Abu Dhabi: As local real estate developers launched new residential
projects at Cityscape Abu Dhabi featuring high-end villas and town
houses, affordable housing remained the elephant in the room, with
limited supply in that market.
There is, however, growing demand for affordable housing
both from individual investors and corporate clients especially in the
oil and gas sector that are looking to cut their housing costs,
according to Cluttons, a real estate consultancy.
“I suppose what’s telling is we’re actually seeing rental rates going
up in the affordable residential developments because there is demand
for them. We believe there is a gap in the market for more affordable
products.
It’s certainly an avenue developers should look at because there will
be demand for these products,” said Edward Carnegy, head of Cluttons
Abu Dhabi.
Legal framework
Speaking to Gulf News during Cityscape, Carnegy said that there was also a need to strengthen the regulations and the legal framework from the government in order to boost the development of affordable housing.
Speaking to Gulf News during Cityscape, Carnegy said that there was also a need to strengthen the regulations and the legal framework from the government in order to boost the development of affordable housing.
“If we talk about financing, people have to be able to afford to buy
[the housing] in the first place. I think a compromise situation could
be public-private partnership, so the government may be injecting land
into a development and a developer financing cost-effective housing,” he
said.
From a developer’s perspective, affordable housing comes with a
challenge of lower profitability compared to higher-end projects.
However, Carnegy pointed that affordable housing also requires lower
build cost, which means it was a matter of developers trying to find the
right cost-to-profit equation.
Difficult segment
Sameh Muhtadi, chief executive officer of Bloom Properties, an Abu
Dhabi-based developer, said, affordable housing was a “very difficult
segment to cater for”.
“It’s a very difficult segment to contain construction costs
especially with the land valuations as they are … It’s not as profitable
as [the rest] of real estate, but the profit is in numbers — in scale,
so you make up for the smaller margins in the scale,” he said.
The CEO believes that Bloom has found the right formula, however,
with plans to launch more than 5,000 units in the affordable housing
units for sale and lease by early 2019.
The development, which will be located close to Abu Dhabi
International Airport, is still in the master-planning stage. Muhtadi
said he was hoping the project’s location will help attract large
corporations whose employees work at the airport.
Sweet spot
“[Affordable housing], in our mind, is the one segment of the market
that is least catered for and it has the highest demand. The sweet spot
for what we would consider affordable would be Dh800,000 for a
two-bedroom apartment to sell, and it will be Dh75,000 to rent,” Muhtadi
said.
As per the Urban Planning Council’s regulations, every master plan
must have a certain quota of residential units allocated to mid-market
housing. For Mubadala, for example, which is the master developer behind
Al Maryah Island, a component of the Island’s plan has been allocated to the mid-market segment.
However, the strategy on when and how to develop such housing has not
been finalised, according to Saed Arar, associate director of Mubadala
Real Estate.
The case is much the same with other developers that have approved
plans for mid-market housing, but are yet to construct the units.
Cityscape Abu Dhabi runs until Thursday at Abu Dhabi National
Exhibition Centre (Adnec), bringing together more than 90 exhibitors.
