In our last blog, we examined alternative finance mechanisms which could see a significant rise in market share in the GCC over the coming decade including mezzanine finance and private equity. Assuming these alternative finance mechanisms become available in GCC markets at levels close to those seen in international mature markets, the effects for GCC real estate developers will be significant.
The Impact of Alternative Finance Mechanisms on Developers and End-usersAccess to alternative finance mechanisms such as mezzanine finance and private equity comes with a price – a portion of the development profits – in return for significant risk reduction and less financial exposure. GCC developers will thus need to increasingly assess their projects on a risk scale, rather than simply a profit scale. The key question for GCC developers will be, how much is risk reduction and reduced financial exposure worth? The answer to this question will drive the deal terms offered by both mezzanine and PE funds.