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Foreign Investments in Lebanon

Foreign Investments & Ownership in Lebanon

To understand the concept of foreign ownership in our Country we should look upon and study the topic of foreign investments in Lebanon and all the issues or matters related to this topic which leads us to more than one question:

1- Why an investor would invest in Lebanon?

2- Moreover, Why an investor would invest in Real Estate in Lebanon?

3- What is the legal frame for investing in Real Estate in Lebanon?

4- Some numbers and statistics concerning foreign ownership in Real Estate in Lebanon.

5- Real Estate Properties Market on the Rise in Lebanon

1- Why Lebanon For Investments?

Located at a strategic geopolitical crossroads situated on the eastern coast of the Mediterranean Sea, Several factors help to contribute to providing Lebanon with a suitable environment for local and international investments.

Indeed, with its liberal economic regime, it safe business environment, the wide access it gives to the markets of the Middle East and its extremely highly-skilled labor force, the country can guarantee investors the very best conditions for the development of their businesses.

Not to forget a solid, secure and banking system with full professional secrecy.

The Legal framework and taxation, give investors as well incentives to invest in Lebanon.

2- What Makes of Lebanon an Attractive Market for the Real Estate Properties and Projects?

Real Estate has always been one of the piles of the economy’s life in Lebanon.
Believe or not, Real estate properties in Lebanon never knew a crash or even significant decrease.

Properties may have decreased due to some country factors but on the long run and historically real estate properties or lands never went down, which is pretty amazing.

That could be explained by the fact that Lebanon is a small country and has a limited geographical space for both residential and commercial properties.

Another important fact is that the demand in Lebanon is real and not subject to exaggerated speculations and for most of the cases (As the governor of the central bank mentioned few days ago, Mr. Riad Salameh, most of the demand, over 80% is real and linked directly to the end consumer or client)

Other Factors encourage foreign ownership in Lebanon and foreign investments these are mainly:

reduced interest rates, high liquidity in the banking sector and specially lately after the crisis with the flow of money coming from Lebanese expatriates and Arabs, low and favorable taxation, long-term mortgages and in a certain period the rise of the oil prices on the market which boosted the arab investments in Lebanon.

Since 1969, the law and legal framework governing real estate and foreign investments into that sector in Lebanon was amended many times to encourage the acquisition of real estate by foreigners and therefore to encourage the foreign direct investments in Lebanon.

That leads us to our next topic which is the legal framework for foreign ownership or investments in Lebanon.

3- Legal Framework for Foreign Ownership or Investments in Lebanon

Foreign ownership in Lebanon is governed actually by Legislative Decree Number 11614 dated 4 January 1969 and it subsequent amendments notably Law No. 296/2001.

The ownership of real estate properties in Lebanon by foreigners is governed by the following principles:

A-Restriction related to the prospective buyer

Regarding individuals:

Any individual who does not hold the Lebanese nationality is treated as a foreigner.

As for Corporate entities:

Legal entities which are established outside Lebanon are considered as foreign entities.

Are considered foreign entities according to the text of Law:

- For companies, when all of the parts or the shares are not held by Lebanese citizens or when its articles of association permit or do not forbid the transfer of said shares or parts to non-Lebanese individuals or companies that are not fully Lebanese.

So to respect the articles of that law an entity will be considered as Lebanese:

-If all of its shares or parts are owned by Lebanese individuals or Lebanese companies and the articles of incorporation forbids the transfer of any shares or parts in that company to any foreigner.

B- Restrictions Related to superficies or law formalities

1- The Law allows foreign ownership by any person / individual or entity of up to 3,000 square meters of land in the aggregate (including built property) across Lebanese territory.
Spouses and minor descendants are considered as one individual.

2- The acquisition of real property by foreigner above 3,000 square meters requires the grant of a permission / license issued by a decree of the Council of Ministers who decides and has a discretionary power to accept or refuse an application for a License.
That decision is not subject to appeal.

3- The Council of Ministers enjoys full and its decisions are not subject to any form of appeal.
4- Applicant should complete the purchase of the real property and registration in a delay of 1 year maximum, under the risk of having his license cancelled.

As for the foreigner given the license for building a property he will have to complete that project or building in a delay no longer than 5 years which can be renewable for the same period.

C-Territorial Limitations

Real Estate properties owned by foreigner can not exceed the following limits:

-3% of the total surface of the Lebanese territory

- Within the limits of a particular Caza, 3% of the total surface of the said Caza can be owned by foreigners, not more.

-Within Beirut (the capital), 10% of its total surface can be owned by foreigners.

Note that the above mentioned limitation are applicable on the whole surface and not on the constructible area, which means that the mentioned limitations are more elevated if we take into consideration the area considered to be suited for construction.

