Simeon Kerr in Dubai
Dubai’s Emaar Properties aims to tackle one of the main socioeconomic drivers of the unrest that has driven Arab revolutionary ferment this year: affordable housing.
Dawahi Development, the property company’s specialist subsidiary, has been 18 months in the making, so the initiative predates the Arab spring, but the timing of this week’s launch is striking.
In a changed world, the developer that built the Burj Khalifa, the world’s tallest tower and the embodiment of Dubai’s deluxe real estate market, says Dawahi is as much about philanthropy as it is about profit.
"The focus will be on value housing to meet the needs of the Arab youth," says Mohammed Alabbar, Emaar chairman. "It is philanthropic in the sense that our communities will create new jobs and support the youth population. However, Dawahi Development will operate as a commercial initiative."
Dawahi, named after the Arabic for "suburbs", is seeking to gain government contracts and private sector joint ventures across the Arab world, but will initially focus on Saudi Arabia, the United Arab Emirates and other Gulf states.
From the poor Shia villages of Bahrain to the industrial port of Sohar in Oman, many young people complain of similar financial woes: being unable to start a family because they cannot afford a house, or having to start married life in their parents’ house.
Dawahi, which will announce its first contracts "soon", says it will use economies of scale to build "value housing" developments to help meet the rising demand in this neglected property segment. Emaar also points out that the number of Arab families with an annual income of $25,000 a year will double to 28m by 2025.
The company, which will fund projects via government funding and bank lending, hopes financial reforms will deepen mortgage markets and that governments will underpin the initiative by making available cheap land.
The new regimes in north Africa and the oil-rich Gulf states recognise the pressing need for housing for their burgeoning populations.
Arab governments have already pledged $150bn worth of mid-income housing projects in the region to help tackle the shortage of 5m units in the region’s fastest growing cities, Emaar says.
Jones Lang LaSalle, a property consultancy, said in a recent report that the most pressing shortages were in Egypt, Iraq, Morocco and Saudi Arabia.
The Egyptian government has pledged to build 1m extra units but Jones Lang LaSalle puts total demand for affordable homes at 1.5m.
Saudi Arabia, potentially Dawahi’s most interesting market, is facing a shortage of 400,000 homes, which is set to increase as population increase outstrips supply, the consultancy says.
The Saudi government, which is expected this year to raise real spending by 25 per cent, has announced a bumper SR500bn ($133bn) package as it seeks to ward off discontent among its large, young population.
The bulk of this stimulus, according to the Institute for International Finance, will be apportioned to the construction of about 500,000 homes at a cost of approximately $67bn over a number of years.
Bahrain, which has seen the worst unrest in the Gulf, faces demand for 40,000 new homes as it seeks to combine political reforms with economic handouts.
The government, which was slow to address domestic housing needs in the past decade, is receiving $10bn aid from the Gulf Co-operation Council to improve standards of living.
Dubai’s property crash may have solved the issue of affordable housing in the oversupplied emirate, but the rest of the UAE – especially Abu Dhabi – faces a shortfall of 20,000 new homes, says Jones Lang LaSalle.
