A booming market with growing dispute risks
The real estate markets across the Middle East and Africa are undergoing continued growth. Fuelled by large-scale urban development, infrastructure investment, and a surge in cross-border capital, these regions have become hotbeds for property development and acquisition. Yet, with this rapid expansion comes an increase in the volume and complexity of disputes. Investors, developers, and stakeholders alike must therefore pay close attention to the mechanisms available for resolving such disputes – particularly in cross-border contexts where jurisdictional issues can complicate matters considerably
Disputes in real estate are as varied as the projects themselves. From disagreements over land titles to claims involving delays in construction or breach of joint venture agreements, the nature of these conflicts often requires sophisticated legal tools and thoughtful planning. Against this backdrop, dispute resolution has become a critical consideration – not just when conflicts arise, but as part of any prudent transactional strategy from the outset.
Market trends in the Middle East and Africa
In the Middle East, the continued growth of real estate markets has been driven by national development initiatives and a steady influx of foreign investment. Saudi Arabia’s Vision 2030, for instance, has led to the creation of entirely new cities and megaprojects. Similarly, the United Arab Emirates continues to see high demand in both the residential and commercial sectors, particularly in Dubai, Abu Dhabi, and Ras Al Khaimah. These developments frequently involve joint ventures between local and foreign investors, adding contractual complexity and elevating the potential for disputes.
Africa presents a contrasting yet equally dynamic landscape. Real estate development across the continent is being propelled by urbanisation, infrastructure expansion, and the rise of a middle class with increasing purchasing power. Kenya, Nigeria, and South Africa remain regional leaders, while countries like Angola and Mozambique are attracting attention as emerging markets. Notably, Morocco has also emerged as a key destination for real estate and infrastructure investment, particularly in the wake of the Abraham Accords signed in 2020. These agreements have helped normalise diplomatic and economic relations between Morocco and several Middle Eastern countries, leading to a marked increase in capital flows from the Gulf into Moroccan development projects. The country’s strategic location, stable macroeconomic policies, and growing infrastructure needs have made it an attractive market for investors focused on long-term regional growth.
However, political instability, regulatory ambiguity, and evolving legal frameworks across certain parts of Africa continue to present challenges for foreign investors and domestic players alike.
Evolving preferences in dispute resolution
When it comes to resolving disputes, the choice of forum and method is critical. While litigation remains common, particularly for domestic or lower-value disputes, it is often hampered by slow court systems and unpredictable outcomes – especially in jurisdictions where the judiciary is underdeveloped or subject to political influence. The courts heavily rely on court-appointed experts, who have varied levels of technical expertise. The absence of specialised courts compounds the issue in complex fields. Arbitration, by contrast, is increasingly the preferred route in real estate matters due to its flexibility, confidentiality, and the ability to appoint decision-makers with sector-specific expertise. The rise of virtual hearings and digital platforms has further improved accessibility and efficiency. However, the cost and length of arbitration are important factors which stakeholders in the real estate industry must weigh up when choosing their preferred forum of dispute resolution.
Mediation is also gaining traction across both regions, offering a cost-effective and less adversarial alternative. In situations where the parties maintain an ongoing relationship, such as continuing joint ventures, mediation can preserve business ties while resolving key points of contention.
Real estate arbitration statistics
Statistics from arbitral institutions underscore the growing prominence of real estate disputes. The Dubai International Arbitration Centre (DIAC), for example, reported that 16% of its caseload in 2022 involved real estate matters. Other institutions such as the Saudi Center for Commercial Arbitration (SCCA), the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), the Cairo Regional Centre for International Commercial Arbitration (CRCICA), and the Lagos Court of Arbitration have also seen a notable uptick in real estate-related filings, reflecting investor preference for arbitration in this sector. Most recently, the SCCA reported that 4.2% of its 2024 caseload related to real estate disputes, in addition to 38% of cases which relate to construction and engineering (and hence may also involve real estate developments).
Common types of real estate disputes
The types of claims that arise are diverse but often fall into several recurring categories. Construction-related disputes on real estate projects are among the most common, typically involving delays, cost overruns, or defective work. Disagreements over master development plans and infrastructure obligations frequently arise, particularly where developers fail to deliver on large-scale commitments.
Ownership and sale or transfer disputes also feature heavily, especially in high-value commercial transactions. Joint venture and partnership disagreements are another key area, with conflicts stemming from non-compliance with contractual terms or governance failures. In some cases, financing issues can derail projects mid-development, leading to disputes between lenders and borrowers. Public-private partnerships are also a growing area of contention, particularly when government-backed infrastructure projects fall through or encounter regulatory roadblocks.
Allegations of corruption or failure to comply with local licensing requirements add further complexity, particularly in jurisdictions with limited transparency.
In addition to commercial arbitrations, investor-state arbitrations in the real estate sector are also becoming more prevalent. A recent example that highlights the role of investor-state arbitration in real estate disputes is the case of International Holding Project Group et al. v. Arab Republic of Egypt, heard before an International Centre for Settlement of Investment Disputes (ICSID) tribunal. On 13 September 2024, the tribunal – composed of Pierre Tercier, John Y. Gotanda, and Claus von Wobeser – issued its award, addressing claims involving major real estate investments and regulatory interference. The case illustrates the growing relevance of investor-state arbitration in the sector, particularly in African jurisdictions where state involvement in development projects is common.
Practical guidance for real estate investors and developers
For clients entering into real estate transactions in the Middle East or Africa, several key recommendations emerge. First and foremost, conducting robust due diligence is essential. Investors should seek to fully understand the local regulatory framework, especially in relation to land ownership, foreign investment rules, and zoning requirements. In certain African markets in particular, legal clarity around title deeds and ownership rights can be lacking, increasing the risk of disputes.
Second, contractual clarity is paramount. Agreements should be comprehensive and leave no room for ambiguity, especially when it comes to construction milestones, payment schedules, quality standards, and penalties for breach. Parties must embed detailed dispute resolution clauses, with a clear preference for arbitration where local court systems may not offer adequate protections or timely enforcement. Specifying the seat of arbitration, the applicable law, and the chosen institution in advance will significantly reduce uncertainty in the event of a dispute.
Third, clients should also consider the protections offered by investment treaties as well as domestic foreign investment laws and ensure that their investment structures are designed to benefit from such instruments, particularly when investing in jurisdictions with higher political or regulatory risks.
Finally, technology should not be overlooked. Embracing tools such as electronic document platforms, virtual data rooms, and remote dispute resolution technologies can streamline both the transaction process and the resolution of any subsequent disputes.
Conclusion
As real estate markets in the Middle East and Africa continue to expand and attract capital, disputes will inevitably follow. Arbitration is increasingly becoming the method of choice for resolving these conflicts, particularly in high-value, cross-border contexts. By planning ahead, conducting thorough due diligence, and embedding sound dispute resolution strategies into their contracts, clients can better protect their investments and position themselves for success in this fast-evolving sector.
Client Alert 2025-153
