Dubai’s Emaar sets sights on low-cost housing market

Analysts warn home financing, rent caps needed for affordable housing to flourish
Dubai’s Emaar sets sights on low-cost housing market
Emaar has launched a division to build ‘value housing’ across the MENA region
By Shane McGinley
Mon 24 Oct 2011 12:54 PM

Emaar Properties, builder of the world’s tallest tower, is
switching its gaze to affordable housing in a bid to capitalise on government housing
schemes aimed at addressing the region’s chronic housing shortfall.

The Dubai-listed developer said Sunday it had launched a division
to build ‘value housing’ across the Middle East and North Africa, opening up a
potentially lucrative new revenue stream.

“The public sector alone cannot bridge the gap for value
housing across the wider region,” said

Mohamed Alabbar, chairman of Emaar Properties, in an emailed
statement.

“The number of families in the region with an annual income
of over AED100,000 ($25,000) is expected to double to 28 million by 2025.”

The Middle East and North Africa has an estimated affordable
housing shortfall of 3.5 million with nearly half in Egypt, Jones Lang LaSalle
said in September.

High land prices coupled with the cost of infrastructure,
limited home finance to low-income households and poor financial returns have
all contributed to the region’s severe shortfall in midmarket housing, the consultancy
said.   

Iraq has the second largest shortfall of affordable housing
(1 million) in the region followed by Morocco (600,000), said JLS. Saudi
Arabia, the wealthiest Gulf state, has the greatest need in the Gulf compared
to 40,000 homes in Bahrain, 20,000 in the UAE and 15,000 in Oman.

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 Arabia has promised to spend $130bn on social projects
such as building new houses and creating jobs, while King Abdullah in March
pledged to spend $67bn on 500,000 new homes.

Bahrain and Egypt are also pushing to meet the shortfall
following widespread unrest in the Gulf Arab state and an uprising that topped
former Egyptian president Hosni Mubarak in March.

In April, Abu Dhabi awarded a AED21bn ($5.7bn) 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".

Analysts said any steps to address the MENA region’s
affordable housing shortage must be supported by access to home financing

“A campaign to create low to medium-cost housing will be a
productive one unless the developers understand that there is more to creating this
housing than just building it,” said

Tom Bunker, investment sales consultant at real estate
agency Better Homes.

“Financing needs to be made available for those who wish to
buy.”

Rent caps should also be enforced, to stop speculators
snapping up lower-priced units and leasing them on at a significant profit, he
added.

 “I am not one to look
towards government to get involved in projects, but if we want a real low to
medium-cost housing scheme, it should be managed by the government who can cap
the rents and possibly provide financing to those who need it.”

Mario Volpi, head of residential sales and leasing at
Cluttons in Dubai, said the rise of midmarket housing could help spur a
resurgence in regional property markets.

“[Emaar is] focusing in on a newly emerging niche within the
wider Arabic market. Owning a home is the main goal of most families but
affordability is always the key issue,” he said.

“This initiative will create jobs and regenerate the areas
of the Middle East emerging countries that have been affected by the Arab
Spring.”

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