Bahrain’s construction and real estate sectors contributed a combined 12.5% to GDP in 2022, with the two recording growth of 1.4% and 5.5% for the year, respectively. They are engines for job creation, as the country’s economic diversification agenda includes major infrastructure projects. The development of high-value sectors has resulted in significant construction activity, with new and existing businesses establishing and expanding factories and facilities.
Bahrain’s economy makes it an attractive investment destination in the GCC, and its growing population means that there is a need for a greater volume and more diverse range of residential properties. Indeed, the real estate sector saw a revival in 2022 and the beginning of 2023 reflected by rising residential rents. A number of new affordable homes have hit the market in recent years, and the government continues to work with the banking sector to launch new mortgage products to help Bahrainis in the lowto middle-income brackets buy homes.
Structure & Oversight
As part of Royal Decree 25/2022 issued in June 2022, the Ministry of Works, Municipalities Affairs and Urban Planning – the construction arm of the government – was divided into three separate entities: the Ministry of Works (MoW), the Ministry of Municipalities Affairs and Agriculture (MMAA), and the Ministry of Housing and Urban Planning (MHUP). The MoW is responsible for planning, designing and supervising the construction of public infrastructure, such as buildings, roads and drainage networks, while the MMAA is responsible for regulating and overseeing urban and rural development, as well as providing related services. The MHUP was formed by merging the Ministry of Housing and the Urban Planning and Development Authority (UPDA) as part of the June 2022 decree.
While the MHUP and UPDA report to a single minister, the latter maintains its own services through its website. The three ministries work together to regulate and oversee construction activities in Bahrain. Broader cross-ministerial collaboration is also required for projects related to specific sectors.
The authorities also play a key role in the country’s real estate sector. The Real Estate Regulatory Authority (RERA) is responsible for formulating and implementing policies for the sector and regulating the activities of all real estate entities and professionals.
The digitisation of government services is a core component of Bahrain Economic Vision 2030. To that end, in October 2018 the kingdom launched Benayat, a portal dedicated to managing the allotment of building permits. All processes related to such permit applications, payments and issuances are now carried out through Benayat, and the portal is designed to streamline business procedures and improve efficiency. Fees depend on the areas in which a developer wishes to build, the type of permit required and other criteria.
Legal & Regulatory Changes
Bahrain has been dedicated to improving the regulatory environment with the aim of bolstering the country’s standing as an investment destination in the MENA region. Multiple laws covering issues such as property registration, rent, stalled developments, the collection of development costs, and foreign ownership of property and land have come into force over the past two decades. One notable example is Law No. 13 passed in June 2013, which named the Survey and Land Bureau Registration (SLBR) as the primary authority for conducting property surveys.
Bahrain allows for the 100% foreign ownership of property for companies operating in most economic sectors. Foreign ownership of residential properties is permitted for specific parcels of land allocated by the government. Meanwhile, the 10-year Golden Residency Visa was launched in February 2022, allowing retirees with a minimum monthly income of BD4000 ($10600), owners of property with a value of at least BD200,000 (531,000) and other individuals meeting certain criteria to remain in the kingdom indefinitely.
In June 2022 a new guide on public-private partnerships (PPPs) came into force, unifying and upgrading articles from a range of other laws that had previously been used to regulate PPPs (see Economy chapter). The new guide aims to facilitate large-scale private investment in major infrastructure projects. Other notable regulatory changes include Law No. 20 published in May 2022, which amends Article 5 of Legislative Decree No. 13 of 1977 on the Constructional Organisation of Buildings. The change raises building safety standards following a number of structural collapses in recent years. New measures on planning, project lifecycles and proof of required financing have been put in place. Rules regarding soil testing and suitability have also been tightened, and soil must now be shown to be suitable for a specific type of construction before building permits can be obtained.
Performance & Size
While a steady growth of 3% was recorded in the first quarter of 2022 in the construction sector, its expansion slowed in the second quarter to 2.6% before dipping to 0% in the third quarter and 0.1% in the fourth quarter, putting the 2022 average at 1.4%. Bahrain’s overall economy witnessed robust growth during the corresponding period, with non-oil GDP growth reaching 6.2% in 2022 compared to 3.3% during the previous year. The construction sector accounted for 7.2% of national GDP in 2022. According to analytics firm GlobalData, Bahrain’s construction market reached a value of $8.5bn in 2022, with an average annual growth rate of 4% expected from 2024 to 2027 due to developments in the government’s priority sectors, including financial services, ICT, logistics, manufacturing and tourism.
After reporting a growth of 3.3% in 2021, real estate and business activities expanded by 5.5% in 2022, with growth peaking at 6.8% in the third quarter of the year before falling to 6% in the fourth quarter.
