Chasing affordable housing dream
Affordable housing is a long-held dream of every expat living in Abu Dhabi. In the last decade, even as many new development projects have redefined the real estate landscape in the Capital, middle class families have continued to reel under the exorbitant rents charged in the city.
The gleaming residential towers and beachfront villas are beyond their reach.
Abu Dhabi’s extortionate rents have always been in the news. The emirate has been ranking high in the global living price index. According to CBRE’s Global Living Report 2016, Abu Dhabi has one of the highest rents in the world.
Even with the dip in global oil prices, and cut in government spending, the average rents in Abu Dhabi are still considered the third highest in the world — only coming after Singapore and London — says another report.
Market experts estimate villa rents fell by six per cent and apartment rents by seven percent in Abu Dhabi in 2016. It is a huge relief for residents, yet housing is the biggest budget drainer for many low-income families and bachelors. This is compounded by the acute shortage of affordable housing units in a real-estate market where supply outgrows demand otherwise. Industry experts say builders have not tapped into this segment because of the low profit margins. Mario Volpi, chief sales officer, Kensington Luxury Real Estate Brokers said that given there is little by way of rentable affordable housing, this segment is potentially huge. “But developers have been narrow minded, preferring to target the luxury end of the market, perhaps believing that profits would take a hit compared to
higher valued projects,” Volpi told Khaleej Times.
Ben Crompton, managing partner at Crompton Partners Real Estate, said the affordable housing segment could be well over half of Abu Dhabi’s population. “Many of those at the very bottom of the income ladder are housed in workers’ villages, but that still leaves a huge section of the population in illegal accommodation,” said Crompton. “The returns in this market segment are not very high, so you need cheap land and cheap construction to make a profit; neither of these are readily available in Abu Dhabi,” he explained.
Currently, there is an enormous number of people on low incomes sharing rooms in apartments or split villas. “For the mid-range segment, again, there will be a very high demand.”
Though some developers had announced mid-range housing projects, many are not yet available in the market. For instance, Abu Dhabibased Bloom Properties announced a plan to build 3,000 housing units for rents as low as Dh45,000 a year in Abu Dhabi, during Cityscape 2016. The developer also revealed plans to construct mid-range projects in Mohammed Bin Zayed City, Al Raha and Baniyas.
“There is so much demand for this sort of product in Abu Dhabi and Dubai, that we do not think that either we or other developers out there will be able to satisfy demand,” Sameh Muhtadi, Bloom’s chief executive was quoted saying.
The move from luxury to midrange was also indicated by Aldar when it announced the construction of 400 apartments in Meera Shams on Reem Island. “Bloom is still in the planning stage of these units, as I understand it. Aldar has also launched these mid-range products, but as off-plan ones, in the shape of Meera Shams and the Bridges. These are not necessarily very cheap on a per-square-foot basis, but are much smaller units than have traditionally been built,” said Crompton.
Volpi said there will always be a migration to better quality units when prices come down. “Provided developers do not use cheap materials or inferior quality fixtures and fittings and proceed to build decent units that still offer good facilities, I believe there will be a good demand from mid-range/low income households.”
It is in this context that the Abu Dhabi municipality’s (ADM) recent decision to build affordable housing for low-income families ad bachelors come as a huge relief for expat families. The proposed housing units will be rented out between Dh1,400 and Dh2,100, catering to families earning between Dh4,000 to Dh6,000. The second segment will cater to bachelors who earn Dh2,000 to Dh4,000 and with rents ranging from as low as Dh700 to Dh1,400.
The initiative also offers an investment opportunity for commercial property developers to construct new buildings or convert their existing properties into residential units for low-income residents. “This initiative aims to provide proper and legal options of residential units befitting the financial means of low-income individuals and at the same time open an investment opportunity to owners of commercial properties in Abu Dhabi Emirate,” said ADM.
Volpi said if these market segments are catered to, the problem of illegal and congested housing could be solved. “The problem of illegal housing only exists because people cannot afford the available inventory. If developers do cater to this section of the market, the problem will eventually be eradicated. I ask the question, why would anyone still rent a sharing space with many others, if they can rent a similar unit/space of their own for the same price?”
anjana@khaleejtimes.com
Developers have been narrow minded, preferring to target the luxury end of the housing market.” Mario Volpi, Kensington Luxury Real Estate Brokers
Affordable housing returns are not high; you need cheap land and construction to make a profit.” Ben Crompton, Crompton Partners Real Estate