Real estate in Bahrain has remained resilient in the face of successive macroeconomic challenges, maintaining a positive – albeit subdued – growth trajectory in recent years even as rental and occupancy rates declined across the residential, commercial, and hospitality segments. While developers have struggled with persistent oversupply and weakening demand – particularly for luxury residential space – lower property prices have created new opportunities for businesses in the kingdom, where office space remains significantly less expensive than Abu Dhabi and Dubai. Although the rate of expansion has not returned to its peak from before 2009, demand for high-end commercial space and affordable residential properties proved to be strong in 2018.

Bahrain has one of the most open and liberalised real estate markets in the region, both in terms of services and property ownership A series of sweeping reforms rolled out by the industry regulator have been welcomed by most stakeholders and are expected to reduce speculation, improve consumer protections and help the market maintain stability in the coming years, paving the way for robust long-term expansion.

Structure & Oversight

The Ministry of Housing (MoH) is one of the main entities responsible for developing new housing. Established in 1975 as the Ministry of Works to provide adequate housing for low- and middle-income families, the MoH was re-branded to the Ministry of Works and Housing in 2002. In December 2007 it was split to create two separate entities: the MoH and Ministry of Works, Municipalities Affairs and Urban Planning.

In order to ensure sustainable long-term growth, authorities implemented a series of reforms, including the creation of a new regulatory body for the industry. The Real Estate Regulatory Authority (RERA) was established via royal decree in 2017. RERA is mandated to regulate the property market and promote economic growth with a reform agenda to bring the kingdom in line with international best practices. The authority is in the process of collaborating with public and private stakeholders to develop a real estate policy that will be supported by five-year strategies with an emphasis on improving consumer protection and streamlining services. A key goal for RERA is to improve clarity for investors, and to this end the authority is currently working to develop new mandates to clearly define the responsibilities of owners associations for shared properties and services.

The Bahrain Real Estate Investment Company (Edamah) is the real estate investment arm of Mumtalakat, the country’s sovereign wealth fund. Edamah was incorporated in 2006 and oversees and develops an increasingly diverse portfolio of projects in the kingdom. Now a leading developer, Edamah’s portfolio spans leisure, entertainment and industrial developments, as well as large-scale parking lots. In September 2019 industry publication Construction Week Online ranked Edamah one of the top-100 real estate developers in the GCC.

Foreign Ownership

Bahrain has one of the most open and liberalised markets in the region, both in terms of services and property ownership. In July 2016 the Commercial Companies Law was amended to permit 100% ownership of businesses across various sectors. Under the reforms, foreigners are allowed to have full ownership of businesses in residency, food, administrative services, arts, entertainment, health, social work, information and communications, manufacturing, mining and quarrying, water supply, and services including real estate. The changes were made to “spur growth, generate rewarding jobs for citizens and attract businessmen to invest in various economic sectors”, the Cabinet said in a statement announcing the amendment.

What is more, foreigners are permitted 100% ownership of residential and commercial buildings of 10 or more floors in Ahmed Al Fatah, Hoora, Bu Ghazal, Seef and North Sanabis, and the diplomatic area north of Manama. They are also permitted full ownership in the tourist areas of Durrat Al Bahrain Bay, Danat Howar and Amwaj Islands.

Investment Trusts

Central Bank of Bahrain (CBB) authorised real estate investment trusts (REITs) are regulated by Financial Trust Law No. 23 of 2006, as well as REIT listing rules issued by the Bahrain Bourse (BHB). Under existing regulations dividend payout of a REIT must be at least 90% of its realised income. REIT’s net asset values must be derived from a property rental business comprising at least two properties with a minimum valuation of $20m, and development property may not exceed 20% of the REIT’s net asset value. REIT offerings are limited at present as there is only one – the Eskan Bank Realty Income Trust – listed on BHB.

Regulatory Reforms

RERA has been active developing regulations since officially launching in March 2018. The agency issued two laws, 15 regulations and three circulars since its establishment, and has introduced reforms in areas including broker and sales agent licensing, off-plan sales, project licensing, escrow accounts, property management, fees, and registers for brokers and developers.

One of the most important reforms was Law No. 27 of 2017, which officially came into effect in March 2018. It not only created RERA but also regulated off-plan sales, or projects in which units are sold to buyers before having been built. The law introduced consumer protection mechanisms for off-plan projects and required that all off-plan developers register with the authority. Developers were given a six-month grace period to be in compliance with the law, which came into effect September 1, 2018. According to RERA, brokers’ response to the new legislation was “overwhelmingly positive”, with more than 98% of developers licensed as of August 2018.

