The Construction & Housing Ministry is responsible for roads, housing and public buildings, making it one of the most important organisations in Iraq’s infrastructure sector. Housing is the most high-profile of these as the country battles an accommodation crisis created by population displacement and growth, the destruction of property and an influx of refugees from Syria.

Only the construction of millions of new homes can solve the shortfall. However, even before the US invasion a decade ago, demand outstripped supply. Although housing was seen as a basic right by the state, access to and provision of land and housing were used to control who lived where and to reward those close to the government. Land was then often sold off in the secondary market by those who had been allocated it.

Even when permission had been granted for new developments, construction fell behind. Between 1994 and 2004, more than 200,000 permits were issued to build new homes but only 62,400 were actually built.

Today, experts estimate that the country has been building 5,000-6,000 units a year. This is not enough to solve the housing crisis. Current estimates of housing needs range between 1 million and 3.5 million by 2015.

In recent years, the ministry has been working on a number of initiatives to accelerate progress. It has plans to invest $8bn through a range of schemes including 55 individual housing projects spanning most of Iraq’s major cities.

However, one of the biggest tasks in the housing sector has been handed over to the country’s National Investment Commission (NIC). The organisation is working in partnership with private developers to deliver a raft of 100,000-unit housing complexes in major cities. The first, at Bismayah in the south of Baghdad, is to be built by South Korea’s Hanwah and was awarded in May 2011. MEED understands that work has commenced on the project, but no residences have been completed so far.

Another 100,000 units are being built in Basra by another South Korean developer, Trac Development Group. US-based project management specialist Hill International is managing the scheme and has reviewed the technical plans and designs. TRAC is now seeking to raise finance for the project.

Iraq’s strategy for the new megaprojects is to provide a 10 per cent advance payment and 15 per cent of payments through the construction phase. The developer will fund the remaining costs and will be paid when the units are handed over.

Infrastructure law

For developers such as TRAC, obtaining finance would be easier if Iraq’s parliament were to approve the infrastructure bill, which has been awaiting sign-off for five months. The country’s strategy of financing construction by making deferred payments guaranteed by the government cannot move ahead without the bill becoming law.

TRAC and its counterparts have the power to bring in major international contractors if the legislation is in place. Bringing in major firms is a necessary part of the strategy as local companies do not have the capacity or expertise to deliver the huge volumes of infrastructure required. But this is also hindered by the inconsistency of contracts used, problems with logistics including obtaining visas, and inherent bureaucracy.

Beyond its longstanding housing shortage, Iraq also has a relatively new problem. Refugees from Syria and Iraqis returning to their home country are now settling in illegal areas. In Baghdad alone, there are an estimated 250 makeshift settlements housing 1 million people. In some cases, this is on land that has been earmarked for development.

Hill International is advising the government on using a self-help housing programme to enable low-income families to build their own homes on allocated land under a not-for-profit housing entity – an approach that has been successful in other parts of the world.

Whatever mechanisms are used, Iraq needs new houses fast. To this end, the ministry is investigating prefabricated housing systems, with a view to specify these on projects. It is also urging the private sector to collaborate with state-owned companies to build houses – an approach that is possible under the existing law.

The Housing Ministry is also pushing firms to design high-rise apartments and flats in direct contrast to the traditional horizontal sprawl. However, so far, potential residents are yet to be won over by this approach. Homeowners have opted for villas over apartments and have yet to be convinced by high-rise living. This could be a huge stumbling block for the NIC as its selling model relies on residents making advanced payments towards their properties.

Despite the challenges, Iraq is pushing for new housing to be delivered and the Housing Ministry and the NIC are considered to be among the most proactive and committed organisations in the country. Data from regional projects tracker MEED Projects shows that investment in housing has been increasing steadily since 2009 and, if the planned housing projects are delivered, the sector is set for huge growth.

However, with political issues continuing to hold back essential legislation such as the infrastructure bill, and security still a concern for contractors, progress is likely to remain slow.