Qatar’s enthusiasm for embarking on new projects remains undiminished despite the global economic downturn, and the government is expected to launch its largest-ever budget for the financial year 2009-10.

The financial indicators bode well for Qatar in 2009. Economists predict its real gross domestic product [GDP] will grow by 9-10 per cent, outperforming all other Middle East markets. That is not to say the country will escape unscathed from the global financial crisis – the projections are much lower than the 21.4 per cent growth initially forecast by the International Monetary Fund (IMF) in mid-2008.

But Qatar is expected to be more insulated from the downturn than other GCC members, primarily because of its growing gas exports, which is providing the economic security for the government to back much-needed infrastructure projects and public works.

New projects

The Public Works Authority (Ashghal) plans to issue tenders for a range of projects this year, including road-building and drainage schemes, the Ruwais port expansion, the construction of 20 new schools and 10 new kindergartens, along with multi-storey car parks and hospitals.

Ashghal’s road-building plan is part of a wider project to link up the country’s new airport and port, improving Qatar’s reputation as a logistics hub. Invitations to bid have been released for the G ring-road project and contract awards are expected in the first quarter of this year to build the 19km ring-road linking Express Road 55 to both New Doha International airport and New Doha Port.

The Qatar General Electricity & Water Authority (Kahramaa) also intends to launch two tenders in the first half of the year. One will be for a 30-50 million-gallon-a-day (g/d) reverse osmosis desalination plant, while the second will be a consultancy contract for a new power project. Ashghal is also expected to begin awarding contracts on its planned 280km of new primary roads, which are being upgraded to dual, four-lane highways to ease the congestion associated with the country’s economic boom.

Congestion caused by heavy goods vehicles and buses transporting labourers to the giant Ras Laffan project is bringing traffic to a halt during rush hours, and the upgrade of Qatar’s North road is seen as crucial to the country’s further development.

On top of the road-building schemes, multi-billion-dollar infrastructure projects, such as the construction of the new port and airport, are set to move forward. At the end of December 2008, selected companies were invited to prequalify for elements in the third phase of the airport project, while in November, consultants were appointed to engineer the relocation of Doha port to a site outside the capital.

The winning companies were WorleyParsons Qatar, the local division of the Australian group, and Cansult Maunsell, the regional subsidiary of US engineering giant Aecom.

The final design of the much-awaited Qatar-Bahrain Causeway is also nearing completion, and construction is expected to get under way by the middle of the year. “There is a significant amount of domestic and regional infrastructure investment going ahead, and that sets the agenda for growth, both for today and the next 10 years,” says Avik Rakhit, head of the northern Gulf region at US real estate services company Jones Lang LaSalle.

Buoyed by the positive economic fore-casts and continued government spending, confidence in the Qatari real estate sector remains high compared with other markets in the region.

Increasing demand

This sentiment is supported by a lack of residential and office space, as well as hotel rooms, in the country. The vacancy rate for office space is less than 5 per cent, according to Jones Lang LaSalle, and availability is expected to remain tight at least until the end of 2010.

The company estimates there is existing housing stock of about 90,000 units, with a further 10,000 units due to come to the market in the short to medium term.

“The supply that is coming up in West Bay, The Pearl and in Lusail is not significant enough to make a big dent in the demand,” says Rakhit, adding that since vacancy rates for residential property are below 2 per cent, any future supply would easily be absorbed.

Although property prices are expected to stabilise or even undergo a slight correction, demand is expected to hold up over the medium term. As a result, developers with financing in place are pushing ahead with construction plans, particularly for individual tower block projects.

Nevertheless, sector analysts say developers must respond to the needs of an increasingly discerning market and heed the lessons learned elsewhere in the region, where in the race to finish projects, the emphasis has been on speed rather than quality of build.

“Before, when there was a tremendous shortage, quality was not so important,” says Rakhit. “But in future, properties will have to compete in terms of amenities. A lot of the supply that is coming up in Doha is skewed towards high-end apartments and there needs to be some rebalance in that. The focus should be on affordable luxury.”

