GCC mortgage demand set for upswing
As the region’s commercial and residential real estate sector looks to finds its feet following the impact of the financial crisis, the spotlight falls on financing through mortgages.
According to R Lakshmanan, Chief Executive Officer, Sakana Holistic Housing Solutions, the team behind the GCC Mortgage Summit 2010 the residential mortgage market penetration is low in the GCC when compared to Europe and the USA.
In Bahrain, the market penetration against GDP per capita is approximately five per cent compared to average of 23 per cent in some of the European countries.
“We have a wonderful opportunity to create a meaningful mortgage sector and now is the time for the industry to come together to look closely at this,” said Lakshmanan.
He advised that the Gulf region’s first ever forum to focus on the mortgage market will take place in June. He said that the annual event is positioned to be the region’s specialist forum for the mortgage sector discussing best practices, regional relevance and improving results.
“Building on the success of last year’s GCC Mortgage Class, we are committed to ensuring that this relatively new-to-the-region sector is established on a solid platform.
“Bahrain has long-since been accredited as the regional hub for banking and finance and our decision to host the the Summit stands in respect of this. The GCC Mortgage Summit is designed to combine the regional and international experience of eminent speakers and provide attendees with best practices to improve results in this unprecedented, new business era.”
Lakshmanan said that the GCC’s real estate and mortgage markets have grown significantly since 2002, fuelled by the advent of a freehold model in tandem with the growing population, backed by strong oil price. However, the impact of the financial crisis brought the sector to a virtual standstill at the end of 2008.
“The real estate sector is experiencing a rapid facelift. With the off-plan market and speculators virtually out of existence, the market now leans towards end-users and medium- and long-term investors,” he said.
“However, with a significant number of real estate projects cancelled or on hold we are faced with a supply- demand mismatch, with supply overshooting demand. We can help re-energise the demand by the introduction of relevant mortgage offers.”
Other factors that face the sector are increased job losses, default rates, evolving legal framework, as well as new regulations governing the real estate/mortgage sector.
Lakshmanan also cited the region’s young and growing population, saying that there is a huge potential for the market pie to grow as the economy expands. He also urged that Sharia’a compliance is considered.
“The GCC mortgage market is also set to expand in line with the significant growth of Islamic mortgages providing customers with a wide range of financing products and services.”
Meanwhile, leading industry voice, Mungo Dunnett is on board to open the Summit with a freshly published white paper that looks at the lessons to be learnt from the mortgage crisis in the West.
Indeed, some pundits place much of the blame of the unprecedented global economic downturn on the fragility of the sub-prime mortgage sector in the United States.
Dunnett, managing director of Mungo Dunnett Associates will look at the implications for starting and managing mortgage businesses. He will table what he sees as the strategic weaknesses that caused the crisis, and that made the crisis worse once it began
“I am ready to share what I believe are the crucial aspects for successful mortgage lending, as well as building and managing a successful mortgage business,” he said.
Lakshmanan said that the decision to host a specialist conference in the GCC stems from Sakana’s confidence in opportunities in the region. He said that Governments are including ‘housing for nationals’ as a priority in respective longer term plans, He also mentioned the ‘much awaited’ introduction of the Mortgage Law in Saudi Arabia.
The decision also stems from Sakana’s vision of being a catalyst for the prosperity of the housing sector including the mortgage market: “We are right behind the growth of a healthy, useful, sustainable mortgage sector; one that truly underpins economic growth.
He said that there is an opportunity to create a new-world mortgage sector that uses the learning of yesteryear and is structured in a manner that better suits the lifestyles and economic-styles of the emerging cycle.
“The GCC Mortgage Summit 2010 is timely and highly relevant to the sustainability of the region’s mortgage industry,” Lakshmanan concluded.
The GGC Mortgage Summit 2010 will run for two days (June 2-3 2010) in Bahrain. The forum is pegged to attract more than 100 trade professionals from across GCC including real estate developers, real estate service providers and other organisations that provide support such as insurance companies, legal, research and rating agencies.