Event Reports

Arab Real Estate Development - Innovations and Potential

The 5th Annual Business Conference

The Konrad-Adenauer-Stiftung together with the Business Unit of its long lasting partner, the Center for Jewish-Arab Economic Development, hosted the 5th Annual Business Conference entitled “Arab Real Estate Development - Innovations and Potential”. The conference attracted Jewish and Arab businesspeople, contractors, economists, consultants as well as representatives of banks and embassies. Some of the participants traveled from far towns in the north and south of Israel in order to participate.

At the conference, both Jewish and Arab speakers discussed issues relating to real estate development in the Arab sector in Israel, such as the obstacles the Arab sector faces in this field, including cultural and economic barriers, as well as the need for change in the state of mind of the Arab population in order to reach real development and growth.

The Main Objectives of the Conference Were:

1. To provide businesspeople from Israel, who are involved in the real estate business or wish to get involved in it (including contractors and investors), with an overview of the current state of real estate development in the Arab sector and the different obstacles that this sector faces in this field.

2. To discuss with businesspeople from Israel, who are involved in the real estate business or wish to get involved in it (including contractors and investors), how significant development may be achieved in the Arab sector, including discussion of innovative ideas, new directions, changes that are necessary and which actual steps should be taken in order to promote real estate development in the Arab sector.

3. To raise the issue of Arab real estate development and advancement at the governmental level.

4. To raise the issue of Arab real estate development nationwide via the press as well as to distinguished guests from various embassies in Israel.

5. To provide a unique platform for businesspeople to network and make business and other connections, mainly in real estate.

Mr. Helmi Kittani, CJAED Director, opened the conference by thanking the Konrad-Adenauer-Stiftung for its long lasting partnership and congratulating Mr. Michael Mertes on his new position as the Director of the Konrad- Adenauer-Stiftung in Israel. Mr. Kittani was proud to mention that CJAED in its partnership with KAS shows itself to be an innovator at its conferences, as it continues to bring up original subjects for discussion that no one else tackles, but that are expected to grow and become major issues in the next few years. Accordingly, this year CJAED is the first to discuss the issue of real estate development in the Arab sector, an important subject that became even more acute due to the fact that the recent real estate “boom” almost completely skipped the Arab sector. CJAED’s mission, Mr. Kittani mentioned, is to turn real estate development into a main tool of economic development of the Arab sector.

Mr. Ayman Saif, CEO of the Authority for the Economic Development, Prime Minister’s Office, was the first guest to speak during the conference. Mr. Saif spoke about the characteristics and barriers in the real estate market in the Arab sector. He explained that there is not enough data about how many dunams of land are actually owned by the Arab sector today, however according to certain sources 730,000 dunams of land are privately owned by Arab Israelis. Mr. Saif noted that the issue of real estate development in the Arab sector is a very new issue that was hardly ever discussed. Mr. Saif also addressed the issue of demand and supply of apartments/houses in the Arab sector and explained that he believes there is demand for 120,000 new apartments per year but only 7,000 supply. He mentioned that the main obstacle that the Arab sector faces regarding real estate development is the “detailed design” that the local municipalities are in charge of and fail to promote. This brings the Arab sector to a situation in which there are not enough available lands for development.

Mr. Ron Aichel, an economist and chief strategist at “Meitav” Investment House, spoke about global and domestic economic highlights in the past year such as the debt of Greece, the recent economic crisis in 2008, the cost of basic products such as wheat, and more.

Mr. Nissim Boublil, President of the Association of Contractors and Builders in Israel, put an emphasis on the fact that there is a very large shortage in apartments throughout Israel and that the feeling of neglect that this situation causes is felt in many sectors (including the Jewish sector) but is especially felt in the Arab sector. Mr. Boublil called the Arab sector to begin promoting this issue at their end.

Mr. Reuven Kogan, Deputy Commissioner for the Budget Division, Ministry of Finance, indicated that the Ministry of Finance is interested in providing the Arab sector with solutions for the real estate issue, including saturated residential construction, easier process of receiving permits and receiving mortgages.

A very interesting overview about the Palestinian experience of real estate development was given by Dr. Samir Halaila, CEO of “Padico” Group, a Palestinian development and investment company. He outlined the progress in real estate in the West Bank and Gaza, including the building of five 5-star hotels (4 in the West Bank and 12 in Gaza) in the past few years. The main problem in the West Bank and Gaza, mentioned Dr. Halaila, is the lack of land for construction or even for rent. In the West Bank and Gaza there is a problem that prevents real growth in real estate development, becaues people are unable to take mortgages since they don’t have enough guarantees.