In Qatar’s hotel sector, consistently high occupancy rates are fuelling an investment boom. Occupancy rates average 70 per cent throughout the year, reaching 95 per cent during the conference season in the winter months.

Room rates are also among the highest in the region, at $200-350 a night. According to the Qatar Tourism & Exhibitions Authority (QTEA), 101 new hotels are planned or under construction in the country, and the number of rooms and furnished apartments available is set to climb from 6,000 to just under 30,000 by 2012.

Despite the downturn in the global economy, Qatar has ambitious plans for its tourism sector and is targeting a 20 per cent rise in visitor numbers over the next five years.

In 2008, visitor numbers totalled about 900,000. Over the next five years, state spending on tourism infrastructure will total $17bn, according to Ahmed Abdullah al-Nuaimi, chairman of the QTEA.

“Doha aims to attract premier leisure, business, medical, sport and education tourism, while preserving and highlighting our authentic and rich past,” he says.

Aside from investment in new hotels and resorts, key projects include the construction of New Doha International airport and the $1.2bn Doha Convention Centre & Tower.

About 50 million passengers a year are expected to use the airport, which is scheduled for completion in 2012. This compares with 13 million passengers that pass through the current terminal each year.

Business travel currently accounts for almost 90 per cent of all visitors to Qatar. This is in part due to the QTEA actively targeting the conference and exhibitions industry. In 2009, about 25 conferences will be held for the first time in Doha.

The 105-storey Doha Convention Centre & Tower will reinforce that strategy, providing 100,000 square metres of additional exhibition space and 300 hotel rooms. Qatari Diar, which is wholly owned by the Qatar Investment Authority (QIA), is developing the project, and bids were submitted for the construction contract in January.

Ambitious growth

The 550-metre-tall tower is set to become an iconic landmark, dominating Doha’s skyline, when it is completed in 2012. The height of buildings in the city has always been restricted to 470 metres to allow clearance for the flight path of the centrally located airport. With the relocation of the airport, that limitation has been lifted for future projects. This change is expected to provide further impetus to the real estate sector.

While much of the world braces itself for a recession, the ambition and confidence in Doha echoes that seen in Dubai about 10 years ago, when the construction boom in the emirate was still in its infancy. “The projects will go on, the major industrial expansion will go on, there is no real postponement of projects, just some redevelopment in terms of timeline,” says R Seetharaman, chief executive officer (CEO) of Doha Bank.

Seetharaman says state revenue generation in 2009 will not be less than $118bn, if oil averages $30 a barrel, rising to $145bn if it averages $50 a barrel. “The country will do well,” he says. “There is no question about it.”

Analysts suggest Qatar will use this time as a chance to catch up with or even pull ahead of its rivals in the region. “What we see is that Doha is positioning itself as a mini-Singapore or mini-Dubai for the future,” says Rakhit.

The country has already been chosen to host the Asian Football Confederation’s 2011 Asian Cup and has submitted its second Olympics bid, for 2020, after losing out on 2016.

While new projects on the scale of the Pearl and Lusail developments are unlikely to be unveiled in the short term, the country is well positioned to complete construction projects already launched, particularly with the fall in material and labour costs in recent months.

The countless project delays in Dubai are not expected to be repeated in Doha. Rather, Qatar will take advantage of the slowdown in construction activity elsewhere in the region to push ahead with its infrastructure expansion programme.

In the past, Qatar has always struggled to attract skilled professionals to work in the country, having to compete with the lure of Dubai. But now, as job cuts mount across all sectors of Dubai’s economy, Qatar has become a more desirable prospect.

An increasing number of expatriates, reluctant to return home to stagnating economies, are seeking employment in Qatar, where the projects market is still alive and the country is still expanding. “The fundamentals of Doha are compelling,” says one contractor eager to find work in Qatar.