In July 2019 RERA extended licensing requirements to real estate valuers, instructing them to participate in the authority’s Continuous Development Programme in order to qualify for and renew their licenses every year. As part of the valuation reform process RERA will introduce a new classification model that will enable licensed professionals to value properties within a variety of monetary bands and valuation bases based on experience, qualifications, competency and expertise. The reform was developed in partnership with the Royal Institution of Chartered Surveyors and the International Valuations Standards Council, bringing Bahrain in line with international best practices and bolstering stability.

Escrow Requirement

Resolution No. 3 of 2018 brought another important reform to the market, stipulating that every real estate development would be required to establish an escrow account. The deposit for the account would be calculated based on the execution stage of the project or the loan amount if the developer mortgaged the project to obtain a loan from a financier, as well as all amounts provided by developers and depositors. RERA set the escrow value at 20% of the total project value, with permitted deposits including cash instalments, bank guarantees, insurance policies or any other financial instrument provided by a CBB-licensed institution subject to RERA approval. Funds deposited in the account are to be allocated exclusively to construction, execution, project management and infrastructure costs, such as those for utilities, roads, sewage systems and water supply. Consultant engineer fees are also permitted. Not more than 10% of the escrow account balance can be used for administrative and marketing expenses.

This rule was in line with the CBB’s stated goal – highlighted in its 2018 annual report – of introducing “an insurance bond of escrow accounts for real estate projects, which is considered the first of its kind in the GCC region”. The CBB coordinated with RERA and the Bahrain Insurance Association, and expects that insurance bonds will strengthen consumer and investor protections, improve cash flow and management practices, and increase access to finance for developers and investors.

Breaking the Cycle

Reforms will also help Bahrain avoid the real estate bubbles and volatile boom-and-bust cycles that have been prevalent throughout the region over the last decade. Indeed, the total value of Bahrain’s defaulted and stalled real estate projects, some of which date back to before the 2008-09 global financial crisis, was BD473m ($1.3bn). “The escrow requirements create a barrier to entry for many developers and really ring-fences the money they can gather,” Amin Alarrayed, CEO of Edamah, told OBG. “But the benefits are obvious. You used to see a mushrooming of projects, and developers would take a 5% or 10% down payment and use the money to invest in new and unrelated projects instead of committing the funds to their intended purpose. Subsequently, when there was no market for the units or the financing collapsed, buyers would simply default.” He noted that before the resolution the market was based on speculative off-plan sales, which led the regulators to act.

Other important regulatory changes include the May 2019 launch of a property seller-broker contract template developed in collaboration with the private sector designed to clarify the sales process, and the June 2019 announcement that Bahrain will establish a real estate court that will resolve any dispute regarding a property valued at BD100,000 ($265,000) or more within 44 days.

Performance & Size

Real estate accounted for 5.9% of GDP in 2018, according to the Ministry of Finance and National Economy, a smaller contribution than oil and gas (17.8%), financial services (16.5%) and manufacturing (14.5%), but larger than trade (4.5%) and hotels and restaurants (2.4%). The sector has maintained a upwards trajectory despite facing challenging macroeconomic headwinds, with annual growth reaching 6.4% in 2017 and 2.8% in 2018. On a quarterly basis, the sector expanded by 3.7%, 3%, 2.9% and 1.5% in the first, second, third and fourth quarters of 2018, respectively.

Lending to the construction and real estate sector has also increased, with the CBB reporting that the biggest contributor to business loans in November 2018 was construction and real estate, accounting for 36.6% of the total. Total construction and real estate lending rose from BD1.66bn ($4.4bn) in 2009 to BD1.74bn ($4.6bn) in 2010, moderating to a low of BD1.37bn ($3.6bn) in 2016, before expanding to BD1.70bn ($4.5bn) in 2017 and BD1.87bn ($5bn) in 2018. Total lending to the sector held steady at BD1.9bn ($5bn) as of the second quarter of 2019, the most recent period for which statistics are available.

Residential Rentals

The housing market felt the effects of new regulations, subdued economic growth and external pressures, all of which weighed down prices. On the other hand, there has been increased activity and transactions from January to May 2019, particularly in new and emerging areas.

