Affordable housing a GCC priority

Affordable housing a GCC priority
Updated 06 October 2012

Affordable housing a GCC priority

Affordable housing a GCC priority

A mismatch between supply and demand has caused a crisis in the Gulf Cooperation Council (GCC) housing market spurred by rapid population growth, rising house prices, and increasing urbanization. Property for renting and buying in most of the main cities is out of financial reach for most of the young middle and lower-income classes. GCC governments have to action now to prevent the problems caused by inadequate housing worsening.
Housing is an economic asset, an investment and a market commodity. It is a means for poverty alleviation. Homeownership usually promotes wealth accumulation, allows the building of wealth through home equity growth, and boosts a better quality of life. Housing is also a major social issue as well as a basic condition for survival. A good housing policy helps to maintain political stability and a secure social order while preventing problems related to homelessness, poverty and exclusion.

The Housing Problem in GCC Countries

In spite of the oil-based wealth of the region, the supply of housing affordable by those on a low or average income is constrained by lack of finance schemes and scarcity of available land, resulting in a huge unmet demand for housing among lower-income households of both nationals and expatriate workers. Wealth created by the oil boom has increased young people's aspirations for their living standards, but it has also created obstacles by encouraging high-cost construction. This has put property for buying or renting in most of the main cities of the region out of financial reach for the majority of the young middle- and lower-income classes.
The shortage of affordable housing is one of the social problems underlying the unrest in the Arab region. High youth unemployment rates have made it harder for young people to secure a house. Housing shortage causes stress for young people who have to spend most of their income on housing. It may also be a cause of marriage delay or even marital breakdown as housing is still linked to traditional family values in the Gulf region where the groom and his family are usually responsible for the expenses of marriage including housing.
The GCC housing crisis has been spurred by rapid population growth, the high cost of land and rising house prices, increasing urbanization and lack of competition. Increased migration of population from rural to urban areas as well as an influx of foreign labor led to the expansion of large cities in the region causing a chronic shortage of housing and a huge increase in price. Available land is high in cost not only due to its scarcity but also because most landowners leave it unused letting its value increase.
In Bahrain, the housing crisis is acute mainly in Manama where demand is high. More than 55,000 Bahrainis are on the wait-list for low-cost housing. In Kuwait, the waiting time for a government housing grant is several years. Rising housing costs are an obstacle for middle- and low-income Kuwaiti families to homeownership. In Qatar, the massive influx of foreign labor has led to high population growth and a heavy burden on the residential market. Housing problems have emerged in greater Doha region both for expatriates and nationals with limited income. In Oman, the demand for affordable housing continues to be high.
In Saudi Arabia the housing market, the largest in the GCC region, suffers from high land prices, high sale prices and a shortage of small houses. Estimates project that the country needs at least 15,000 housing units annually for residential property, but there is a serious mismatch between high prices of houses and lower salaries. Most Saudis live in rented accommodation and it is estimated that only 30 percent of Saudis own their houses. The cost of building a small house is around $ 200,000, out of reach of many young Saudis. But as elsewhere, they prefer not to buy apartments for cultural reasons as well as lack of satisfaction in quality of building and high costs of maintenance and repairs.
In the United Arab Emirates (UAE), both Abu Dhabi and Dubai experience a serious housing shortage for lower- and middle-income nationals. As rents in Dubai are still considered to be lower than in Abu Dhabi, many residents who live in Dubai commute daily to work in Abu Dhabi. Emiratis applying for affordable housing in Abu Dhabi have to wait years and according to data published (April 2011) by the Abu Dhabi Chamber of Commerce and Industry there is a shortfall in supply of 40,000 residential units in Abu Dhabi.

