Since protests erupted on the streets of Manama in 2011, the Bahraini government has found itself under increased pressure to appease large portions of the population.

A disenfranchised Shia majority has been calling for the authorities to do more with regards to social inclusion, employment opportunities and state support. Central to the discontent spreading across some of the country’s Shia communities has been the question of accommodation.

According to government statistics, there are currently 47,000 families on the waiting list to receive social housing.

PPP project

In October 2013, Bahrain took an important step in addressing the shortage of low-cost homes, with the announcement that the first public-private partnership (PPP) housing project in the country had reached a financial close.

Last May, a target was set to build more than 40,000 government homes in eight years

The scheme had been launched before the 2011 unrest, with a consortium led by the local Naseej appointed preferred bidder in late 2010. Special-purpose vehicle Sharaka for Housing Projects Company was subsequently established to deliver the project and $450m in funding was provided by the local Ithmar Bank.

The project is being managed by US-based Hill International and entails the construction of more than 2,800 social and affordable housing units over a five-year period in Al-Madina al-Shamaliya and Al-Luwzi.

At Al-Madina al-Shamaliya, 1,618 social housing units will be built, along with 367 affordable villas and apartments. In Al-Luwzi, Naseej will develop 832 social units to be delivered to the housing ministry to allocate to families on its waiting list.

Local companies Cebarco WCT and Chase Manara, as well as Greece’s Terna, are the main contractors on the initial phase. The first units are expected to be handed over in mid-2016.

Important precedent

Although the scheme took three years to reach financial close and was trimmed in size due to concerns about its feasibility, it set an important precedent not just for

Bahrain, but for the whole region. It was the first housing PPP negotiated in the Middle East, as well as the biggest single project ever awarded by Bahrain’s Housing Ministry. The legal adviser was the UK’s Trowers & Hamlins.

In the current low oil price environment, the PPP structure will protect the scheme from declining government revenues as a result of falling hydrocarbons earnings. Bahrain finds itself extremely vulnerable to the recent drop in oil prices as the longer-term sustainability of its economic position continues to face uncertainty.

The country’s fiscal breakeven crude price has increased to more than $120 a barrel, from an average of $52 a barrel between 2000 and 2010, underlining its vulnerability to oil prices and growing social expenditure.

The government’s debt burden has doubled since 2009 and stands at some 42 per cent of GDP. Estimates from ratings agencies suggest Manama is now in a net debt position of almost 10 per cent of GDP.

Although there was a recent government reshuffle, creating a new 17-member cabinet, the key economy-related ministries such as finance, oil, works, transport, housing and health remain the same and are likely to embark on a similar journey of high social spending.

Law amendments

However, the Shura Council once more postponed a vote on amendments to the housing law, which has been in place since 1976. The vote has now been pending for four years. The adjustments proposed included providing social housing for single women and mothers, as well as raising the salary cap for applicants. These changes would raise the number of people who qualify for public housing, thereby increasing the financial burden on the government and extending the waiting list.

Despite delaying the vote, the government says it is committed to tackling the housing shortage. In February, Shura Council member Reda Faraj told MEED: “Housing is a key element of the king’s efforts to increase political stability; the government is determined that even if other projects stall, the housing plan will still go ahead.”

There is a lot of municipal land that we could utilise better by offering it to investors

Ahmed al-Ansari, Southern Municipal Council

Last May, a target was set to build more than 40,000 government homes in eight years, with new urban areas planned for Hidd, Sitra, the Southern Governorate, Salmabad and Muharraq. Further to this, in January, MEED reported the Southern Municipal Council of Bahrain had announced plans to develop unused land in the south of the country. It plans to draw up a list of all government-owned land, which covers an area stretching from Sakhir to Isa Town in the south.

This land will then be packaged according to its size, location and investment potential, before being offered to developers for long-term leases. “What is now wasteland in most of the area covered by the governorate will in the next 10 years turn into an oasis of multimillion-dinar investment projects,” said council chairman Ahmed al-Ansari. “There is a lot of municipal land that we could utilise better by offering it to investors rather than leaving it unattended.”

An important element of the solution to the housing problem is access to financing. In October 2013, the government introduced a social housing financing scheme, under which Bahrainis on the waiting list can apply for a loan to purchase their own home. Applicants have to be 35-45 years old and have a minimum monthly household income of BD700 ($1,857). They also need to be able to make a 10 per cent downpayment to access financing of up to BD90,000.

Mortgage instalments are capped at 25 per cent of the beneficiary’s monthly income, with the government subsidising the remainder through the local Eskan Bank. Homes can be bought from an accredited developer or development, and the finance obtained from participating banks, which include Bahrain Islamic Bank and Ithmaar Bank. Naseej and Eskan Properties are among the accredited developers.

Housing eligibility

The 367 affordable homes being developed by Naseej in Al-Madina al-Shamaliya were offered exclusively to those on the housing list for the first three months of sale, then to Bahraini citizens with incomes of up to BD2,000 for a further three-month period, before being offered to all nationals and then finally being put on the open market, including being offered for sale to expatriates. The starting price of the cheapest unit was BD44,800.

While it is clear the authorities in Bahrain remain committed to developing social and affordable housing across the country, many more large-scale PPP projects – with sizeable social housing components – need to be signed to make serious inroads into shrinking the waiting list for homes.