D-Registration Fees for Foreigners

On 3 April, 2001, the Parliament introduced amendments to the legislation governing the Foreign Acquisition of Property. Law No. 296/2001 which provided incentives for foreign investment in real estate by making two important steps:

1-simplifying and easing the legal limits on foreign ownership of property, and

2-decreasing the estate registration fees to 5% for foreign investors (Same as Lebanese citizens)

Thus, registration fees, net of the additional duties, have been reduced by 1% for Lebanese investors and 11% for foreign investors.

Other incentives are given as well by The Investment Development Authority of Lebanon (IDAL) which is a public institution enjoying independent legal personality with financial and managerial independence, under the direct administrative authority of the Prime Minister.

In the end, we can say that various exemptions and reductions are given to encourage the foreign investment in the real estate market in Lebanon.

4- Some Numbers and Statistics Concerning Real Estate in Lebanon and Foreign Ownership

A-General Information

Here are some statistics and numbers showing the development of the real estate sector.

Source: Land Registry, Real Estate Sales Volume / Year:

2006: 3.1 Billions
2007: 4.2 Billions
2008: 6.5 Billions
2009: 7 Billions.

Prices of Real estate properties in prime locations such as Achrafieh and Ras Beirut has more than doubled or tripled up from 2003 to 2009.

Figures released by the United Nations Conference on Trade and Development show that foreign direct investment (FDI) in Lebanon totaled $3.61 billion in 2008, constituting an increase of 32 percent from $2.73 billion in 2007, FDI inflows to Lebanon totaled $2.68 billion in 2006 and $2.79 billion in 2005.

The FDI performance of Lebanon in recent years contrasts sharply with that of most other regional countries.

In 2003, the country was the one of the largest recipient of FDI flows in the region, attracting almost 28 per cent of total inflows.

Lebanon also had by far the highest FDI to GDP .

Foreign direct investment activities were mainly concentrated in the real estate and financial sectors, with Lebanese expatriates accounting for a significant proportion of total inflows.

Most of these FDIs are directed to the real estate market.

More than 50 per cent of total FDI in 2006 were directed to the residential and real estate sector, while financial services and tourism received approximately 40 per cent.

In the second quarter of 2009, the average residential property price in the Beirut Central District (BCD) soared 40.7% to LBP8.85 million (US$6,000) per square metre from the same period last year,

Beirut Central District (BCD) has the most expensive properties in the country, with prices around 33% higher than Beirut’s outer districts. Residential property prices in the BCD have risen by about 24% annually in recent years.

High-end properties located in Beirut’s posh neighborhoods are still in demand with asking sales prices ranging from LBP1.2 million (US$3,500) per sq. m to LBP5.9 million (US$4,000) per sq. m.

The number of property transactions was 167,054 in 2008, up 8.4% from a year earlier.

Small-sized to medium-sized properties in Beirut and Mount Lebanon are in demand. Sales are dominated by properties with areas between 150 sq. m to 300 sq. m.

Beirut accounted for about 52.4% of Lebanon’s 2009 transactions by value, according to the Real Estate Registry, followed by Metn (19.2%), Kesrouan (12.3%), North Lebanon (6.8%) and South Lebanon (5.8%).

Property sales are expected to rise further, as demand continues strong, and the economic outlook is bullish.

B- Construction activity on the rise

Total construction permits, an indicator of future activity, rose 23% to 6.27 million sq. m. in the first half of 2009 from 5.1 million sq. m. from the same period last year, according to the Order of Engineers of Beirut and Tripoli. The surge in construction permits was a response to increasing housing demand.

In 2008, construction permits (measured in terms of area) rose by an astonishing 79% to 16.1 million sq. m., from an average of 4.1% for the past two years. Cement deliveries, also a gauge of the state of the construction sector, increased 7.7% to 4.2 million tons in 2008.

5- Real Estate Properties Market on the Rise in Lebanon

The real estate market seems to benefit from its Arab neighbors’ troubles. Despite the crisis engulfing Dubai and other GCC countries, Arab investors and wealthy Lebanese expatriates have been moving money into Lebanon’s property market.

While many countries slipped into recession in 2008, the Lebanese economy grew by a spectacular 8.5%, the highest rate for 15 years. In 2009 growth of 6% was predicted to be reported, up from an earlier projection of 3%, according to Central Bank of Lebanon..

Lebanon’s potential is growing large helped by many factors: Tourism, Weather, Beirut liberal society…etc…

The wise policy followed by local banks and Lebanon Central’s bank governor and political stability makes of Lebanon a very attractive market at this time for local and foreign investors.