Gross value added by the construction sector expanded by 24% over the decade leading up to 2021, reaching BD944m ($2.5bn). Data from the SLBR showed that the value of real estate transactions rose from $1.9bn in 2020 to $2.8bn in 2021, and then to $2.9bn in 2022. The number of transactions – 21,444 in total – was up 29% compared to 2020, and the figure increased slightly to 21,603 in 2022. In the first quarter of 2023, 6336 real estate transactions worth BD253m ($671m) had been recorded by the SLBR.
Strategic Projects
Following the economic stagnation caused by the Covid-19 pandemic, in November 2021 Bahrain’s government announced the $30bn Strategic Projects Plan (SPP), which incorporates 22 major construction projects across key sectors such as telecoms, tourism, education, manufacturing and health. Among the most ambitious of these is five new cities to be built on reclaimed land off the kingdom’s coastline. The cities will expand Bahrain’s total land mass by around 60% and feature comprehensive transport and logistics infrastructure. Portions of the new land are to be allocated to industrial development as the government continues to bolster and diversify its production base. “The announcement of five new sustainable cities serves as a clear indicator of Bahrain’s growth potential in the construction and real estate sector, helping the country attract a greater number of tourists and investors,” Sheikh Mohammed bin Khalifa Al Khalifa, CEO of RERA, told OBG. “These new developments are expected to have a transformative effect on the economy and society. Developing this infrastructure will necessitate significant investment, resource allocation and collaboration.”
Another key construction project – the development of a US-Bahrain trade zone that will eventually cover more than 1m sq metres – broke ground in February 2022. The goal of the project, which is being overseen by the Ministry of Industry, Commerce and Tourism, is to enhance economic cooperation between the two countries and make Bahrain a regional centre for distribution, logistics and manufacturing for American companies operating in the region. Meanwhile, the pre-qualification tender for the Bahrain Metro project was issued and closed in May of that year. Once built, the fully automated, driverless metro system will connect the country’s population centres, covering an estimated 109 km, with the first phase consisting of the construction of a 28.6-km elevated corridor with two lines. Plans to construct a new four-lane causeway to improve road connectivity and enhance the transportation of goods and people between Bahrain and Saudi Arabia have also seen significant activity (see Transport chapter).
Expenditures & Contracts
In 2011 and 2018 Bahrain received financial support packages from its GCC neighbours, each totalling $10bn. By the fourth quarter of 2022 the total cumulative value of projects tendered by the GCC Development Fund reached a value of $6.1bn. A cumulative $200m in contracts had been awarded in the first quarter of 2022; $100m in the second quarter; $9m in the third quarter; and $5m in the fourth quarter. The specific projects funded by those contracts cover various infrastructure-related sectors and areas, with funds in the third and fourth quarters of 2022 going towards projects such as a long-stay care centre in Muharraq; water and electricity substations for the Al Ramli housing project; a social care complex in Hamad Town; and water transmission stations in the Southern Governorate and East Hidd. Many of the projects were road developments, such as the widening of the Janabiya Motorway, the development of the Madinat Salmat Road and phase one of the Bahrain Southern Road. In December 2022 the Electricity and Water Authority began to receive bids for a 20-year contract to develop a 72-MW, gridlinked solar project on a build-own-operate-maintain basis as part of the kingdom’s efforts to achieve its goal of reaching net-zero carbon emissions by 2060.
Building Materials
Bahrain’s primary locally manufactured building material is aluminium, which has a variety of uses in construction projects, such as in window and door frames, tubing for ventilation systems, roofs and solar panels. Aluminium Bahrain, in which Mumtalakat is the majority owner, operates the second-largest smelter in the world and the largest outside China. Its recently expanded production capacity – at over 1.5m tonnes per year as of mid-2023 – feeds local and global downstream markets. Gulf Aluminium Rolling Company produces a host of products relevant to construction, including aluminium sheets, coils and tread plates. Meanwhile, Midal Cables produces aluminium rods and wires, overhead line conductors, aluminium-clad steel and multiple extruded products. Bahrain Mechanical Construction Company, an integrated construction firm and construction metals fabricator, produces aluminium doors, windows, partitions and curtain walls, along with a range of structural steel products.
Steel is another key locally produced material in Bahrain. Foulath Holding, established in June 2008, owns Bahrain Steel, which specialises in iron-ore pellets and is the only major merchant pelletising producer in the Middle East. United Steel Company (SULB) and United Stainless-Steel Company (USCO) are both subsidiaries of Foulath Holding. SULB, a joint venture with Japanese industrial conglomerate Yamato Kogyo Company, is a fully integrated producer of medium and heavy structural steel sections. USCO, whose stainless-steel re-roller started commercial operations in the fourth quarter of 2008, can produce 100,000 tonnes of cold rolled stainless per year.
