By Waleed Ibrahim and Jason Benham

BAGHDAD/DUBAI (Reuters) - Iraq's parliament passed an investment law on Monday that would allow foreigners to own land for housing projects, and is designed to streamline regulations and applications for foreign investment, lawmakers said.

Iraq hoped for a tide of foreign investment as the sectarian bloodshed triggered by the 2003 U.S. invasion subsided in the last two years, but bureaucracy, red tape and outdated land ownership laws have deterred investors.

"This is a huge achievement for everybody, the parliament, the cabinet and the Iraqi people. This will remove many obstacles blocking the investment process in Iraq," National Investment Commission Chairman Sami al-Araji told Reuters.

The investment law does not cover the oil sector, nor hotel construction, but housing is a potentially huge growth industry.

Iraq's old real estate laws only allowed the lease of land to foreign investors for a limited time.

Shi'ite-majority Iraq hopes to build millions of new housing units, including some near Shi'ite Islam's holiest sites. The millions of pilgrims who visit each year are likely to show a strong interest, especially as hotel accommodation is limited.

GULF DEVELOPERS EYE IRAQ

The law is likely to be welcomed by developers. Iraqi officials say Gulf construction and real estate firms have shown increasing interest in the country.

"From the legal side, this is a step in the right direction. We believe that Iraq holds value in real estate investment for developers in the Gulf," said Markus Giebel, chief executive at Dubai developer Deyaar.

Iraq has the world's third-largest oil reserves, and with a clutch of oil deals pending, hopes to leapfrog to third place from eleventh among the world's oil producers.

Iraqi leaders say oil revenues will be plowed into infrastructure battered by years of war and sanctions, potentially creating more opportunities for developers.

"This is ... an interesting move and it may be timely because globally, real estate markets appeared to have bottomed. Iraq is a fully fledged economy and while there are risks there, there are also good opportunities," said Saud Masud, head of research and senior real estate analyst, Midde East and north Africa at UBS in Dubai.

The new law, which must now be approved by Iraq's presidential council, also aims to speed up the process of applying for investment licenses and to clarify federal and provincial powers when dealing with investors.

(Writing by Mohammed Abbas: Editing by Ron Askew)

Iraq passes key investment law -  Source