By David Ingham
Qatar puts itself on the map with a $2.5 billion real estate project that could rival others in the Gulf for size and ambition.
|~|pearlofgulf.jpg|~||~|Spectacular real estate projects are no longer the sole preserve of Dubai. In April, United Development Company (UDC) took the wraps off the Pearl of The Gulf, a US $2.5 billion effort to develop a manmade island off the coast of Doha.
UDC envisions the Pearl eventually covering 400 million square metres and encompassing 7,600 residential units housing 30,000 people. The current population of the whole of Qatar is only around 800,000, according to the CIA Factbook.
For the first time in Qatar’s history, homes within the boundaries of the development will be sold to foreigners on a freehold basis, with residency rights coming as part of the deal. “We are proud to offer the first freehold properties in Qatar for international investors and look forward to welcoming the first residents in 2006,” said Hussein Al Fardan, chairman of UDC. “The Pearl of the Gulf has been designed to include all the latest facilities and services in an exclusive island retreat.”
Like similar mega developments elsewhere in the Gulf, The Pearl promises to be a self contained community. Supporting the 30,000 residents will be 60,000 square metres of retail outlets and restaurants, community and entertainment centres and four marinas with space for 700 boats. International hotel companies will also be competing to manage the three luxury hotels that are planned on the island.
Construction of the island began on April 5 and the first phase of residential construction is scheduled to be ready by September 2006. Full completion is pencilled in for 2009.Qatar has been making a lot of noise recently with a new airport, a massive educational park and several hotels under construction. Although a 400 million square metre manmade island may seem ambitious, Khalil Sholy, managing director of UDC, says that the project perfectly complements these other developments.
“Qatar now plays an important role regionally and internationally within the LNG [liquid natural gas] business,” says Sholy. “In addition to that, Qatar has embarked on a number of ventures that will put it on the map. They are hosting major conferences; they have invested a huge amount of capital, over a billion dollars, in the Education City; there is a vision to establish Qatar as a touristic attraction as well.”
Some of the ingredients required to give The Pearl a chance of success already appear to be in place. Unlike in other parts of the Gulf, foreign ownership of property within the development is legal, thanks to an Emiri decree that will allow the island to have its own by-laws.
UDC’s chairman also claims that Qatar’s financial institutions are ready to provide home loans. “All the banks are ready to finance buyers,” explains Al Fardan. “Arrangements have been made between the company and the banks.”
The company has not yet, however, revealed how much residential properties on the island will cost. Pricing is set to be revealed in May when the first set of sales begins and Sholy is confident that “phase one will not last an hour before it’s sold.”
Sources of funding for the project have also not yet been disclosed. Both foreign and local banks are reported to have expressed interest and UDC says funding plans will be revealed within “the next two months.” Khalil Sholy talks of adopting “quite sophisticated means [of fundraising.]”
Different methods could be used for different phases of the project and sukuk, a Shariah compliant alternative to bonds, have been mentioned as a possibility. Qatar’s huge per capita GDP of around US $24,000 in 2003, its abundant natural gas resources and the liquidity of its financial institutions imply that fundraising shouldn’t be a major challenge.
Long term overseas residents of Qatar, who count for around 75% of its population, will form a large part of the target market for Pearl of the Gulf. They are expected to snap up villas and apartments as an alternative to ‘wasting’ money on rent.
UDC is vague about whether it will position the Pearl as somewhere for Europeans to buy a second holiday home. It also avoids the question of whether it is competing with similar developments in the Gulf for overseas buyers. “Different countries have different things to offer,” says Sholy.
“The difference between us and others is that we are a growing country, we have a very strong backbone for economic growth and we see this continuing for many years to come. This is a major advantage that we have here in Qatar.”
Recent statistics back him up. The World Bank predicts that Qatar’s economy will grow 8.2% in 2004 and the country has 17.9 trillion cubic meters of proven natural gas reserves, more than 5% of the world total.
The country has also been investing big money in a bid to turn itself into a tourism and conference destination. According to the Qatar Tourism Authority, the country welcomed 500,000 visitors in 1999 and its aim is to accommodate 1,250,000 in 2005. More detailed figures indicating whether or not that target is on the way to being achieved are not available.
In the last two years, Qatar says that it has invested $20 million in ‘tourism promotion’, in an effort to target the conference and incentive market. The Sheraton, InterCon, Marriott and Ritz-Carlton hotels all now have conference facilities capable of hosting events for several hundred people.
US $140 million has been spent to upgrade the existing Doha International Airport. In the meantime, work on a new airport is underway. Phase one of the project alone has a budget of US $2 billion.
When the new airport is finally complete, in around 2015, it will be able to handle around 50 million passengers annually. Meanwhile, hotel construction continues.
By 2006, when the country is scheduled to host the Asian Games, Qatar’s hotel room inventory should have doubled from 3,600 to more than 7,000, with a target of 10,000 by 2010. “We believe Qatar can make a real and very valuable contribution to world tourism, offering a dramatic new holiday experience for the more discerning holidaymaker,” says Fred van Eijk, chief executive officer of Qatar Tourism Authority.
Qatar is investing now in a bid to leave itself less dependent on its mineral wealth in the long term. The success of projects like Pearl of The Gulf will reflect the success of this strategy.||**||