Mr. Israel Erlich, Director of Economics and Credit, Mercantile Discount Bank, spoke about recent trends in real estate in the Arab sector, from a baking point of view and mentioned that as opposed to the Jewish sector, most of the Arab sector lives in private homes, with their extended family, and they usually own those homes. He also spoke of other new trends in the Arab sector today such as more educated youngsters, an increase in birth, more spending in shopping malls, etc.

Mr. Salim Laham, Chairman of the Association of Contractors in the north of Israel talked about the lack of land which, in his opinion, the best solution would be saturated residential construction. However, there are many problems to be faced in such a situation of saturated residential construction which the Arab sector is not used to - such as dealing with the house committee, determining how many satellite dishes will be situated on the joint roof (as each family is used to having its own dish, as opposed to the Jewish sector).

A panel discussion moderated by Professor Rassem Khamaisi concluded the successful conference. Prof. Khamaisi spoke about the option of building a new Arab town in Israel. He mentioned that there will be great demand for such a town from local population however mentioned that he believes that most Arab towns are not actual “towns” but rather large settlements. In addition, since many Arabs today choose to live in “Jewish towns”, Prof. Khamaisi brought up the question, why we even need to use the term “Arab town”?

Other participants of the panel discussed selected issues in real estate investing. Mr. Tariq Bashir, Attorney (CPA), Business Unit Manager at the Center for Jewish-Arab Economic Development mentioned that part of the problem is the Arab culture that does not allow that society to live in an apartment building, but rather only in private houses. He spoke about commercial real estate in the Arab sector that has much trouble sustaining itself as many Arab people go and do their shopping at the Jewish shopping centers. Development of real estate in the Arab sector requires, among other things, lowering the necessary funding needed, dividing the financial risk, enlarging the bank funding, integrating between the abilities of the land owners and the abilities of the entrepreneurs.

Mr. Mohammed Awad, the National Bank, spoke about the options for funding and financing for real estate investment. He mentioned that he believes that the future of the Arab economy lies in the hands of the women who need to go out to work.

Mr. Jacob Engel, Chairman of the “Engelinvest” Group, talked about cooperation between Jewish and Arab entrepreneurs and investors and mainly focused on such cooperation in developing and building commercial real estate.

The Main Results of the Conference:

1. Building Specialized Teams and Round Tables:

In order to leverage the conference to the maximum and to truly advance the issues discussed during the conference, there is a great need to continue the discussions and brainstorming. Therefore it will be useful to form several specialized teams that will meet periodically at round table discussions. Each team will be in charge of a certain aspect of real estate development in the Arab sector and will discuss, research, analyze and promote that certain aspect. For instance, teams will discuss financial issues such as forming an investment fund; land issues such as the differences and difficulties of building on privately owned land and government owned land; and cultural issues such as saturated residential construction and cooperation between Jewish and Arab investors. Each team will be comprised of businesspeople, contractors, economists and academia experts. This way, whilst each team will focus on a very specific area of real estate development, each team will be able to provide clear, sustainable and practical ideas and conclusions that will help advance the issue on a practical level.

2. Practical Knowledge and Innovative Ideas:

The feedback on the conference by its participants was very positive. CJAED received many personal phone calls from those who attended, congratulating for being the first body to bring up the important subject of real estate development in the Arab sector. Many expressed their satisfaction from the practical knowledge they gained during the conference and for the innovative Ideas that were brought up. Many also expressed their will for continuing discussions of the conference subjects and for actual progress in the field, following the conference.

3. A Unique Networking Platform:

The conference was an excellent unique platform for Jewish and Arab businesspeople from the real estate and banking businesses to network and form business as well as other relationships. The unique aspect was that Arab and Jewish businesspeople were able to meet and network.

4. Awareness of the Decision Makers:

The participation of Mr. Ayman Saif, CEO of the Authority for the Economic Development, Prime Minister’s Office, will raise the issue of advancement and development of real estate in the Arab sector and will raise before the government the need to look more closely at this issue.

Published articles included:

1. An article at The Israel Project website: http://www.theisraelproject.org/site/apps/nlnet/content2.aspx?c=hsJPK0PIJpH&b=3907543&ct=10899161

2. All the lectures are available for view on You Tube: http://www.youtube.com/user/TheCJAED