AFP/ Beirut Ghostly apartment blocks and half-built buildings dot Lebanon, as entrepreneurs and experts fear that the country’s key real estate sector is on the brink of collapse. The small Mediterranean country’s construction sector witnessed an unprecedented boom from 2008, fuelled in part by sales to wealthy Gulf Arabs and Lebanese expatriates. But after civil war broke out in neighbouring Syria in 2011, political insecurity caused these sales to dwindle and local demand to drop. A slump in oil prices from 2014 compounded this slowdown, leaving thousands of apartments unsold across Beirut, and forcing some developers to freeze construction sites. “Some 3,600 unsold apartments exist today in Beirut alone,” says Guillaume Boudisseau, an expert at the Ramco real estate consultancy firm. In front of Beirut’s port, a building dubbed “The Coast” is one of many luxurious apartment blocks desperately looking for buyers.

The tower was completed in 2014, boasting views over the Mediterranean and moored cargo ships from its 500-square-metre apartments. But in the four years since, just two of its 21 flats have been sold. “When we started works in 2010, the context was very different,” said owner Hussein Abdallah, who had hoped to make lucrative sales. Instead, the businessman had to hand over ownership of eight flats in the building to the bank to pay off his debt. Other entrepreneurs have decided to halt building altogether. A road back from the Beirut seafront, the construction of another tower grinded to a halt two years ago, with only the concrete outer shell completed. “We only sold a single apartment off plan,” its owner said, asking to remain anonymous. He reduced the price by 20%, “but it didn’t help”, he added. Near the capital’s iconic Martyrs’ Square, the foundations of another high-brow project — “Beb Beirut” — stand frozen in time, concrete pillars jutting out from the ground, and rusty rebar rods protruding from them. Still cranes loom overhead, while all around the stunted construction site sparkling new apartment blocks appear completely empty. Owner Mireille Choufany decided to stop building two years ago. “Demand is almost non-existent,” she said.

Outside the capital, real estate sales have also dwindled. Sales dropped by 19% during the first 10 months of the year in southern Lebanon, and by the same percentage in the north, according to the country’s real estate registry. Multi-confessional Lebanon has been without a government since May, threatening to derail an already fragile economy. The deadlock is the latest in a series of political crises that make Lebanese reluctant to invest in apartments — both luxury and smaller-scale. To make matters worse, at the start of the year, the central bank suspended a subsidy to real estate loans for less well-off Lebanese. Among them, 33-year-old bank employee Marwan, who signed a contract to buy a flat in January. “The next day, I learnt that the subsidised loans had been suspended”, he said, asking that his family name be withheld. Marwan paid 20% of the apartment’s cost when he signed, but “was counting on the loan to pay the rest”, he said. “Now I risk losing the amount I already paid, without even getting a flat.”

To avoid a devaluation of the Lebanese pound — which has been trading at a fixed rate of 1,500 against the dollar since the mid-1990s — banks increased deposit rates, causing lending rates to jump more than 10%, which further discourages buyers from taking out loans. A banking source said they feared any collapse of the real estate sector could have repercussions on the banking sector. Builders and home buyers owe $24bn to banks, which is equivalent to more than a third of credits to the private sector, the source said. To avoid disaster, bank and real estate companies launched an investment platform in October that aims to raise $250mn to purchase some of the unsold properties. “The aim is to buy up more than 200 flats in greater Beirut and sell them on the foreign market,” focusing on Lebanese expatriates, said Massaad Fares, head of the Legacy One platform. But Wael el-Zein, chief of Lucid Investment Bank which is taking part in the project, says that it will not even cover 10% of unsold dwellings. “It’s a lifebuoy to avoid drowning, while waiting for political respite,” he said. Jihad Hokayem, a real estate investment expert at the Lebanese American University, agreed such initiatives were only temporary fixes. “These measures cover up existing or potential bankruptcies. It’s the beginning of a total collapse” of the real estate sector, he said.