The CEO of Bahrain’s single largest real estate project, Diyar Al Muharraq, on what makes his development better than the rest.
Several years ago Aaref Hejres embarked on a global tour of the world’s newest urban developments. The former architectural engineer visited the UAE, Kuwait, Australia and the United States in search of inspiration for a new multi-billion dollar development in his home country, Bahrain.
Today, sitting in his plush office, where outside skyscrapers are rapidly growing, he shows CEO Middle East the master plans for Diyar Al Muharraq, the 12km development being built just off Bahrain’s northern coastline.
“Things are changing in terms of creating cities. The United States has created this new urbanism so we got some great ideas from there,” the CEO explains as he flicks through the various artists’ impressions, which will eventually become Bahrain’s largest single development.
“I have this book called the ‘Best Communities in the World’ and I want Diyar to be in there,” he continues. “Not only is it going to have a high local and regional standard but it will also be an international one.”
Hejres’ passion for the project is almost contagious. The Bahraini is an extremely hands on manager, overseeing the smallest of details from the overall look of the development to the continued monitoring of the marine life around the newly created islands. “Sometimes I get criticised for being so hands on but it is only because my heart is in this project. We want to deliver the best and we cannot afford to go wrong with anything,” he smiles.
Bahrain’s real estate sector has been hit hard by the global financial downturn. Around $13bn of projects were halted last year as demand slowed. Although the kingdom didn’t experience the flood of speculative buyers that many Gulf countries did during the boom years, the island still suffers from an oversupply of high-end accommodation. Real estate prices in the first half of this year are down 20 percent compared to the previous year and the market is not expected to make a recovery until 2011 and 2012, according to real estate experts.
But Hejres isn’t concerned about the gloomy outlook, and instead opts to take a long term approach to the country’s real estate sector. “Yes, there is a slowdown of the market globally but this is a big project, it will go through lots of cycles. The good news is that there is a demand in Bahrain,” he says.
Much of the demand is coming from the country’s rapid growth. Bahrain’s current population is expected to double to 2.6 million by 2030, an overall increase of 102 percent compared to 2010, according to Euromonitor. This growth is largely a result of an increase in immigration coupled with the huge growth in the expat workforce and a young population - around 60 percent of Bahrainis are under the age of 30.
Diyar Al Muharraq — which is majority owned by Kuwait Finance House — was re-launched to great fanfare in June 2008 after several revisions to the original master plan. The development was previously known as Two Seas and was shaped like a seahorse, but according to reports the land opportunities were deemed too limited to make the project viable. The new and improved development now features a main island with five smaller islands, forming a long rectangular shape.
The master developer is spending around $3.2bn on infrastructure and land reclamation as well as its own developments. Reclamation for stage one of the project is now complete and infrastructure work is underway. Reclamation has also begun on the second stage. Work is expected to be fully completed in ten to fifteen years.
While Diyar will act as a developer on some of the project’s smaller plots, other companies will be invited to take on the rest of the development in the near future.
The firm has yet to tender to outside developers but Hejres says he is already being approached by a number of developers keen to work on the project. “Demand is there and smart developers are approaching us because they know they can sell the houses; so many other markets are experiencing oversupply,” he says.
Once complete the project will include around 30,000 housing units and be home to 100,000 people. It will also include five-star hotels, a shopping mall, a business district and a 40km stretch of beach, much of which will be open to the public. All government departments will also have a presence as will government schools and health centres.
“It’s a country within a country,” explains Hejres. “You can live there, work there and enjoy. In fact you don’t ever need to leave the city because it has everything for everyone. You will see lots of projects in the Gulf where people just go and live but what makes this project unique is, for example, the fact that you don’t have to leave to take your kids to school, whether they are in public or private school,” he explains.
“You have the business district for work, we even have a car showroom strip, which includes garages and workshops.”
Hejres’ “bigger is better approach” is slightly reminiscent of Dubai days of old when large scale projects were launched at an alarming rate. Back then every development has its own USP and at first glance the Diyar Al Muharraq project seems to be no different. But one of the most significant aspects of this $3.5bn development is the fact that it will appeal to such a wide strata of incomes in the kingdom.