According to real estate portal Property Finder the most-searched area for apartment rentals in 2018 was Al Juffair and Saar for villa rentals. Al Juffair was the most-searched area for apartment sales, while Amwaj Islands was the number one search for villa sales. Apartment rental prices declined across all four governorates between the first and last six months of 2018, with demand for affordable units simultaneously rising against a backdrop of subdued macroeconomic growth, the portal reported. In Al Galali, average apartment rental rates fell from BD350 ($930) to BD346 ($920) per month between the first half and second half of 2018, while average apartment rental rates fell from BD475 ($1260) to BD450 ($1190) in Al Busaiteen.

Areas offering a mix of affordable and high-end properties including Reef Island, Tubli and Um Al Hasam in the Capital Governorate, and Al Riffa in the Southern Governorate, recorded higher rental rates in 2018, although Property Finder did not publish specifics for these areas. Hoora in the Capital Governorate saw average apartment rental rates fall from BD446 ($1180) per month to BD393 ($1040). This was largely attributed to an influx of new properties exacerbating existing oversupply in the area.

The downwards trend was mirrored in villas. The Capital Governorate saw villa rental costs decrease by 4.2% between the first and second halves of 2018, while prices in the Southern Governorate were more stable, declining by just 0.5% over the same period. The Northern Governorate’s Jannusan recorded the most significant decline in prices, with monthly rental rates sinking from BD1192 ($3160) to BD980 ($2560). In Adliya villa rental rates fell from BD1167 ($3100) to BD1094 ($2900), while rates in Barbar fell from BD904 ($2400) to BD832 ($2200).

Residential Sales

Similarly to rentals, apartment sale prices declined in 2018. The most significant decline – 4% between the first and second half of the year – was recorded in the Southern Governorate. The Capital, Muharraq and Northern Governorates fared better, with prices sliding by less than 2% over the same period. Prices in Al Muharraq fell from BD1149 ($3050) per square metre to BD986 ($2620) per square metre, while prices in Seef declined from BD947 ($2510) to BD921 ($2440) per square metre. Prices in Al Busaiteen dipped from BD688 ($1830) to BD661 ($1750) per square metre.

The 1.45m-sq metre Bahrain Bay Development, a mixed-use project built on reclaimed land was credited in the report for “rejuvenating the sale market in Bahrain, as it is offering a number of luxurious high-end properties in one of the country’s newest freehold areas, prompting both local and regional investment”. Construction began in 2007 and the majority of the work was completed between 2008 and 2011. This has been reflected in the fact that Bahrain Bay Development bucked the broader national property price trend in 2018, with prices rising from BD1312 ($3480) in the first half to BD1377 ($3650) in the second half of the year.

Even so, luxury properties were among the most affected by the macroeconomic climate, owing in large part to the sector reforms. “While the reforms have been broadly positive, off-plan luxury developers are going to have more difficulty,” Alarrayed told OBG. “The segments that are dependent on speculation or short-term investor demand are suffering because there is a lot of stock. There is not a secondary market for these units.”

In terms of villa sales, there was increased interest in Capital Governorate areas including Reef Island and Seef, with prices rising by 6.8% between the first and second half of 2018. All other governorates saw prices decline, most notably the Northern Governorate, where prices fell by 3.2%. One outlier was Bu Quwah in the Northern Governorate, where the average price per square metre for a villa rose from BD577 ($1530) to BD582 ($1540). All other locations experienced a dip in prices, including A’ali, where they sank from BD605 ($1610) to BD486 ($1290).

While the residential market has struggled, a government push to build 40,000 housing units for Bahrainis before 2024 has created new opportunities for investment (see Construction chapter) and should lead to increasing numbers of sales and mortgages. The government’s efforts to increase housing availability are being bolstered by the private sector, which has committed to building 25,000 homes between 2019 and 2022.


The total value of mortgage loans and advances rose from BD360.3m ($955.7m) in 2009 to BD1.06bn ($2.8bn) in 2015 and BD1.8bn ($4.8bn) in 2018, according to the central bank. Home loans continued the upwards trajectory in 2019, reaching BD1.85bn ($4.91bn) in the first quarter and BD1.86bn ($4.93bn) in the second.


It is expected that mortgages will expand further after the MoH re-launched its Mazaya subsidised mortgage scheme in March 2019. Originally established in 2013, Mazaya allows Bahrainis on the government’s housing waiting list to buy directly from a list of approved projects. Under the programme, both Islamic and conventional lenders offer loans for properties valued at up to BD120,000 ($318,000), with mortgages capped at BD81,000 ($215,000) and an additional BD38,500 ($102,000) of top-up financing available.

