Investors Prepare To Unlock Market Potential
A partial lifting of sanctions and the possibility of a permanent agreement with the West, has drawn the interest of foreign construction companies that are keen to invest in Iran. Should a long-term agreement over Iran's nuclear programme be reached, we will see the opening of one of the biggest markets in the Middle East - with outdated infrastructure presenting numerous opportunities to investors. As such, recently confirmed interest from Korean companies presents a considerable upside to our construction industry forecast for the country.
Iran's construction industry has suffered from years of underinvestment, partly as a result of international sanctions which have been established to isolate the country from regional and global dynamics. The industry has grown by an estimated 0.6% - remarkably low growth considering the size of the country's economy and its population. Iran suffers from a severe shortage in the housing market and its transport and energy infrastructure are insufficient to cope with existing demand. In terms of industrial construction, we expect growth to be driven by the construction of refineries and petrochemicals plants as the country aims to increase its refining capacity.
In the context of a more optimistic outlook for Iran, now that a temporary agreement has been reached on the nuclear issue, the country has the potential to become one of the most attractive markets in the Middle East. The conciliatory approach of President Hassan Rouhani has led to more open and constructive negotiations over the country's nuclear programme and this has led to a partial lifting of sanctions that could herald a 'return to normal' scenario over the medium term. This was evidenced by the deal reached in January 2014 between Iran and the so-called P5+1 countries - China, France, Russia, the UK and the US plus Germany. The accord starts a six-month timetable to reach a final agreement on the nuclear programme.
|Highly Volatile Growth|
|Iran Construction Industry Value (IRRbn) And Real Growth %|