limited cash flow flexibility to expand internationally, said UBS Masud.
