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Abu Dhabi to force firms to build homes for poor
Abu Dhabi may force real estate developers to allocate 20% of their housing units to low-income families as the government looks to rectify the current supply shortfall that continues to push prices up.
Government officials said developers were focusing too much on high-end properties and there were not enough houses being built for middle- and low-income families, which make up the majority of the emirate's population.
Officials said the lack of affordable accommodation for this segment of society was contributing to the emirate's soaring housing costs, which rose 30% year-on-year in January, HSBC said.
"The majority of the developers are focusing on the high-end market, a fact that contributes to the imbalances in the housing market today," said Butti Ahmad Al Qubaisi, assistant undersecretary at the Abu Dhabi Department of Planning and Economy (DPE), quoted UAE daily Gulf News.
The DPE made the recommendation in a recent housing study, which will now go to the executive council for approval.
Housing costs have been blamed for driving inflation to record highs in the UAE.
Inflation in the Emirates hit a 19-year high of 9.3% in 2006 and likely rose to 10.9% in 2007, according to a recent estimate by the National Bank of Abu Dhabi (NBAD).
"Our studies revealed that rents constitute 58% of the overall inflation rate [in Abu Dhabi], while it stands at 60% at the federal level, followed by energy and transport with 15%, and foodstuff with 11%," said Ahmad Al Minnawi, economic expert at the DPE, quoted the newspaper.
"According to our study, the burden of housing is about 60% or more on those who earn 5,000 dirhams or less, while it constitutes about 22% for the higher income segments."
Real estate prices in Abu Dhabi could to shoot up by as much as 25% this year, HSBC said in a report last month, driven by the rising cost of raw materials due to further weakening in the value of the US dollar and by the continued shortage of housing in the market.
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Posted by Rodger, Dubai, United Arab Emirates on 21 April 2008 at 10:15 UAE time
This is a good initiative but the Abu Dhabi authorities need to be very careful about the way it is implemented. Simply forcing developers to charge a lower price for 20% of their project will not work; it will affect the viability of the entire development and will risk damaging the "high-end" 80% as well.
The primary driver for resale or rental values (for any given size or type of property) is location, therefore you risk a situation where the first buyer or tenant gets a windfall profit by reselling or subletting at the true market rate; I'm sure this is not what is intended.
A good technique would be to zone the city so that you have areas set aside for low cost housing and make planning permission for a high-end project conditional on the developer also undertaking a project in the low-cost zone. Alternatively, the Government themselves could commission a large-scale building project in these low-cost zones; by keeping rents low and operating a strict waiting list system (to prevent subletting and "key money" scams) they could influence general market prices and help contain rent increases across the city.
Posted by T Crowe Semler, Santa Fe NM, USA on 20 April 2008 at 19:16 UAE time
Abu Dhabi is wise to address the issue of "gentrification". When the working class can no longer afford to live within the city proper we all lose...
The increase in commuting, the lack of connection, not feeling part of the community, and a constant struggle to afford housing. These pressures create a serious class stratification that is counter productive when we are following the modern models which, are "back to the future" "Neo Classical" communities urban planning for ALL the people.
Posted by BUDDHADEB MOOKERJEE, Dubai, U A E on 20 April 2008 at 18:00 UAE time
This is a very welcome move. In the glitz and glamour of high end developments we are losing sight of the less fortunate who deserve state support all the more. I hope the other emirates, mainly Dubai, take a cue and emulate this laudable move.