Race to stem Iraq's housing crisis

05 March 2012

With an ongoing lack of housing, a steadily growing population and the effects of political unrest, Baghdad is racing to rejuvenate its long-neglected property development sector

One of the biggest challenges facing Iraq over the next decade is providing adequate housing to its citizens. Estimates of the current shortfall range from 2-3.5 million homes and demand is growing.

“What was completed last year does not represent more than 5 per cent of what is required, and since then, demand has risen by more than 5 per cent,” says Akram Ogaily, senior vice-president at US-based Hill International, which was awarded a conditional contract to manage the construction of 100,000 new homes in 2011 once the project is fully procured.

Population growth, a shortage of new housing, and dilapidation of existing housing have all contributed to the issue

Peter Besley, Assemblage

In the National Housing Plan, launched in 2010, Baghdad set out a number of ambitious housing targets and objectives for building new homes. With an underdeveloped construction sector and lack of large-scale developers, the programme will present international firms with numerous opportunities in the coming years.

Causal factors to housing crisis

The housing crisis can be attributed to three main factors, says Peter Besley, director of UK-based architecture firm Assemblage, which recently won a design competition for a residential scheme in Baghdad. “Strong population growth, a shortage of new housing, and dilapidation of existing housing have all contributed to the acute problem,” he says.

Iraq population
Source: World Bank

The size of Iraq’s population has increased 3 per cent over the past four years and is expected to rise from 32 million today to 50 million by 2030. This would be challenging in any country, but the local armed conflicts over the past three decades have compounded the issue.

“The housing sector was neglected for 50 years, or more,” says Ogaily. “It was never mass production, but mainly individuals building their own houses. After [the war with Iran and the invasion of Kuwait], there was little built in the 1990s in terms of housing or other infrastructure. This is why there is such a shortage.”

In addition to the wars, Iraq’s governance under Saddam Hussein’s autocratic regime resulted in the suppression of the private sector. “Under the centralised government, all of the construction activities were moved to the public sector and there was no opportunity for the private sector to be developed,” says Ogaily.

In the National Development Plan (NDP) for 2010-14, the government has allocated $31.6bn, 17 per cent of the $186bn of total planned investment, towards increasing housing stock and regenerating dilapidated buildings. The programme will be funded through government and private investment and schemes will be procured by central government and regional governorate bodies.

Estimated housing needs 
 New units requiredUnits to be upgraded
Source: Iraq Housing Market Study Ministry of Construction & Housing

To help deliver the housing schemes, UN-Habitat, the UN’s agency for human settlement, has signed an agreement with the Ministry of Construction & Housing to implement the housing programme. “The housing crisis has become so acute that it has come to the UN’s attention,” says Besley. “The aim of the partnership is to get new housing out quickly.”

The government set up the National Investment Commission (NIC) in 2006 to procure private investment in several key infrastructure schemes and housing projects. The commission has pledged to oversee a programme to build 1 million units across Iraq’s 15 governorates and the Kurdistan region. It will grant land to developers and will oversee and coordinate the implementation of the construction programme. When the developments are completed, investors and developers will sell the housing units to individual buyers.

In one of its largest projects, the NIC has released land in Basra to South Korea’s Trac Development Group for the construction of 500,000 homes. In June 2011, Hill International won provisional contracts from NIC worth $1.5bn.

Hill will provide project management services for the first phase of the $35bn development, while its fully owned subsidiary, Hillstone, will provide structural steel for 100,000 new housing units. Hill was also recently awarded a project management contract for a 30,000-seat stadium in Al-Anbar.

Iraq: An emerging market

“Iraq will be one of the major markets in the region for Hill International, along with Saudi Arabia, in the next few years,” says Ogaily. “It’s not just housing that is needed; it is everything.”

In line with the wider plans to decentralise power from Baghdad and increase the strength of regional governments, each governorate will also undertake large housing projects.

In addition to funding their own schemes, the local public offices will also encourage private investors by offering them land.

The Mayoralty of Baghdad has instigated projects to build new homes and regenerate damaged areas. In August 2011, UK-based architecture firm Broadway Malyan completed the masterplan for the Sadr City area of Baghdad, a $10bn project regeneration and expansion project.

The masterplan involves a 17-square-kilometre extension of the existing Sadr City and the creation of New Sadr City. The scheme is named ‘10x10’ due to its estimated cost of $10bn and the 10-year timeframe it is expected to take to complete. Part of the plan calls for the construction of more than 90,000 apartments providing accommodation for more than 500,000 residents.

The mayoralty is currently considering proposals from Broadway Malyan and a number of international firms for the consultancy and supervision contracts. “The amount of new housing required in decaying areas is massive, and we are hopeful we can play a part in the rebuilding process,” says John Turner, director of Broadway Malyan.

Complex challenges to creating residential communities

“[Iraq] is a phenomenal challenge,” says Turner. “Housing isn’t just an isolated aspect; residential areas require new infrastructure and utilities. Electricity is still in short supply in much of Iraq and new roads are required before work on housing construction can start.”

Another challenge is creating regulations to provide surety to potential investors, The 2010 National Housing Plan highlights an insufficient legal system for private investment.

“Iraq’s construction sector is still viewed as a risk by many potential investors,” says an international consultant currently bidding on work in Iraq. “A regulatory framework is important so investors know that if they give money to developers the projects will go ahead.”

There must also be a regulatory framework to cope with corruption. “Corruption slows everything down,” says Turner. “The Baghdad mayoralty has made a big effort to crack down on corruption and it is important that other agencies do the same.”

Security hurdle for Iraq

The biggest hurdle facing Iraq’s housing programme, however, is political unrest. In January, Sadr City, the location for the proposed 10x10 development, was one of the districts targeted in a series of car bomb attacks that killed 13 people and injured 62.

“The security situation is critical for all the infrastructure projects,” says a UK-based consultant. “Violence will cause projects to be delayed and will put investors off.”

If Iraq can overcome these challenges, it looms as one of the region’s most vibrant construction markets in the next decade. With 23 per cent of Iraqis living below the poverty line, a central part of the rebuilding programme will be providing housing for those in need. Iraq’s housing strategy is undermined by a lack of local developers. As a result, it will provide ample opportunities for regional and international firms to assist in its regeneration efforts. 

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