The Need for Affordable Housing

Rapid population growth and demographic changes are a major factor behind the increasing need for affordable housing in the GCC region. The total population of the GCC countries quintupled over the past 40 years, increasing from 7.8 million in 1970 to 46.2 million in 2011, and is projected to reach 65.6 million by 2050. Saudi Arabia, which accounts for over 60 percent of the region's population, scored the highest rise in population - 28 million in 2011, projected to reach 45 million in the next 40 years.
The GCC region has become one the most urbanized areas in the world with over 75 percent of its population living in cities. During the past decades, GCC countries have experienced exceptional economic and social changes due to the oil boom and its subsequent flow of wealth, creating a fast-changing demography of population growth and large-scale urban development. It has also witnessed an increasing influx of rural and desert dwellers into urban areas as young people migrate to cities looking for jobs. Urban annual growth rates (2010-15) reached 3 percent in Qatar, 2.52 percent in the UAE, 2.42 percent in Kuwait, 2.38 percent in Saudi Arabia, 2.23 percent in Oman, and 2.21 percent in Bahrain. In 2011, 99 percent of the population in Qatar and 98 percent in Kuwait lived in urban areas. The lowest urban population was in Oman with 73 percent. It is projected that percentages will increase over the next 50 years.
Rapid urbanization has led to the growth of huge cities. In 2011 the population of Riyadh was 5.45 million, Kuwait City 2.4 million, and Dubai nearly 2 million.
The GCC population is still young: The population median age in 2010 was lowest in Oman (25 years) and Saudi Arabia (26 years) and highest in Qatar. (32 years). This "youth bulge" means that the fastest growing segment of the GCC population is the younger generation from the lower- and middle-income group who are newly entering the labor market and looking for small affordable houses. This is a temporary situation as the population is expected to get older over the next 50 years.
Another reason for urban expansion is the influx of foreign labor, which flooded into the region more than 40 years ago. The private sector still relies heavily on foreign workers and they still account for between 50 percent and 90 percent of the labor force in GCC countries.
A third factor is related to the lack of available land for affordable housing construction. Arable land is scarce due to drought, desertification, and land degradation, and agricultural productivity and rural subsistence are threatened. Saudi Arabia occupies four-fifths of the Arabian Peninsula but the majority of its lands are desert. Oman, Qatar and the UAE are smaller, built originally on desert lands, and lack habitable agricultural and rural areas. Bahrain is an archipelago of 33 islands with limited rural areas. According to the World Bank (2009) the percentage of land that is arable is for Bahrain 1.3 percent, Kuwait 0.6 percent, Oman 0.3 percent, Qatar 1 percent, Saudi Arabia 1.5 percent and the UAE 0.8 percent.

Challenges in the Provision of Affordable Housing

Inadequate housing finance constitutes a major challenge for the provision of affordable housing in the GCC region. Housing finance includes plot distribution, land servicing, and the provision of loan and mortgage facilities through the banking system. Mortgages are difficult to obtain for those on low monthly salaries due to the limitations of a mortgage market that constitutes less than 5 percent of the region's gross domestic product. Other obstacles include the restriction of mortgage information, a dearth of innovative solutions, an inadequate regulatory framework, and business models that are still at an initial stage.
In Saudi Arabia, many housing problems have been connected until a few months ago to the scarcity of mortgage financing and the lack of official legislation to regulate mortgage lending. The state-funded Real Estate Development Fund gave subsidized medium or long-term loans to Saudi individuals for private or commercial housing projects but did not lend money to buy land. Borrowers have tended to treat extended loans as charity and default on payments is high. In the UAE, special conditions are provided for those eligible for mortgages and banks are now selective when lending money, favoring people who own their own business.
Social and cultural considerations constitute another critical challenge in the context of affordable housing. The physical aspect and the design of housing are linked to socio-cultural factors, including norms and lifestyles. Almost all GCC nationals prefer to live in houses rather than apartments. Social requirements such as privacy, social cohesion of family members within the same housing unit, and independence from residential density are all factors young people consider in looking at affordable housing. Most of the major housing projects built by GCC governments during the past decades were relegated to remote areas where the land was cheaper. They not only lacked important social infrastructural requirements but they also neglected the extended family structure and traditional values of segregation.
Location and public transport systems represent another challenge for affordable housing. Most GCC countries lack a well-developed and effective urban planning system that covers affordable housing projects. Most projects are usually built outside the boundaries of the city where land is cheaper and they lack an adequate public urban transportation system. The absence of transport disadvantages residents needing to travel to work or school as not everyone has access to private cars.

Another issue is sustainability. Sustainable construction is environmentally responsible and resource-efficient and has to consider location, design, construction, operation, maintenance, renovation, and demolition. Most GCC affordable housing projects tend to neglect the quality of the environment ignoring factors such as site/energy optimization, water conservation, waste/pollution reduction, and environment degradation. The integration of smaller units and efficient use of land are important factors for housing sustainability and "green" building is important for reducing the overall impact of the built environment on health and the natural environment, but both these areas have been neglected by GCC construction.

— Dr. Mona AlMunajjed ([email protected]) is a sociologist, author and adviser on social and gender issues.

(Tomorrow, in part 2 of this article, the author looks at current measures and future needs.)


