Gulf developers lower gaze to affordable homes
By Praveen Menon
DUBAI (Reuters) - Burnt by grand and audacious real estate projects, which became financial burdens when market bubbles burst three years ago, property developers in the Gulf are putting more emphasis on mundane but affordable housing.
Their motives are mainly economic, but they are being encouraged by governments, which are trying to improve mass living standards after this year's political unrest in the region. A chronic lack of affordable, quality housing for growing populations was one factor behind the unrest.
"Post-Arab Spring, countries like Saudi and Bahrain have realised that affordable housing is an issue," said Deepak Jain, head of strategic consulting for the Middle East and North Africa at real estate services firm Jones Lang LaSalle.
"The focus now is on building as per occupier demand, a concept that is relatively new in the region."
Saudi Arabia has promised to spend about $130 billion (82 billion pounds), or around 30 percent of its annual economic output, on social projects such as building new houses and creating jobs over an unspecified period. Earlier this year, King Abdullah pledged 250 billion Saudi riyals (42 billion pounds) to be spent on 500,000 new homes.
Bahrain is pushing to fill a longstanding shortage of about 50,000 affordable homes, hoping this will also mitigate some of the discontent behind the unrest that hit the tiny island state in February and March.
By launching big housing projects and awarding the contracts to developers, governments in the Gulf can influence the types of homes being built and the pricing.
In April, for example, Abu Dhabi awarded a 21 billion dirham (3.6 billion pound) contract to state-linked firms to build housing for the local population. It has said it wants to provide "adequate and modern housing" for citizens "to help achieve social stability." Many property developers in the region are partly owned by the government or, in the case of the United Arab Emirates, were bailed out by the state after the market soured and they ran into debt two or three years ago. Aldar Properties, the biggest developer in Abu Dhabi, was given a $5.2 billion bailout by the state-owned Mubadala fund. Continued...