Private debt is forecast to become a greater source of funding for real estate investment in the Middle East, according to a report from investment manager Jones Lang Lasalle (JLL) and law firm Clifford Chance.
In the last ten years, the size of the global private debt market has grown five times over to around $638 billion as of the end of 2017. Yet the Middle East has largely relied on commercial banks as the main source of funding for real estate investors and developers.
But greater market transparency and supportive regulations will make private debt an increasingly attractive alternative source of funding for real estate investors and developers, states the report.
"With historical limitation of terms on lending from commercial banks, it is not unreasonable to assume that up to 10% of the total real estate debt market could come from private debt providers within the next decade,” said Gaurav Shivpuri, head of capital markets for JLL in the Middle East and North Africa.
“Collective investment vehicles will also emerge as debt providers, as investors see debt as an attractive capital stack for taking real estate exposure, especially given the interest rate cycle we are entering,” he added.
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