An apartment building is seen in Beirut, Lebanon, July 10, 2020. (Photo by Bilal Jawich/Xinhua)
Lebanese flee their money from banks to real estate amid the serious financial crisis in the country.
by Dana Halawi
BEIRUT, July 10 (Xinhua) -- Lebanon's real estate sector saw significant demand following years of stagnation as most depositors in Lebanese banks decided to flee their money into real estate amid fears of a possible haircut given the financial collapse in the country, experts say.
Apartment buildings are seen in Beirut, Lebanon, July 10, 2020. (Photo by Bilal Jawich/Xinhua)
"At least 2 billion U.S. dollars were transferred from banks to the real estate sector since the beginning of this year," Mazen Moharam, CEO of Moharam and Itani Developers, told Xinhua.
Moharam explained that people have been withdrawing their deposits through bankers' checks to developers for residential apartments, to guarantee that their long life savings stay safe in case Lebanese authorities resort to haircut given the country's financial collapse.
Lebanon has been going through the worst financial crisis in its history amid shortage in U.S. dollar caused by economic slowdown, the drop in cash injection from Lebanese abroad, and transfers by big depositors to foreign banks, reducing the central bank's foreign currency reserves and leading to a shortage in dollar for businesses and individuals.
Hence, banks put restrictions on cash withdrawals in Lebanese pound and U.S. dollars while stopping exchange from Lebanese pounds to dollars, which created great panic among depositors who resorted to withdrawing some of their money and storing them in their houses or investing their money into the real estate sector.
Moharam noted that internet sites promoting real estate projects such as OLX, a network of leading marketplaces present in over 30 countries, saw the viewership of properties in Lebanon surpassed recorded 22 million since January 2020.
A traditional house is seen in a building in Beirut, Lebanon July 10, 2020.(Photo by Bilal Jawich/Xinhua)
Raja Makarem, owner of RAMCO real estate developer, told Xinhua that demand has tremendously increased since the beginning of this year.
"Developers who were indebted to banks were able to settle their dues by accepting bankers' checks from buyers and paying them to the banks in return for their loans," Makarem said.
Those developers who have already settled all their dues to banks have stopped selling their units to avoid being paid with bankers' checks out of fear from losing their money in Lebanese banks, added Makarem.
The unofficial capital control imposed by banks on the Lebanese caused a total loss of confidence in the banking sector.
Most Lebanese have previously placed their money in the banking system to benefit high interest rates on their deposits instead of buying properties or investing in projects in the country.
An appartment building is seen in a building in Beirut, Lebanon July 10, 2020. (Photo by Bilal Jawich/Xinhua)
On the other hand, banks lent depositors' money to the central bank and the latter financed the government using people's money, noting that the government has defaulted on its debt earlier this year.
Hence, the Lebanese have been trying to withdraw their remaining deposits from banks at all costs.
As a result, it has become harder to find residential apartments in some areas of the country as most developers have already sold their units.
Developers interviewed by Xinhua do not expect new real estate to start anytime soon in the country due to the increase in the price of the U.S. dollar to the Lebanese pound, while developers are forced to import their material in foreign currency amid restrictions in banks transfers.
"We will not see any new projects developing soon due to the shortage in U.S. dollar and the increase in its price which triples the prices of materials imported by developers," Moharam said.
He added that developers, who have unfinished projects, are currently suffering as they cannot continue construction since prices of materials have increased to a great extent.
Bank Audi's Lebanon Weekly Monitor stated in its last report that cement deliveries, an indicator of construction activity, declined by a yearly 55.7 percent in the first quarter of 2020.
Cement deliveries reached 300,334 tons in the first quarter of 2020, down from 677,629 tons compared to the same period of 2019, reflecting a continued slowdown in the construction activity in the country. ■