Tourism
The government’s drive for economic diversification has a strong focus on expanding highvalue tourism inflows, prompting the announcement of various construction projects related to the sector. Bahrain Real Estate Investment Company (Edamah), a government-owned real estate investment entity, launched a number of major projects to that effect, including Bilaj Al Jazayer and South City. The former, which is expected to require $330m in funding and offer financiers a 10% return on their investment, took a significant step forward in the first quarter of 2022, when the Higher Committee for Urban Planning approved the tourism city’s general masterplan. The development is set to include an array of hospitality and leisure facilities, including a 3-km beach, and retail and residential components. Indeed, a number of international resort and hotel brands, including Avani and Tivoli, are scheduled to open in the city in 2024. The first phase of South City, which is being developed by Bareeq Al Retaj, includes the construction of a theme park, a five-star hotel and an outlet mall, among other attractions.
Looking ahead, the construction sector may see opportunities to prioritise the use of eco-friendly materials and energy-efficient technologies in the building design and construction for properties in the tourism and leisure industry, in line with customer demand. This could include incorporating renewable energy sources, implementing efficient insulation and lighting systems, and utilising recycled or locally sourced materials. “As the world becomes increasingly conscious of sustainability, consumers are redefining their values and priorities and placing a greater emphasis on the origins and longevity of products. As such, companies must adapt to meet the demands of a more socially aware customer base,” Theo Swart, CEO of Al Zain Jewellery, told OBG.
In June 2022 Bahrain’s Southern Municipal Council approved a proposal to build an underwater city off the Hawar Islands, a nature reserve under consideration for World Heritage status by UNESCO. Dive Bahrain, the world’s largest underwater theme park, initially opened in 2019 before closing to undergo a BD2.5m ($6.6m) refit that is expected to finish in 2023.
Luxury Holdings
The Diyar Al Muharraq project is a large, high-end integrated residential development encompassing commercial, recreational, health care, education and religious facilities. It is being built on 10 sq km of reclaimed land divided into seven islands. In April 2022 the project developer, also named Diyar Al Muharraq, completed the primary road infrastructure on the southern island, while in June of that year the company confirmed that the chief contractor for the development’s constituent Al Naseem housing project, Ahmed Omer Group, began work on the second phase of construction, with completion slated for the fourth quarter of 2023. Al Naseem is part of the southern island development and will contain 110 luxury villas ranging from 305-384 sq metres. As a fully integrated community, the project is expected to draw significant investment to its various initiatives.
Elsewhere, in January 2023 ground was broken on the luxury 108,000-sq-metre Onyx SkyView project in the Bahrain Bay district. The mixed-use development is being carried out by Kooheji Development and Kooheji Contractors, and it will comprise 435 residential units, 40 offices and seven retail units spread over 53 floors. Ten of those floors are reserved for office space, while the residential units will be composed of studios; and one-, two- and 3.5-bedroom apartments.
Affordable Housing
Bahrain’s shortage of affordable housing units has hovered around the 40,000 units in recent years. To address this need, multiple high-volume affordable housing projects are included in the SPP, and in January 2023 the MHUP announced the opening of bidding for the development of 771 residential units. The constituent components of the project are a development in Salman Town comprising 131 houses and 360 apartments, and a 280-unit development in Khalifa Town.
These represent the initial phase of the government’s land rights development programme, through which the government – with the MHUP as the implementing entity – aims to build 19,000 affordable residential units by 2032 in collaboration with private partners, with total investment expected to reach BD1bn ($2.7bn). In December 2022 the government announced that it started to distribute over 6100 residential units throughout the kingdom.
Mortgages
The number of beneficiaries of the Mazaya mortgage financing programme nearly doubled to 3271 in 2021 from 1691 in 2020. Its popularity owes to its favourable conditions, with customers able to borrow 100% of a home’s value up to BD120,000 ($318,000), with repayment periods of up to 25 years. Building on Mazaya’s success, in August 2022 the government announced a new scheme, Tas’heel, to improve on a number of Mazaya’s conditions in a bid to get more citizens onto the homeownership ladder, with a number of large-scale social housing developments nearing or reaching completion.
The Tas’heel programme raises the cap for subsidised financing from BD60,000 ($159,200) to BD70,000 ($186,000) and increases the amount of minimum financing from BD19,000 ($50,400) to BD40,000 ($106,100), as well as imposes no maximum property value and fixes loan repayment periods at 30 years. Applicants on the waiting list under the Mazaya programme are eligible to switch to Tas’heel if it better suits their needs.
