Ramallah rising

Amid political and economic turmoil, the city of Ramallah has established itself as a rare example of stability and development in the West Bank. Yet as Gulf developers look to make the most of new opportunities in Palestine, such growth remains precarious in the extreme.

Last month palestinians took to the streets in celebration of their first ever international football match on home soil. Victory against the Jordanian national team led to a vast crowd of fans streaming out of the brand-new stadium in Ramallah and into the surrounding streets, chanting nationalistic songs and sending fireworks into the night sky.

Not that the football is the only thing to shout about in Ramallah. Located 10 km north of Jerusalem in the centre of the West Bank, the city is considered the unofficial capital of the Palestinian National Authority and is home to a population of around 188,000.

And somehow, amid political and economic turmoil, Ramallah has managed to establish itself as a rare example of stability and development in the West Bank.

"Ramallah is becoming the economic capital of Palestine," says Sami Alsabawi, spokesperson for Union Construction and Investment (UCI) in the West Bank.

UCI is one of Palestine's largest property developers, buying land and building residential and commercial units for sale and leasing. Land prices in the West Bank have risen significantly in the last few years, according to a recent report by the World Bank.

The cost of central land in Ramallah has doubled annually in the last three years reaching $372 a square foot, the report said. The report cited Israel blocking development in 60 percent of the region under its control, as the reason for the dramatic price increase.

"This is partly intentional as Israelis are posing heavy restrictions on other areas such as Nablus, Bethlehem and Gaza," says Alsabawi. "The restrictions are driving Palestinians living in other cities to move to Ramallah, which is creating an increase in demand on housing."

He also notes that both commercial and residential units are in high demand, but the latter is "top priority". "Palestinians living in other cities are finding it difficult to travel to Ramallah everyday. It's much easier for them to take residence in Ramallah closer to where they work."

Additionally, the restrictions imposed by Israel on Palestinians living in Jerusalem - such as high taxation and municipal restrictions - are making it increasingly difficult for people to continue to live there, says Alsabawi.

"Ramallah, being very close to Jerusalem, is offering an alternative to Palestinians from Jerusalem to own a home," he says. "Many are being very reluctant to give up their homes in Jerusalem, but it's a slow process that has been quite affective for the Israelis."

Another reason for the explosion in property prices was been the drop - until recently - in the strength of the US dollar. With the decline of the currency, many people turned to real estate and land as a "safe investment".

While the rise in construction material costs has boosted property prices, the rising cost of land is becoming the "most expensive aspect of real estate development now. The appreciation in land prices is what's causing real estate prices to go up substantially," says Alsabawi.

According to consultant Samer Assaf at ARIC Engineering and Consultancy in Ramallah, land prices have also been pushed up by the growing number of investment companies buying up vast areas of land for development.

"We have a larger number of big projects, and developments such as cities and suburbs. Land has mainly been bought for these projects, which increased the price of land significantly," says Assaf.

Most investors are from Palestine, he says, but the West Bank is seeing more interest from Palestinians abroad, and GCC companies looking to property development. Saudi-based The Land Holding has ventured into the West Bank with the $250m Al Irsal project, developed in partnership with the Palestinian Investment Fund (PIF).

Also located in Ramallah, Al Irsal will include residential, hotel, commercial, retail, and office spaces.

Qatar also has its foot in the door. The boss of Qatari Diar, the Gulf state's real estate investment arm, has partnered with one of Palestine's biggest property developers and businessmen Bashar Masri.

The plan is to build Rawabi, the first new large Palestinian city in the West Bank. Masri was unavailable for comment, but a spokesperson at the developing company Massar, confirmed construction of the multibillion-dollar project will start in 2009 and is currently in the planning phase.

"I think we are seeing an increased cash flow from this year's rises in oil prices, which had created that liquidity in the Gulf region," says Alsabawi. "A lot of that money is being spent on real estate developments across the Middle East, and Palestine is no different. We're just getting a smaller share than many other countries but still see a bit of that money filter in.

UCI advertises and markets its property and land offerings directly to Palestinians living in the Gulf, namely the UAE, according to Alsabawi. "We have Palestinian Americans who are now buying homes here, Palestinians from the UAE buying homes in Palestine and taking advantage of the investment opportunity," he says.

Today, buying property in Palestine is providing people with a combination of things, Alsabawi explains. In addition to fulfilling Palestinians' "nationalistic patriotic duty of owning a home in Palestine they can actually now merge that with their desire for a good return investment".

However, owning land or a dream home in Palestine is not within everyone's reach. In certain areas of the West Bank, land prices are rising to a degree where they become "prohibitive for all but high-value commercial activities or high-rise apartment buildings", as the World Bank report stated.

"There is definitely a gap between what people can afford and prices. The wages haven't increased to match the new living expenses and real estate costs," says Alsabawi.

The banking system has so far been unable to absorb that increase. Mortgages remain much lower than the average price of the homes to come, he says.

"Banks here don't lend to individuals $200,000 and $300,000 mortgages. Real estate prices have hit that price range and banks are not capable of lending those numbers," says Alsabawi, adding that the banking system is trying to catch up with the rapid increase, which is starting to take on a "bubble-like appearance".

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