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Wed 4 Jan 2012 12:14 PM

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Bahrain inks record $505m social housing deal

Plan will include 1,042 low-cost units aimed at tackling kingdom's affordable housing shortage

Bahrain inks record $505m social housing deal
A construction site in Bahrains capital Manama. The Gulf state has a 40,000 shortage of low-cost homes

The Bahrain
government has signed a record BD208m ($550m) with a local developer to build
more than 4,000 homes in a bid to ease the Gulf kingdom’s chronic low-cost housing
shortage
.

The
deal, a first in the GCC, will see Bahrain-based Naseej build 3,110 social
housing units
and a further 1,042 low-cost homes in the Northern City, Al
Buhair and Al Lawzi projects.

The
partnership is the Gulf kingdom’s first public, private partnership (PPP)
agreement and follows months of civil unrest that saw thousands flood the
streets to demand a bigger say in the country.

Minister
for Housing Basim bin Yacob Al Hamer said the deal was a step towards
addressing the
more than 55,000 people in Bahrain on a waiting list for social housing.

“[It
is] part of
a series of innovative solutions the ministry has accepted to reduce waiting
lists and shorten the period of time between application and delivery of
housing units,” he said.

The
affordable housing units will first be sold to those already on the ministry’s
waiting list using a loan from the government. The remaining will be sold on
the open market.

Bahrain-based
Naseej will finance the project with 30 percent equities and 70 percent debts, the
company said in an emailed statement.

Living
costs were a key issue in the wave of political unrest that swept Bahrain and other
Arab states last year, toppling rulers in Egypt, Tunisia and Libya. The MENA region
has an estimated affordable housing shortfall of 3.5 million, pricing homes out
of the reach of many citizens.   

Saudi Arabia has the largest shortfall in the Gulf of
400,000 homes followed by 40,000 homes in Bahrain, 20,000 in the UAE and 15,000
in Oman, according to consultancy Jones Lang LaSalle (JLL).

More
than 86 percent of Bahraini households qualify as low-income, JLL said.

Several Gulf states have pledged to ramp up spending on
housing in the wake of the Arab Spring revolutions, in a bid to secure quality
housing for their growing populations.

Saudi has pledged to spend $130bn on social projects such as
building low-cost housing and creating jobs, while King Abdullah in March
pledged to spend $67bn on 500,000 new homes.

But some analysts have warned the GCC’s high land prices
could deter developers from building low-cost homes, making it financially
impractical for developers to cover their costs.

Deepak
Jain, head of strategic consulting for Jones Lang LaSalle, said the deal
remained a significant step in Bahrain’s attempt to tackle its housing
shortfall.

“Whilst
the will has been there on the part of the government, the execution had been
stalled as the government on its own was unable to deliver the required
housing,” he said.

“PPPs
are key as they allow for private sector participation which brings in
expertise and capital and also enables faster execution. In the past we had not
seen many successful examples in housing but this seems to be a good model.”

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Red Snappa 7 years ago

This would be a valid move in Dubai or is that what Mr. Alabbar and Emaar's new affordable housing initiative is all about? Most of the newcomers are in the affordable housing category anyway so it makes sense.

The oversupply is all luxury so that will have to wait until foreign companies come flooding back,once the world's economy has been completely reconstructed.

Dr. Murad 7 years ago

Overcoming the psychological barriers of utilizing panel construction technology, as opposed to brick-and-mortar, in building family homes is one way of filling the shortage at an affordable rate. But, a bigger hurdle remains the lack of a mortgage banking industry with capital market's operational, regulatory and management infrastructure for mortgage-financing the sale of these homes at long-term affordable rates; and the recycling of the mortgage lenders' funds through the subsequent securitization and sale of such home-loans portfolios on the capital market would be another way for mortgage lenders and home developers to exist in filling this regional shortage.

Selling a term loan under a mortgage lending title will continue to place homes outside the reach of home buyers; and the lack of a mortgage banking industry with customized regulatory and market infrastructure will make the region's home shortage deeper.

Bassam Kameshki 7 years ago

This is very big step for us in Bahrain as this is considered the PPP project in housing, i am sure there will be obstacles arising but with listening to the right professional consultants and right people, the government will learn and become much better for the next PPP and the ones after that.