Revealed: Will GCC construction invest in Iran?
GCC suppliers and real estate experts tell Construction Week Iran presents opportunities for significant growth if investors tread with patience
The ongoing slump in global oil prices, and its impact on state spending in the GCC, has compelled construction firms in the region to explore new geographies.
Iran is rapidly emerging as a formidable option within this context.
Supplier firms, keenly aware of fluctuating fluidity within the regional construction industry, are conscious about Iran's potential as a market for their operations.
Juan Vela, regional director at dorma+kaba, told Construction Week that Middle Eastern countries, such as Egypt, form a crucial part of his firm's future plans.
"With the recent new developments in the Egyptian pound, we see more scope of venturing in these markets," Vela said.
"The aim of raising direct foreign investment proves to be a pull for companies now to enter the country.
"Iran is certainly the next big emerging market," Vela asserted.
"In the coming years, Iran has the potential to emerge as a major player in the global construction market."
Next page: Oman goes to Tehran
Oman is already paving its way towards Iran.
In March, Oman's top port, Salalah, signed trade agreements with key Iranian terminals in the latest efforts by the Gulf country to boost shipping ties with Tehran following the lifting of international sanctions.
According to Arabian Business, citing Reuters, Salalah Port said it has signed a memorandum of understanding with Iran's biggest cargo port, Bandar Abbas and with Chabahar port, which would "facilitate growth in shipping, trade and commerce" between the two countries.
Last year, it was revealed that Oman is funding an "iconic commercial complex", worth millions of dollars, in Kerman, an ancient city southeast of Iran.
In September, the director of Oman's Sarooj Construction Company, Simon Karam, said the project is worth $120m, excluding the land price.
Karam said the company has partnered with WJ Towell in Oman, with both firms holding equal stake in the project.
Next page: Could Iran boost Dubai property?
UAE firms are also working towards increasing trade with Iran.
In 2015, Iran was Dubai’s fourth largest expat nation by overall investment size and the first by average investment size, according to statistics released by the Dubai Land Department (DLD).
Additionally, real estate in the UAE is also likely to benefit Irani investments, Faisal Durrani, head of research at Cluttons, said.
Speaking to Construction Week in January, Durrani said the removal of international sanctions would provide a boost to the UAE's real estate market, with specific focus on Dubai.
"Iran and the UAE share a close historic trading relationship that goes back centuries and the lifting of sanctions after 10 years is expected to directly benefit Dubai as it resumes its position as the world's gateway to Iran," he said.
"Iranian high net-worth individuals are also expected to target residential assets in Dubai as they seek out investment safe havens while the government adjusts to the removal of sanctions and restrictions on overseas investment are eased.
"This is expected to provided a fresh demand stream to Dubai's slowly maturing residential market," he added.
Next page: Reality check for suppliers
However, experts are quick to point out that growth in Iran will have to be pursued at a realistic pace.
Construction supplier firms could also target underdeveloped GCC markets in the meantime, Simone Sebastiani, business development manager at Giesse Gulf, told Construction Week.
"For Giesse’s scope, which is hardware for aluminium windows and doors, we see good opportunities in countries like Oman and Bahrain, where the residential construction markets are currently undersupplied.
"With rising demand, several new developments are due for completion in the next few years," Sebastiani explained.
"In Bahrain, for example, about 1,443 and 5,241 housing units are planned for completion by 2016 and 2017, respectively.
"Our attention is also on the Iran market, which is expected to grow faster after the lifting of the international sanctions.
"To see significant improvements, anyway, we will have to wait a few years," Sebastiani warned.