Daniela Andreevska is Marketing Director at Mashvisor, a US-based real estate data analytics company

 

Foreign direct investments (FDIs) in the real estate sector offer important opportunities for the sector to develop and grow at a pace that cannot be achieved with domestic capital only. However, many countries lack the necessary means to attract foreign investments into the industry. Many of these policies concern the ease of doing business in general, while other indispensable policies and reforms have to be implemented to target overseas investors in specific.

Ahead of our upcoming roundtable, entitled “Means of Attracting Future Real Estate Investments”, Marketing Director of Mashvisor Daniela Andreevska shares her thoughts on the most effective policies a country can adopt to attract foreign inflows, particularly into real estate, as follows:

(1) The first step in attracting foreign investors is the digitalization of the property industry to make them aware of the opportunities the country offers. Because of the distance and their general absence of knowledge about local real estate prospects, the first place where overseas investors will look for opportunities is the internet. This means that you have to establish national policies to enhance the sector’s digital presence as a whole and make it stronger than those of your peers.

(2) Another tool for making investors familiar with the investment opportunities in the local residential and commercial real estate market is founding a national investment promotion agency (IPA). The sole mandate of this agency should be to draw the attention of overseas investors, facilitate their transactions, and assure that they put their capital in local real estate projects.

(3) Reforming the tax system to offer tax breaks and other benefits for major investments, including from foreign nationals, should be on top of the national agenda. Indeed, tax incentives are a major factor for FDI in any economy, counting the real estate sector, as investors naturally look for ways to cut down their expenses and increase their profit.

(4) Additionally, foreign investors look for markets with top-notch protection of their investments. Indeed, studies show that in economies with well-developed investor protection policies, investments are less sensitive to financial constraints and result in higher revenue and profitability. Transparency in the real estate market is also key to attracting FDI.

(5) Similar to domestic investors, not all foreign investors will be able to finance real estate developments with all cash. Thus, it is important to assure that foreign nationals have access to credit and can borrow money in your economy under reasonable conditions. As they are investing in intangible assets, these can serve as guarantees for loans.

(6) For investors who are going in all cash, it is crucially important to have an easy and cost-effective way to facilitate money transfers and bring their money to your economy. Money transfers through banks or other institutions need to be available and unproblematic.

(7) Up-to-date and well-functioning infrastructure is also important for any domestic or foreign capital provider. It is essential to ensure offering all types of infrastructure, including transportation, telecommunication, energy, water, amongst others, and thus, provide investors with easy access to their investments as well as with all the means needed to operate profitable real estate projects.

(8) In order to improve the experience of foreign investors and expedite their operations, having all information and resources in foreign languages is necessary. The IPA’s staff and key persons in the real estate industry should be fluent in at least one foreign language.

(9) A major impact on the level of FDI in real estate is migration policies and rules governing entrance and prolonged stay in your country. Many countries have been able to raise the level of foreign investments in the local real estate market by providing major investors with 10-year multiple-entrance visas.

(10) The past decade saw unprecedented growth in the short-term rental industry. More and more individuals and part-time property investors are shifting from investing in traditional, long-term rentals to investing in Airbnb-style, short-term rental properties. That’s why it is important to introduce new legislation which legalizes owner-occupied and non-owner occupied vacation rentals in residential neighborhoods, at least in the hottest tourist destinations.

Investors are always looking for the best opportunities to put their capital in foreign markets in order to diversify their portfolio. Logically, they go for not only the most profitable but also the most accessible and most secure economies to ease their business operations and protect their assets. Implementing the policies outlined above will give any country the competitive advantage it needs in order to attract FDI in the real estate sector. Join Invest-Gate’s roundtable on October 16 and get a grasp of the opportunities and challenges in Egypt’s real estate investment environment.