SA Global Ventures, through its affiliation with Criterium Engineers, now 60 years old, offers training, systems as well as licensing and franchise opportunities in the building inspection marketplace. Computer software in both English and Arabic has been developed to report on construction quality. Below, we discuss its development and ways it may be used.

MARKET NEED/OPPORTUNITY
Increased demand for housing in the Middle East and North Africa is well-documented with high demand for new homes, estimated to be 3,000,000 in Saudi Arabia alone. The infrastructure to fund and develop safe and durable housing is only being put in place now. The ability to participate in this expanding market, help ensure the public good and protect investors, using tried and true methods as well as innovative new techniques, represent great challenges and opportunities. To meet the needs, three challenges must be met. First, financing must be available. Second, a system to determine property values must be in place that support funding levels. Finally, the quality of construction must be assured so that the equity in the property is preserved.

Funding has become more available as a result of new mortgage laws that are designed to comply with Shariah law, direct government funding, and private equity investment. However, lenders face greater risk as the financing structure is more analogous to a “rent to own” approach in the west. In conversations with several lending institutions, SAGV confirmed a market for inspection services paid for by the banks.

Appraisers face the challenge of having few comparables by which to evaluate real estate. This is being addressed by a government/industry partnership, Taqeem, which is assembling such a data base and offering training in association with the Appraisal Institute in the US. It is noteworthy that private companies are also development such data bases in Egypt and perhaps elsewhere.

Construction quality can, to some degree, be ensured by building codes. However, even cities that have adopted building codes do not enforce them and many areas do not have codes at all. Quality therefore varies widely. There is a need to help buyers and investors confirm a basic level of habitability, durability and reliability.
Our experience suggests that the inspection market is in its earliest stage of development in the Middle East. A few small companies offer a basic service but none offer the robust approach and experience provided by SAGV.

BARRIERS TO ENTRY
The MENA inspector faces specific challenges:
• Most homes are new, and defects often have not yet become apparent
• Unlike in the west where most residential construction is wood and steel, in the MENA region, as in other parts of the world, construction is concrete.
• Because the concrete receives a clean and attractive skim coat or parge, it is difficult to identify defects visually.
• The MENA market also employs other techniques that differ from the west, particularly in plumbing and HVAC systems.
• Certain non-construction issues are also important, such as proximity to a mosque and property valuation in the absence of a market comparables data base.

The residential inspection market in the US followed a typical S-curve adoption. The founder of Criterium Engineers established the first inspection service in the US in 1957. It wasn’t until the 70s, however, that the practice started to become commonplace until it became ubiquitous in the 90s. The commercial inspection market followed a similar but much steeper curve, beginning in the early 90s and reaching full penetration by the end of the decade. With systems already in place and rapid growth, but with certain bureaucratic and institutional obstacles, it is reasonable to project that an inspection market in the Middle East would grow at a rate somewhere between the two.

APPROACH
The approach envisioned by SAGV involves 3 basic levels of offering. Level I involves a visual-only inspection. Although it offers the least protection, it is relatively inexpensive. An engineer should be able to perform 4-7 of these per day. Level II involves incorporating certain measurements in the process such as plumb and levelness, pressure, etc. An engineer should be able to perform 2-4 of these within a day. Level III requires additional instrumentation; specifically ground penetrating radar that would be used to detect the existence and location of reinforcement within concrete as well as several additional tests. An engineer could perform no more than 1 or 2 of these per day. It is a much more costly inspection but has value in a region where most construction is concrete.

A distinguishing aspect of the MENA market is that, unlike the US where clients are sought individually, the service can be marketed directly to banks and to the Ministry of Housing. With this added leverage, market penetration will be faster.

TECHNOLOGY SOLUTION
SAGV employs a reporting system originally developed by Criterium Engineers, an international building inspection engineering company. The system was substantially modified to reflect construction techniques and other factors within MENA. In addition, a protocol for scanning concrete using ground penetrating radar (GPR) was established as an optional part of the inspection service.

Content has been loaded into iForm, a data entry format created by Zerion Software of Virginia. The iForm structure was extensively modified to create an intelligent format whereby standard paragraphs could be selected and edited, or new paragraphs could be created on the fly. The content was also translated into Arabic by Industry Arabic in Washington, DC so that the user can choose whether to use English or Arabic for the report.

The software that was developed is designed to be used in the field on either an Android tablet or Apple iPad. The inspector completes the inspection, entering data into the form and when saved, the iForm software converts the file into a pre-programmed report format which may be submitted directly to the client or (and this is preferable) back to the office for review and submission to the client.

After consulting with Concrete Testing Labs, SAGV worked with GSSI based in Nashua, NH, a world leader in Ground Penetrating Radar technology. GSSI’s Structure Mini-Scan tool can be used to identify reinforcement within concrete structures. Results can be incorporated into the SAGV report. Training can be arranged through GSSI’s Athens office.

BUSINESS MODEL
In our travels to the Middle East, we have concluded that it is vitally important to work through a well-connected partner who has influence and credibility with the market drivers at the banks and Ministry of Housing. Two fundamental models are on offer:
• Licensing Model. SAGV will train the licensee in the use and operation of its proprietary systems. The licensee would pay a training fee and a use fee based on an annual commitment. Assuming 250,000 homes coming on line each year and a 5% penetration, the licensee would perform 12,500 inspections/year. Using only the Level I protocols, that equates to $3.75 million USD/year. Historical profitability runs about 11% or $412,000 after all fees and expenses.
• Franchising Model. To qualified entities, SAGV may grant a franchise under its master franchise for a territory within the region. The franchise requires an up-front fee and an annual fixed fee and includes more extensive training, coaching, the use of the Criterium name and logo, and certain other rights and obligations. Operating income may be similar along with the potential to grant additional sub-franchises in the region.