Residential Prices
Property agency Savills reported in its snapshot of the Bahraini real estate market for the fourth quarter of 2022 that villa developments had remained the preferred choice of asset throughout 2022. The growth in the capital value of apartments slowed during the year, ending 2022 at an average of BD763 ($2020) per sq metre. Villa developments saw their prices up by 2% y-o-y in the fourth quarter of 2022 compared to the corresponding period in 2021, with the average value of a villa in Bahrain at BD600 ($1600) per sq metre in the third quarter of 2022. The average rental price for villas in the fourth quarter of 2022 was BD1139 ($3020) per month, up 4.5% y-o-y due to a 20% y-o-y increase in rental values for low-end villas, which Savills considered to be the result of low-end compounds filling to full capacity, leading to a shortage in supply.
Knight Frank’s report on the Bahraini real estate market for the first half of 2022 shows average rents in Saar to have been BD950 ($2520) for three-bedroom villas and BD1200 ($3190) for four-bedroom villas. Villa rental costs in the Amwaj Islands for the same period were BD1100 ($2920) and BD1400 ($3710) per month for three- and four-bedroom developments, respectively. Knight Frank’s figure for the average villa rental price across Bahrain in the first half of 2022 was BD1170 ($3100) per month.
Average rental prices in Juffair for one-, two- and three-bedroom apartments were BD350 ($930), BD450 ($1200) and BD525 ($1400) per month, respectively, while rental prices in Reef were BD500 ($1330), BD650 ($1720) and BD1000 ($2650) per month for the aforementioned sizes. Knight Frank’s estimated average apartment rental price in Bahrain during the first half of 2022 was BD565 ($1500).
Areas such as Saar, Hamala and Jasra saw the most demand for villas, with the higher number of foreign residents cited as a factor following the launch of the 10-year Golden Residency Visa and the post-pandemic normalisation of international travel. New developments with easy access to amenities and infrastructure were the primary driver of demand. Reef was Bahrain’s most expensive residential community as of the first half of 2022 due to its central location in the kingdom’s capital, Manama.
Apartment rentals remained stable as of the third quarter of 2022, with attractive prices in the middle of the market leading to a rise in vacancies in low-end properties. According to Knight Frank, this trend is expected to continue as apartments are surpassing villas in popularity in Bahrain due to their lower prices, both in terms of purchasing and upkeep. The average price for an apartment had reached BD810 ($2150) per sq meter by the end of the first half of 2022.
Commercial Property Prices
The average office rental price during the first half of 2022 was BD63 ($167.1) per sq metre, per year. Office space in the Diplomatic Area in Manama’s business district averaged BD44 ($116.7) per sq metre, per year, whereas office rental prices were highest in Seef and the Financial Harbour at BD66 ($175.1) and BD72 ($191) per square metre, per year, respectively.
Rental prices for industrial spaces were generally uniform throughout the country, with units belonging to the Bahrain Investment Wharf in Al Hidd, and warehousing space in Salmabad, Sitra and Tubli commanding rents of BD36 ($95.5) per sq metre, per year. Rental rates for industrial spaces in Ras Zuwayed averaged BD32 ($84.9) per sq metre, per year, with the overall average for Bahrain at BD35 ($92.8) per sq metre, per year. The range of rental costs for retail spaces was broader, with the average cost per sq metre, per year at BD138 ($366) in Seef. In Diyar Al Muharraq and Bahrain Bay, these rates were BD170 ($450.9) and BD221 ($586.2), respectively. The average rental cost for retail space in Bahrain during the first half of 2022 was BD180 ($477.5) per sq metre, per year.
Outlook
The momentum gathered by Bahrain’s construction and real estate markets since 2021 looks likely to continue over the medium and long term, given the pipeline of public infrastructure and private construction projects. The sharpened focus on PPPs is likely to be a key driver of growth, particularly in relation to affordable housing developments.
Meanwhile, Bahrain’s supportive business environment, coupled with the launch of the 10-year Golden Residency Visa, should see demand increase for midto-high-end villas and apartments. In light of a rise in flexible work dynamics that are making companies rethink office requirements, suppliers may need to introduce innovative pricing models to ensure that they retain and attract tenants moving forward.
The potential economic benefits of the country’s planned infrastructure developments under the SPP, such as the Bahrain Metro, the five planned cities and new tourism zones, are significant. If Bahrain remains on its current trajectory, the construction and real estate sectors should continue to be prominent contributors to both GDP and job creation in the kingdom.
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