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Sat 17 Oct 2015 01:03 AM

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Abu Dhabi plans to impose affordable homes quota on developers

Real estate consultancy Cluttons welcomes move which aims to address shortage of affordable stock in the UAE capital

Abu Dhabi plans to impose affordable homes quota on developers

A plan by the Abu Dhabi Urban Planning Council to address the UAE capital's shortage of affordable homes has been hailed by real estate consultancy Cluttons.

Abu Dhabi Urban Planning Council said this week it plans to enact legislation requiring 20 percent of every new development to offer affordable homes.

The new policy could be introduced before the year-end after Abu Dhabi’s government has studied the policy, Falah Al Ahbabi, the council’s director general, was quoted as saying in local media.

Like Dubai, the lack of what is classed as affordable stock remains limited and has, as a result driven tenants and buyers into markets on the peripheries of the city, Cluttons said in a statement.

The move could see a shift away from previous real estate trends which has seen the vast majority of developments skewed toward the luxury end of the market.

It said at Al Reef for instance, year-on-year rents jumped by almost a third as tenants were drawn in by the relatively affordable annual price tag of AED125,000 ($34,038) for a three bedroom villa, which compares to AED189,000 for three bedroom villas elsewhere in the city's residential investment zones.

"When you consider that an average expat household aspiring to purchase a home has to contend with an average annual rent of AED204,000 against an average household income of AED199,000, the problem of the lack of affordable housing in the UAE capital is incredibly clear, especially when you factor in the 34 percent increase in average house prices since 2010," Cluttons said.

Cluttons added that it remains to be seen whether the new affordability in Abu Dhabi will take the form of discounted rental properties, are offered under some sort of rent-to-own scheme or if they are simply sold at a discounted market rate to those who are eligible.

"The eligibility criteria set for potential buyers will need to be carefully checked and enforced if the scheme is to be a success," it said, adding that no property re-sales for a period of 5 years may be a way to deter speculative activity and would also mirror moves being mooted by the UK's conservative government as a way to limit buying activity to genuine end users.

"The introduction of a way in which the emirate can tap into the potential of the expat tenant generation could have huge ramifications for the city's investment appeal, but needless to say, the establishment of a formal private rented asset class will set Abu Dhabi's market apart from the rest of its regional peers," Cluttons added.

In March, Abdullah Rafia, assistant director-general of planning and engineering at Dubai Municipality, was quoted as saying that it has sent the proposal to Dubai’s Executive Council that would ensure that 15-20 percent of a developer’s project is aimed at lower earners.

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