Changes in eligibility were made prior to the relaunch of the programme. The maximum age of beneficiaries was increased from 35 years of age to 50, and mandatory minimum and maximum salary limits were adjusted to between BD500 ($1330) and BD1500 ($3980) per month. Successful applicants must also be a salaried citizen with an approved Outstanding mortgage loans and advances, 2009-19 Source: Central Bank of Bahrain 0 200 400 600 800 1000 1200 1400 1600 1800 2000 Q2 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 employer and a valid Mazaya eligibility letter. The changes also allow beneficiaries to use mortgages to purchase land for home construction. Eligible applicants will be able to obtain a mortgage with monthly payments capped at 25% of their income.


Oversupply and weak demand have plagued the commercial market, which has been a challenge for the segment in the years since the 2001-08 construction boom. The imbalance between supply and demand has been felt particularly acutely since 2010 when the full effects of the global economic crisis hit Bahrain, according to real estate consultancy Knight Frank in a 2019 report. According to the firm headline rental rates are between 45% and 50% lower than at the 2008 peak.

There was cause for optimism in 2018, however, as rental rate declines abated. Completion rates have also slowed since 2014, and while the supply pipeline remains elastic, several promising sub-segments have recorded positive growth. This includes small, fitted-out units, which has been popular for tenants looking to reduce capital expenditure even as demand for commercial real estate remains muted. This trend is expected to continue into the short to medium term. Vacancy rates across the broader commercial sector hovered at around 40% as of early 2019, although higher-end commercial buildings, particularly those in upcoming developments such as the Bahrain Bay Development, are performing better. Outside of well-performing high-end commercial space, older buildings with inefficient floor plates and limited parking availability will likely continue to suffer from low occupancy levels and steeper declines in rental rates.

As with residential, lower costs presents opportunities for companies looking to set up shop, with commercial sale prices 35% cheaper than Abu Dhabi Global Market and Dubai International Financial Centre rates, Knight Frank found. Commercial rental rates are even more competitive, at 60% and 61% lower than Abu Dhabi and Dubai, respectively.


Existing oversupply in the hospitality segment will be further exacerbated by several big-ticket hotel and tourism projects expected to launch in the short to medium term. At the end of 2018 Manama’s hotel supply stood at 13,000 keys, including 2000 serviced apartments and 10,000 hotel rooms. Four- and five-star hotel rooms dominate the market and accounted for 40% and 39% of total supply, respectively.

Bahrain remains a popular tourist destination for GCC visitors, particularly for those from Saudi Arabia. This is in large part due to business travel and the Formula 1 Bahrain Grand Prix, the latter of which is the most significant generator of inbound tourists (see Tourism chapter). Even so, average hotel occupancy rates have trended downwards in recent years, falling from 56% in 2014 to 52% in 2018, while revenue per available room and average daily rates have fallen by 28% and 23%, respectively. Declining hospitality indicators are largely attributed to falling oil prices, which have weighed heavily on both the domestic and regional economy, softened corporate demand and reduced tourism expenditure.

Demand has also come under pressure by the conflict between Qatar and its GCC neighbours, while Saudi Arabia’s ongoing liberalisation could also result in visitor numbers from Bahrain’s neighbour dropping off. Even so, there is cause for cautious optimism. While the launch of new five-star hotels in the near term will be unlikely due to high supply, there are some opportunities in hospitality, notably for Saudi- and GCC-friendly properties and boutique hotels. Moreover, the $1.1bn expansion of the Bahrain International Airport, which will double annual passenger capacity, is expected to result in an uptick of international visitors (see Transport chapter).

Around 3300 keys are forecast to come on-line by the end of 2022, boosting total supply by 25%. As supply expands, the entrance of global brands is expected to put pressure on local chains. “As more quality, internationally branded properties enter the market, we expect locally operated and less centrally located properties will ultimately lose market share,” Knight Frank wrote. As a result, the short- and medium-term outlook for hospitality is mixed, with rising supply and a new value-added tax expected to further weigh down the market.


Real estate has remained resilient and looks set to expand into 2020, supported by rising demand for affordable housing and high-end office space. While RERA’s regulatory reforms created a challenging environment for speculative developers, they were welcomed by most as a step towards creating a more sustainable and stable market with increased protections for customers, developers and investors. What is more, the changes have brought improvements in transparency, helping the kingdom maintain a competitive regional comparative advantage and setting the stage for long-term growth.