Emirati, Greek firms launch joint venture to tackle maritime waste

Emirati, Greek firms launch joint venture to tackle maritime waste
Updated 12 June 2021

Emirati, Greek firms launch joint venture to tackle maritime waste

Emirati, Greek firms launch joint venture to tackle maritime waste
  • The joint venture, EvoGreen, will provide advanced maritime waste management services to preserve the region’s oceans

DUBAI: UAE waste management company Bee’ah and Greek sustainability firm Polygreen has launched a new company that will offer marine and environmental management solutions.

The joint venture, EvoGreen, will provide advanced maritime waste management services to preserve the region’s oceans, the UAE state news agency has reported.

“Evogreen will take the lead in promoting best practices in the maritime waste management industry and achieve remarkable outcomes for the UAE and wider region,” Salim bin Mohamed Al-Owais, Bee’ah chairman, said.

The new company has already established an alternative raw material facility in Bee’ah’s Sharjah complex. It processes maritime waste and marine-related hazardous waste to produce alternative materials for industrial use.

EvoGreen is currently building another facility that can process waste streams and convert materials into alternative fuel.

Both facilities will collect, recycle and recover hazardous and non-hazardous waste from ships visiting ports in the UAE.

“The launch of Evogreen is a milestone regarding the global effort to protect the environment and address the challenge of climate change,” Polygreen chief, Athanasios Polychronopoulos, said.

The company will also offer oil spill response services and management of distressed vessels, as well as recycling and recovery solutions.


Abu Dhabi to invest nearly $100m in projects in Turkmenistan

Abu Dhabi to invest nearly $100m in projects in Turkmenistan
Updated 12 June 2021

Abu Dhabi to invest nearly $100m in projects in Turkmenistan

Abu Dhabi to invest nearly $100m in projects in Turkmenistan
  • The deal allocates 275 million dirhams ($74.9 million) for the construction of an airport in Jebel in the Balkan region
  • About 92 million dirhams will be used to build a 10-megawatts hybrid power plant

DUBAI: The Abu Dhabi Fund for Development (ADFD) has signed deals worth $99.91 million to build an airport and a power plant in Turkmenistan.
The deal allocates 275 million dirhams ($74.9 million) for the construction of an airport in Jebel in the Balkan region of the country.
It aims to improve airport infrastructure in the area and enhance air connectivity in central Asia.
The project includes building Jebel airport terminal with a capacity of 100 passengers per hour.
About 92 million dirhams will be used to build a 10-megawatts hybrid power plant that will provide clean energy for the people in Altyn Asyr.
Earlier this year, the ADFD signed agreements with the government of Turkmenistan for projects including including an investment company.


G7 to counter China’s clout with big infrastructure project: senior US official

G7 to counter China’s clout with big infrastructure project: senior US official
Updated 12 June 2021

G7 to counter China’s clout with big infrastructure project: senior US official

G7 to counter China’s clout with big infrastructure project: senior US official
  • China’s Belt and Road Initiative (BRI) is a multi-trillion-dollar infrastructure scheme that Xi launched in 2013
  • More than 100 countries have signed agreements with China to cooperate in BRI projects like railways, ports, highways and other infrastructure

CARBIS BAY: The Group of Seven will seek to rival China’s multi-trillion-dollar Belt and Road initiative on Saturday by announcing a global infrastructure plan to help developing nations, a senior official in US President Joe Biden’s administration said.
The G7 is trying to find a coherent response to the growing assertiveness of President Xi Jinping after China’s spectacular economic and military rise over the past 40 years.
The US official, who spoke to reporters on condition of anonymity, said the United States would also push the other G7 leaders for “concrete action on forced labor” in China, and to include criticism of Beijing in their final communique from a three-day summit in southwest England.
“This is not just about confronting or taking on China,” the official said. “But until now we haven’t offered a positive alternative that reflects our values, our standards and our way of doing business.”
China’s Belt and Road Initiative (BRI) is a multi-trillion-dollar infrastructure scheme that Xi launched in 2013, involving development and investment initiatives that would stretch from Asia to Europe and beyond.
More than 100 countries have signed agreements with China to cooperate in BRI projects like railways, ports, highways and other infrastructure.
Critics say Xi’s plan to create a modern version of the ancient Silk Road trade route to link China with Asia, Europe and beyond is a vehicle for the expansion of Communist China. Beijing says such doubts betray the “imperial hangover” of many Western powers that humiliated China for centuries.

