Mohammed Khalil Alsayed, CEO, Ithmaar Development Company: Interview

Interview: Mohammed Khalil Alsayed

How will the new Real Estate Regulatory Authority (RERA) affect the supply side of the market?

MOHAMMED KHALIL ALSAYED: Changes to the regulatory framework of any economic subsector are always works in progress. Businesses need to learn to adapt and compete in dynamic environments, which allows the best players to stay in business. At the same time, it is also true that the introduction of new rules by the RERA may have had an adverse impact on the sector, especially given that we are facing changes in other aspects of our business operations. We are concerned with the additional layer of bureaucracy and the possibility that serious players will be slowed down by cumbersome procedures. Delays in approvals carry a financial cost for developers, which may not be fully appreciated by the authorities. A transition or grace period could be given so that businesses are able to adjust to the new framework.

In what ways has the market reflected recent systemic shocks and successive regulatory reforms?

ALSAYED: In recent years developers have been more conscious of the long-term impacts of their decisions, as well as of global economic events. The financial crisis of 2008 and the exuberance in the real estate markets that preceded it have largely helped to temper the behaviour of developers. They now assess their appetites better before taking on largescale projects. In addition, the increasing oversight of regulators has changed developers’ approaches for the better. Depending on the scale of a project, I believe that there are hardly any serious developers left in Bahrain who look at projects with a speculative mindset. In general, they now look at the entire life cycle before embarking on projects.

How have new fees affected the property market?

ALSAYED: A levy was introduced by the government in mid-2017 whereby developers were required to pay BD12 ($31.80) per sq metre of built-up area towards the building of infrastructure. For both projects that were already in the works prior to the introduction of the levy and new projects, this fee has acted as a significant drag on the ability of private developers to bring good products to the market.

Negative sentiment has probably arisen due to the above, and because of the simultaneous implementation of a host of other fees that may not be directly related to the activities of the real estate sector.

On a macro-level, many of the price levels for public goods and services remained unchanged for decades, resulting in an imbalance of cost versus price. Importantly, this caused a fiscal imbalance and needed to be addressed by a more fair distribution among users. In the long run, such measures help to make the real estate market more competitive.

What can be done to make it easier for developers to access adequate financing and help the government supply more affordable housing?

ALSAYED: The Mazaya scheme is a very innovative government idea that addresses social housing. It brings the private and public sectors together in a unique way, under one umbrella, so that all parties – developers, financiers and the government – can work on one agreed-upon template, for the common benefit of Bahrainis that fall within a given monthly income band. The parameters are defined and transparent so that developers, financiers and eligible buyers know the expectations from the outset.

To make it more attractive, the authorities could look to registered developers with greater confidence and not delay requests for various approvals. This would help to better realise the scheme’s objectives while fostering a greater sense of ownership, as the understanding of authorities is critical to the success of such partnerships. A speedy and efficient response from the authorities is the pressing need of the hour.