“We have four developments all aimed at different income groups and that’s been the vision from day one. This is a socially driven project rather than commercial one,” explains Hejres.
More than 8,000 units in the development will offer affordable accommodation. As the Gulf’s smallest economy with only a small income derived from oil, Bahrain suffers from a severe housing shortage.
The government provides social housing for households earning less than $1,060 per month but around 53,000 are currently on the waiting list, according to CB Richard Ellis. The international property consultant estimates the figure is growing by 3-4,000 units every year, a rate “which exceeds the one which the government can address” and is set to “worsen in the short-term”.
Developers of social housing in Bahrain face two significant challenges. Most nationals prefer to live in and own a villa on a plot of land owned by them but many are unable to buy land due to the extensive land trading in recent years. The result is that many contractors have been more inclined to build high-end property.
“There is an oversupply at the high-end of the market, and with 5,000 luxury apartments currently in the development pipeline, this situation is only set to worsen,”
Jim Lynn, head of research and consultancy at property consultants Frank Knight, said in a recent report on the state of the real estate market.
Hejres says it is only because the project is so large that it is able to offer affordable housing. “Affordable housing in Bahrain is an issue and because of the scale of this project we can afford it. If it was a smaller project it would be hard for any developer to introduce the affordable aspect.”
He adds Diyar is currently in talks with the Bahraini government to develop some form of public private partnership to address the country’s social housing needs.
“We wanted to do some kind of deal with the government in terms of helping them because they have a long list of housing. We’ve said [to them] let’s have a partnership between the private and the public sector. We’ve drawn up the proposal and we are in talks.”
But social housing isn’t Diyar’s only USP, its green areas will also play a big role in the overall look and feel of the development once it’s finished. Bicycle routes will be lined with trees - which are currently being grown in a nursery to ensure they are mature in time for the first residents in 2012 - while the 40km stretch of beach is expected to play a starring role. “It’s like South Miami Beach. You have the public beach, the corniche and the pedestrian areas for walking, restaurants and coffee shops,” smiles Hejres, adding his is already planning to move in once it’s completed.
It would appear the worldwide trip had some influence on his planning.
Land Reclamation projects across the Gulf
Perhaps the most famous of the Gulf’s artificial islands are Nakheel’s Palm Islands in Dubai. Each of the three islands - Palm Jumeirah, the Palm Jebel Ali and the Palm Deira - is shaped like palm tree, topped with a crescent. All of the reclaimed materials are quarried in the UAE.
Residents began moving into the Palm Jumeirah properties at the end of 2006, five years after land reclamation first began. Work on Palm Jebel Ali started in 2002 and was expected to be completed in 2008. Once complete the project, which is 50 percent larger than the Palm Jumeirah, will include six marinas, a water theme park as well as a Sea Village, which will feature homes built on stilts.
The third in the series of islands is the Palm Deira, of which 80 percent reclamation is complete. The onset of the global financial crisis has significantly scaled back the size of the project.
The Pearl-Qatar in Doha is an artificial island spanning nearly four million sq m. Once completed The Pearl, which is being developed by United Development Co, will create over 32km of new coastline and will accommodate up to 15,000 dwellings. In total the project will include thirteen islands, eight of which be for sale to private owners with the opportunity to build. The largest of the islands will feature a large range of luxury villas, apartments, three five-star hotels and over two million sq m of international retail, restaurants, cafes and entertainment.
Ras Tanura, Saudi Arabia
More than 40 percent of Saudi Arabia’s coastline consists of land reclaimed by dredging and sedimentation. Land for Ras Tanura, near the industrial port city of Jubail, was reclaimed in the 1940s to allow tankers to dock on the gulf coast. Today it is home to the world’s biggest offshore oil facility. State oil giant Saudi Aramco and Dow Chemical recently announced plans to build a $20bn petrochemical plant on the site but reports suggest they are considering relocating the plant due to the cost of reclamation. Dow’s investment in Ras Tanura would have been the largest ever single foreign investment in the energy sector of the world’s top oil exporter and the plant would be one of the largest petrochemical facilities in the world.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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