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Interview with a Property Developer in Iraq

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Damien Degueldre is the Vice President of Sigma International Construction Iraq; the Iraqi division of a US based company, that specialises in construction, engineering consulting and project development. As a company, Sigma International Construction has set itself apart by partaking in challenging construction projects in the line of crossfire. With projects involving the renovation and reconstruction of the Iraqi Ministry of Defence, the Baghdad Police College and the Electoral Commission Building under their belt, Sigma International Construction are developing a new residential development in Erbil, the capital of Kurdistan in Northern Iraq called the American Village.

We asked Damien to share a few thoughts about the real estate scene in Erbil and Iraq at large with us, and he was kind enough to oblige.


1. Speaking on behalf of readers, I think the first question on everyone’s mind is – Why Iraq? Why invest in Iraq when there are other politically stable economies to invest in that offer decent returns?

Sigma International Construction is a US based company with major operations in Iraq. Our main partner is an Iraqi American originally from Erbil in the Kurdistan region of Iraq. In 2006, after 4 years of hard work in Iraq, Sigma International Construction decided to buy a large parcel of land in the Kurdistan region to implement a large residential community.

The Kurdistan region is a secure area, with incredible development potential and amazing mountain terrain. When we made the decision to develop in Erbil, the Kurdish Regional Government was implementing a new investment law to facilitate foreign investment. We thought it was good timing and a great opportunity to invest in Kurdistan. At the time, risk was an important factor, but we also factored in the return on investment, which was also as important. Still, we always keep in mind the medium to long term. Today, after two years in the area, we have noticed huge changes and improvements.

2. Can you tell us more about Erbil?

Erbil is the capital of the Kurdistan region. Since 2003, the city has seen increasing level of change and development for the better. A lot of construction is taking place all over the city which would include a brand new international airport. Foreigners are always surprised on their first visit to Erbil; they usually never expect the city to be so developed.

3. How safe is Erbil?

Erbil is very safe. The Kurdish Regional government (KRG) is putting a lot of effort and money to ensure high security in the city and the region. It is critical for the region to maintain high levels of security that attracts investors and newcomers to the region.

4. What is the state of the housing market in Erbil – i.e. demand Vs. supply of housing units?

The housing market is growing. People are looking for higher quality standards. We have positioned our houses in this new market where home buyers are looking for quality and basic infrastructure. Also, as more and more foreigners enter the country, the demand for international standards is growing for renting and purchasing. It is very hard to obtain accurate numbers but we notice a continuous demand for such standards.

There is also a large demand for lower cost houses but as it is still very complicated to obtain loans for buying houses, we have targeted the middle-upper class market.

5. Is the current growth sustainable?

Yes it is sustainable as we have a large Kurdish expat community looking to return to the area. We also have a large expat community establishing itself and more and more home buyers from Baghdad looking for a vacation home in the Kurdistan region. The region is a well known and desirable destination for all Iraqis.

6. How has the current global credit crisis affected the American Village project and the Erbil market in General?

So far, the credit crisis has not affected us as the local banks do not and have never provided finance or mortgages to house buyers. The general uncertainty in the global economy slowed down our sales at the end of 2008. We also noticed home buyers were taking more time to decide themselves but at the same time, within the same period, we noticed an increased number of visitor viewings at the village and a high interest in our houses. The same visitors have now returned to the American Village to buy their houses.

American Village Coverage on Channel 4 News


7. Could you shed some light on the objective of the American Village project?

The American Village is an open residential community based on a US suburban housing design scheme. The idea of the village is to first provide international standard infrastructure and housing. This includes full water supply including an irrigation network, a complete sewage network that includes underground waste and water sewage treatment plants, round the clock 24/7 electricity and modern roads with US type curbs and gutters facilitating water evacuation whenever rain comes.
The other idea of the village is the concept of creating an open friendly community facilitating communication between neighbours that should hopefully break communication barriers sometimes faced in this part of the world.

8. What are the typical buyer profiles of homes in the American Village project?

We have all types of buyers: businessmen, doctors, Kurdish expatriates returning home or looking for a second home, foreigners, retirees… We have also started to have more and more families settling in the American Village primarily to be close to Choueifat International School so that their kids would be within walking distance from the school. The American Village is clearly located where Erbil city will expand in the near future.

9. Would you advice buy-to-let investors or institutions to buy units in the American Village project for the sole purpose of renting out the properties?

Yes, we already have a few home buyers who rent their properties and we have had an increasing demand in the last few months especially from foreigners.

10. What would be the annual occupancy rate & typical rent or a standard entry level home?

You can expect to rent a house between $3,500 to $4,000 per month for a unfurnished house or $4,500 to $5,000 for a furnished house. The fact that you have full infrastructure with 24/7 electricity available enables such monthly rates.

11. So a $250,000 home, renting at $5,000 per month would give investors an annual income of $60,000 or a gross Annual Return on Investment (ROI) of 24% (not bad at all, making your money back in about 4 years)
Yes that is correct. But the time to buy is now as we will not maintain such pricing for our houses forever.

12. Could you tell us more about your parent company – Sigma International Construction ?

Sigma International Construction was established in the US in 2000 and then in Iraq as a Limited Liability Company in 2003. We are a Class A Contractor in Heavy Construction and we have accomplished large projects in Iraq such as the Ministry of Defence of Iraq, the Baghdad Police College and the Electoral Commission Building. You can find additional information on our website www.sigmagroupiraq.com

13. Does Sigma Group intend developing in other cities in Iraq?

Yes, Sigma International Construction is planning to do so but only till we complete the American Village project. We don’t want to spread our resources till the American Village is totally settled. We have now commenced building the commercial area and restaurant in the village. Once we will have 200 families settled in the village, we will be strong enough to expand our knowledge and expertise to other parts of the country.

Thanks you for your time.

Contact

If you would like to make enquires about investment opportunities in the Erbil property market or the American Village project please use the following form to contact Damien Degueldre directly.