LD No. 8 of 2007 boosted investment in real estate
As mentioned earlier, LD No. 8 - like Law No. 10 - failed to prioritise the productive sectors and to grant subsidies and tax concessions exclusively to industrial and agricultural projects, that could have channelled economic resources into modern sectors with the potential for economies of scale and global competitiveness. LD No. 8 reinstated more private ownership - the ownership of land - and thereby served the private interests of the ruling elites and their allied new commercial bourgeoisie. Again, the state failed to address major limitations in the investment reform laws, and market liberalisation was hence bound to benefit a certain group of society at the expense of others. Because LD No. 8 of 2007 allowed local and foreign investors to own land, Gulf money poured into real estate. Al-Zaim pointed out that investments executed under Law No. 10 flowed into the transport sector (private car rentals) while those executed by LD No. 8 flooded into real estate (interview with Al-Zaim, 2007). According to him, the new LD is not an improvement on the previous investment law, which was amended expressly to induce investment in real estate.
Gulf investors placed their funds, which were earned from the oil windfall of 2002-08 oil boom, in the real-estate sector, because speculation on real estate offered high and quick returns over the short to medium term (Barout, 2011). A few Gulf investors also conducted commercial activities that were profitable over the short term. The most prominent was the Syrian-Qatari Holding Company, which was established at the end of 2007 by LD. No. 8 with a capital of S? 250 billion (SIA, 2007). Its investment activities concentrated on real estate, banking, hotels and restaurants, and other services. Speculation on land property prices culminated in a real estate boom in Syria - and other Arab countries - in the late 2000s (UN, 2009). Housing prices increased by 30 per cent every year during 2003-06, while in 2009, they increased by 40 per cent compared to 2008 (Seifan, 2011: 5). Similarly, the sale and rental price of office space in central Damascus increased significantly in 2009, with the average rental cost increasing by 24 per cent in the third quarter of 2009 compared to the same quarter in 2008. Meanwhile the sales price of retail space increased by 40 per cent in the third quarter in 2009 compared to the same period in 2008 (The Syria Report, 26 April 2010). According to a survey conducted by Cushman & Wakefield, Damascus registered eighth among the most expensive cities in office rental prices (The Syria Report, 12 October 2009). While the real estate boom played a crucial role in enriching the Syrian rich, it was harmful to those with lower incomes. Because workers' incomes could not stretch to cover the increase in rental prices, they were unable to obtain decent housing.
