Sustainable Real Estate: Unveiling the Lucrative Potential of Alternative Investments in the MENA Region

Authored by - Alexander Cavendish, CEO, Hedonova, a US based Hedge Fund


In recent years, there has been an increasing investor curiosity around non-traditional investments called alternative investments. Alternative investments, as their name suggests, are non-conventional investments that enable investors to access asset classes across the globe that can bring them higher returns and hedge them against the risk of traditional market volatility. According to Preqin, a leading alternative data reserve that gives the latest insights on the alternative investment landscape to alternative investment professionals, one of the most promising alternate investment asset classes is real estate. Within that asset class, a sub-asset class of sustainable real estate is gaining popularity amongst investors. Overall, Preqin estimates that the real estate sector CAGR is set to grow by 3.4% by 2025 – in terms of actual numbers the sector will grow up to 1.2T$ from 1T$ in 2020. However, sustainable real estate is an even more lucrative opportunity for investors and investing companies in the MENA region. Here’s delving into the reasons why and the type of lucrative alternative sustainable real estate options:

The reasons behind the success of sustainable real estate investment in the MENA region

Long-term value

Sustainable real estate is catching on in the MENA region because of the long-term financial value it offers to both investors and the MENA economy. Real estate projects are incorporating design elements like energy-efficient systems, smart technology, water-conserving, and waste management features. They are also harnessing renewable energy like solar power and wind energy and getting green building certifications. These sustainable-first measures are improving operational efficiency and longevity of properties, and in turn, increasing their market appeal and overall financial returns.    

Tightened regulatory protection

Another reason sustainable real estate is on the rise in the MENA region is because of tightened regulatory measures on the part of the governments. The main result is improved transparency so that investors can carry out due diligence with ease. Governments are also giving tax incentives like grants, breaks, and subsidies and actively establishing green building certification programs to enhance market appeal and improve the financial viability of sustainable real estate developments to potential investors.

Benefits of investing in the sustainable real estate market for MENA investors

Higher returns

The most straightforward benefit of investing in the sustainable real estate market is the scope for earning higher returns than those in the traditional stock market landscape. Because of the cost-cutting and energy-efficient features of sustainable houses, buildings, and other real estate developments, investors can expect higher market valuations, higher rental yields and better tenant retention, more tax incentives, among other financial benefits.    

Hedge against risk

Sustainable real estate has tended to be more resilient in the face of market volatility, inflation, and recession, typically because of the longer lease tenures attached to them. Because of having versatile design elements that minimize operational costs and can withstand unpredictable climate changes, sustainable real estate remains comparatively safer during times of instability. This longevity helps increase their resale rates, occupancy prices, and overall occupancy values.

Positive social and environmental impact

Sustainable real estate investments are in line with the changing investor ideals of being socially and environmentally conscious in their investment decisions. Research shows that more and more investors actively investigate whether the companies they invest in are committed to making a positive social and environmental impact.

This article is authored by Alexander Cavendish, Chief Executive Officer, Hedonova

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