China’s rise
The re-emergence of China as a leading global power is considered to be one of the most significant geopolitical events of recent times, alongside the 1991 fall of the Soviet Union that ended the Cold War.
China in 1979 had an economy that was smaller than Italy’s, but after opening to foreign investment and introducing market reforms, it has become the world’s second-largest economy and is a global leader in a range of new technologies.
Leaders of the G7 — the United States, Canada, Britain, Germany, Italy, France and Japan — want to use their gathering in the seaside resort of Carbis Bay to show the world that the richest democracies can offer an alternative to China’s growing clout.
The US official said until now, the West had failed to offer a positive alternative to the “lack of transparency, poor environmental and labor standards, and coercive approach” of the Chinese government that had left many countries worse off.
“So tomorrow we’ll be announcing ‘build back better for the world,’ an ambitious new global infrastructure initiative with our G7 partners that won’t just be an alternative to the BRI,” the official said.
According to a Refinitiv database, as of mid-last year, more than 2,600 projects at a cost of $3.7 trillion were linked to the Belt and Road Initiative, although the Chinese foreign ministry said last June that about 20 percent of projects had been seriously affected by the COVID-19 pandemic.
In March, Biden said he had suggested to British Prime Minister Boris Johnson, hosting the G7 summit, that democratic countries should develop their own rival scheme.

Forced labor
In talks, Biden will also press the other leaders to make clear that they believe forced labor practices are an affront to human dignity and “an egregious example of China’s unfair economic competition.”
“We’re pushing on being specific on areas like Xinjiang where forced labor is taking place and where we have to express our values as a G7,” the official said of the final communique to be issued at the end of the summit on Sunday.
China denies all accusations of abuse in the Xinjiang region.
There were no specifics on how the global infrastructure scheme would be funded. The plan would involve raising hundreds of billions in public and private money to help close a $40 trillion infrastructure gap in needy countries by 2035, the official said.
The aim was to work with the US Congress to supplement existing development financing “with the hope that, together with G7 partners, the private sector and other stakeholders, we soon be collectively catalyzing hundreds of billions of dollars in infrastructure investment for low and middle income countries that need it.” (Reporting by Steve Holland and Michael Holden Editing by Guy Faulconbridge and Frances Kerry)


Germany buys Dubai data to track possible tax evasion

Germany buys Dubai data to track possible tax evasion
Updated 12 June 2021

Germany buys Dubai data to track possible tax evasion

Germany buys Dubai data to track possible tax evasion
  • Der Spiegel Magazine first reported the purchase of a CD containing details of assets in Dubai

BERLIN: Germany has bought a trove of data that could help treasury officials track down possible tax evasion by wealthy German citizens, Finance Minister Olaf Scholz said on Friday.
“The data will now be evaluated by the regional tax authorities,” Scholz said in Berlin. “Tax evasion is not a minor offense it is a crime.”
Der Spiegel Magazine first reported the purchase of a CD containing details of assets in Dubai such as tracts of land and real estate owned by German nationals.
It said an anonymous informant approached German officials and offered to pass on the data, for which the Federal Tax Office paid about 2 million euros ($2.42 million), Spiegel said.
Scholz did not confirm or deny the details reported by Spiegel about how the CD was purchased or the price.
Tax authorities in Germany’s 16 states had in the past sought information from countries like Switzerland to unearth possible tax evasion by wealthy Germans.
Scholz, who leads the Social Democratic Party (SPD), has made fair taxation a major election pledge before an election in September forecast to deal his center-left party its worst-ever result.


US university completes funding round led by UAE’s Global Ventures

US university completes funding round led by UAE’s Global Ventures
Updated 12 June 2021

US university completes funding round led by UAE’s Global Ventures

US university completes funding round led by UAE’s Global Ventures
  • Nexford is a tech-enabled online university, which focuses on making education accessible
  • The university will use the proceeds for its expansion plans in Asia, and to improve its offerings

DUBAI: Washington DC-based Nexford University has completed a $10.8 million Pre-Series A funding round, led by UAE-based venture capital (VC) firm Global Ventures.
Nexford is a tech-enabled online university, which focuses on making education accessible despite the students’ physical location.
Other participating investors included Future Africa’s education fund, as well as angel investors, family offices and other VC firms from the US, UK, France, Dubai, Switzerland, Qatar, Nigeria, Egypt, and Saudi Arabia.
The university will use the proceeds for its expansion plans in Asia, and to improve its offerings.
“Learners want high-quality, yet affordable education relevant to today’s business environment, whilst retaining the flexibility remote learning provides,” the university CEO Fadl Al-Tarzi said.
He added: “Now, with additional funding, we can invest in the technology and teams required to address these challenges.”
Nextford recorded a 300 percent increase in revenue in 2020 with learners enrolling from over 65 countries. It has formed partnerships with tech giants Microsoft, LinkedIn and IBM.