Real Estate and the Banking Intermediary Between Sellers and Buyers: Will the Real Estate Market Boom or Collapse?
Salam Jabbar Shihab, Political Economy Researcher
- Several macroeconomic factors are driving the development of Iraq’s real estate market. The Iraqi economy benefits from high revenues, and there is a genuine and growing demand for housing. As a result, demand is expected to increase by more than 6% annually in the coming years.
- The real estate market is expected to experience a temporary stagnation due to monitoring procedures, identifying loopholes, and adapting to obstacles and challenges. However, the market is likely to adjust to these new procedures within 6 to 12 months of their implementation.
- Real estate activity will not be significantly affected in cases where housing prices are below 100 million Iraqi dinars. In fact, demand in this segment is expected to increase in the coming months. This decision will also drive higher demand for agricultural land, unregistered properties, and residential complexes that do not require formal registration with the Land Registry
- The expected slowdown in the real estate market will have broader economic implications, particularly because the real estate sector is a major employer. It plays a key role in generating income for marginalized and low-income groups, in addition to being a significant employer of unskilled labor—a crucial component of Iraq’s workforce. As a result, a series of important measures must be taken to prevent widespread job losses in this sector.
- The Iraqi market will witness the rise and fall of new real estate developers (brokers), with some unable to keep up with the ongoing technical and regulatory changes.
- Prices in below-average areas are not expected to be significantly impacted by the downturn. However, a limited decline in real estate prices is possible, though a market collapse in the near term remains unlikely.
- A transitional period of 6 to 12 months will occur in the real estate market, during which sales will stagnate. After this period, real estate activity is expected to recover, with demand surpassing 2024 and 2025 levels.
- The Central Bank’s decision will contribute to regulating the real estate and housing sector in the medium and long term. It will also help structure the sector, enabling better planning and the formulation of strategies with long-term horizons.
- In the future, all financial transactions in the real estate sector are expected to be conducted through the banking system, including sales below 100 million Iraqi dinars. This move aims to fully regulate market transactions.
- There will be active attempts to create lobbies and pressure groups aiming to circumvent or illicitly exploit this procedure. Some real estate developers (brokers), in cooperation with banks or relevant financial institutions, are expected to lead these efforts. Therefore, it is crucial for the Central Bank to tighten oversight of related procedures while also streamlining bureaucratic processes and reducing the time required to complete transactions.
- Monitoring the sources of funds used in purchasing and converting agricultural land into residential plots is crucial. This sector could witness illicit financial flows aimed at acquiring large tracts of land for conversion.
- The new regulations will stimulate the banking sector by increasing the flow of money through formal financial channels. However, banks must encourage this shift by providing credit facilities to buyers and investors.
- Addressing legal and regulatory loopholes in the new procedures is essential. Institutional adjustments within the banking system will also be required.
- A public awareness campaign should be launched to educate citizens about the new transfer mechanisms and processes. This will help reduce resistance to implementation and ensure a smoother transition to the new system.
