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Gulf Real Estate Expo Highlights Affordable Housing Shortage

by Associated Press

   DUBAI --

   Tens of thousands of luxury projects were on display at a premier
   global property show in Dubai on Monday, but missing from the
   glittering mock-ups and pipeline of home dreams being rolled out were
   more affordable housing projects for the Middle East's large and
   burgeoning population of young and aspiring home owners.
   Property analysts say oil-exporting countries in the Gulf are facing an
   immediate need to create more affordable housing, especially as the
   price of living rises.
   Once awash in oil revenue, Arab governments in the Gulf are racing to
   try and create new sources of income. To offset the impact of lower oil
   prices on state revenues, governments have lifted subsidies on food and
   energy and are rolling out a value-added taxation system.
   The construction sector, though, has been among the hardest-hit.

   In Saudi Arabia, for example, the government has not being paying
   contractors on time. This has affected payments to subcontractors and
   delayed the completion of projects, including government-backed
   affordable housing units.

   Major construction firms like Saudi Oger and the Saudi Binladin Group
   have faced major downsizing, thousands of layoffs and protests by
   disgruntled workers, including several highly-publicized incidences in
   which low-wage construction workers primarily from South Asia
   complained they had not been paid their salaries in months.
   "The biggest challenge in Saudi Arabia is actually delivering the
   product," said Craig Plumb, head of research for the Middle East and
   Africa at investment company Jones Lang LaSalle (JLL).
   "There's a lot of announced projects... but they don't have the
   contractors, they don't have the quality builders to actually deliver
   on time and on cost and that's actually probably been made slightly
   worse over the past year or so because a lot of the contractors have
   had to withdraw from the market," he said.

   Plumb was speaking at Dubai's Cityscape real estate event, where
   developers from across the Middle East unveiled their projects - many
   still off-plan - and pitched to investors wanting to grow their
   portfolios.
   Developer Damac, for example, announced its luxury villas designed by
   Just Cavalli. Others showed off high-rise towers with two and three
   bedroom apartments starting at well over half-a-million dollars and
   still to be handed over at the earliest by 2020.
   According to Faisal Durrani, head of research at property consultancy
   Cluttons, the challenge is that there is still no clear definition by
   governments in the Gulf for what constitutes affordable housing. People
   are often paying half of their salaries or more on rent, instead of the
   target benchmark of around 30 percent.
   "People usually look at accommodation as the first place to make a
   saving, and as it stands we haven't had a single government across the
   region step in and define what affordable housing actually means,"
   Durrani said on the sidelines of Cityscape.
   Plumb of JLL said the price of an affordable two-bedroom apartment is
   more commonly the price of a studio in Abu Dhabi, for example. The
   newer, lower-priced projects that are being promised are also not
   typically in prime locations, but in undeveloped desert areas that are
   inaccessible to mass transportation systems.
   In Saudi Arabia, where half of the population is under 25 years-old,
   the kingdom is racing to create more jobs and more accessible housing
   for young couples. The Saudi government has previously acknowledged a
   gap of between 500,000 to 1 million affordable homes on the market.
   If the issue is not addressed by governments across the Gulf, the gap
   in affordable housing could spark social unrest and lead to political
   instability.

   Durrani said it's an "exceptionally urgent" issue.
   "We run the risk of creating a housing market that's inaccessible to
   the next generation of aspiring home owners," he said.