Housing developers focus on affordability in Abu Dhabi

08 December 2009

Abu Dhabi is addressing the emirate’s housing shortage by promoting policies that place the provision of low-cost accommodation at the heart of future real estate developments

If the Abu Dhabi authorities are right, the emirate’s population will more than double from 1.46 million to more than 3 million between 2006 and 2030. And, one of the most serious issues that will have to be tackled is the housing shortage.

According to US-based real estate consultancy Colliers International, unmet demand for housing in Abu Dhabi is currently at about 70,000 homes and this will rise to  more than 120,000 homes by the end of 2012.

“There is definitely a housing shortage in Abu Dhabi and it is only going to get worse,” agrees one Abu Dhabi-based contractor.

Consequently, one of the key proposals of the emirate’s economic masterplan, Plan Abu Dhabi 2030, which was published in 2007, is to provide housing for this growing population at prices it can afford. It identifies a middle-income segment of Emirati society – currently  earning AED5,000-15,000 ($1,360-4,080) a month – among whom demand for affordable housing is highest.

Key fact

Demand for new housing is strongest among Emiratis earning AED5,000-15,000 a month

According to the plan, the government’s affordable housing policy is to “develop a range of housing types and an adequate supply of affordable housing to meet the needs of Abu Dhabi’s diverse population and lifestyles”.

One initiative to be incorporated into Plan Abu Dhabi 2030 is the Al-Falah community, a housing scheme planned by local developer Aldar Properties. Intended to house UAE families, the Al-Falah masterplan provides for the construction of five villages, each with its own town centre, schools and mosques.

In July, Aldar Properties signed contracts with the local Al-Jaber Group, Saudi Arabia’s El-Seif Engineering Contracting Abu Dhabi and Malaysian firm Pembinaan SPK for the construction of 5,000 villas at Al-Falah. The development is due to be completed in the third quarter of 2012. But many more similar schemes will have to be built if Abu Dhabi is to meet demand. 

In August, in response to the housing shortage, the government launched the Abu Dhabi Centre for Housing & Service Facilities Development (ADCHS), whose task it is to implement the emirate’s housing plan as described in Plan Abu Dhabi 2030.

Chaired by Falah al-Ahbabi, the centre will oversee government housing projects and collaborate with the private sector on residential construction schemes. “Developing suitable housing options is the key focus for the emirate’s leadership. The organisation of this centre, which will oversee all construction strategies of citizens’ housing projects in Abu Dhabi is a constructive step in that direction,” said Al-Ahbabi at the organisation’s launch.

According to Khamis Sultan al-Suwaidi, the director general of ADCHS, the centre will build about 17,000 small and medium-sized villas by the end of 2012. Villas are already under construction in the Al-Gharbia region, at Al-Shamkha and at Al-Ain and the first 788 villas have already been handed over to -Emiratis in Al-Gharbia.

Over the next five years ADCHS will develop 23 housing projects, either by itself or in partnership with local private sector developers. They will also include amenities such as mosques, schools, hospitals and commercial centres, plus infrastructure such as electricity, roads, sewerage and water.

Guaranteed buyer

Al-Ahbabi concedes that it has not always been easy to attract private sector developers to such affordable housing schemes, when they could be working on more prestigious and potentially more profitable developments, such as beach resorts or office towers. But the market has changed after the real estate boom.

“It is very difficult to give people the incentive to build affordable housing but we are developing regulations and policies to provide affordable housing in every single development,” he says. “But, in the current circumstances, everyone has come down to earth.”

Abu Dhabi housing shortfall

  • 120,000 - Additional homes needed by the end of 2012, according to Colliers International
  • 17,000 - Affordable housing units being built by ADCHS by 2012
  • 23 - Housing projects being developed by ADCHS over the next five years

ADCHS=Abu Dhabi Centre for Housing and Service Facilities Development

Source: MEED

In the future, he adds, developers can expect to see a regulatory obligation to include affordable housing as part of residential schemes in Abu Dhabi. “Regulations are being put in place to provide affordable housing in every development,” he says.

But this is not without its up-side. “What attracts the private sector is if the government incorporates these developments into their masterplans,” says Stephen Flanagan, associate director at UK-based real estate consultancy DTZ. “The government pays you to build them, there is a significant profit margin, and you have a guaranteed buyer at the end.

“There is certainly an incentive for developers. They will be told to build villas to the value of AED2 million. But the developer can, through economies of scale, build comparable villas for, maybe, AED1 million, so is going to be making money.”

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