|When? March 24-25 | Event? Affordable housing summit | Venue? InterContinental Regency Hotel
Confronted by the challenge of rapid urban
expansion, countries in the region need to invest in
the most underserved real estate market segment — affordable housing.
Given the growing young population in the GCC region, there is an increasing shortage of housing facilities for middle and lower income citizens. Historically, governments have relied on market forces to satisfy housing demand, whereas private players have chosen to cater mostly for the upscale or luxury housing segment.
In this context, affordable housing presents a major opportunity for the real estate industry in serving this segment of the market and expanding access to urban services.
Organised by IQPC Middle East, the 2nd Affordable Housing Summit will bring together government bodies, developers, contractors and financiers in order to discuss ways of speeding up delivery of low-cost housing to the people.
The shortfall of housing units in this sector is substantial, observes Loay Ghazaleh, advisor, Ministry of Public Works, with a backlog ranging from 50,000 units in Bahrain to 100,000 in Kuwait to over half a million in Saudi Arabia.
“The conference provides a platform to latest construction and green building techniques that are being utilised to drive down the costs of new homes,” says Loay, who will speak at the event. Private developers have shied away from this segment, arguing that it offered low margins, but that’s changing.
“In fact, we’re witnessing the opposite as developers are turning to government-led housing initiatives in order to compensate for a decrease in demand for high-end projects with increased focus on realism. This has resulted in more attention to the needs of the consumer, more emphasis on financial returns and bottom-line performance.”
Financing (and refinancing) and market risks are primary areas that need to be addressed to encourage participation of private players. In addition, a wide array of issues such as registration of land titles, land availability at reasonable prices, land appraisals and planning also require in- depth discussion.
While money is available in the local banking sector, most of it is raised on short-term basis and therefore, banks are reluctant to loan it on long-term to comply partly with Basel III capital and liquidity requirements and leverage ratios.
Furthermore, the mortgage law needs to have clear foreclosure provisions, or the government needs to provide loan guarantees to keep the banking sector interested in affordable housing, says Loay.
“Structuring PPP projects with the right scope in terms
of project size and in line with the local market’s appetite
for risk and financing is paramount in order to rejuvenate the sector,” he believes.
Recycling of debt in terms of securitisation to deepen the funding base is an option; however, caution may be needed here to avoid the creation of property bubbles, he warns.
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