Gulf Developers Focus on Affordable Housing by Hook or by Crook
19 September 2011
Property developers in the Gulf have changed their focus, and are now looking towards building more affordable housing. The main motivation is financial, but many governments are also actively “encouraging” the move, because of a desire to improve living standards in the wake of the Arab Spring uprisings. Unaffordable property was partly to blame for the unrest in countries like Saudi Arabia and Bahrain, and this is forcing developers to listen to the demands of the masses and take the incentives of the government.
It certainly makes more sense for developers in the Gulf to build more modest homes, as many have been left with luxury properties which they cannot sell or rent. The UAE was particularly hard hit as much of the property boom was driven by speculators, and has resulted in price reductions of over 50%.
Saudi Arabia is due to spend around $130 billion on social housing and creating new jobs. Meanwhile Bahrain has a shortage of around 50,000 affordable homes, which it is now intending to fill in the hope of appeasing some of the discontent the erupted into violence in February and March.
Quite a number of developers are owned or partially owned by the government in the Arab world, and others have even been bailed out by the state. The biggest developer in Abu Dhabi, Aldar Properties received a $5.2 billion bailout by a state owned fund. These governments are exerting their power in order to steer development; in April Abu Dhabi awarded a $5.7 billion contract to state linked firms to build housing for the local population. Abu Dhabi intends to provide adequate housing for its citizens with the aim of achieving social stability.