The demand for affordable housing which benefits lower and middle income households is rapidly growing in all Gulf Cooperation Council (GCC) member states, a specialized economic report showed Sunday.
"The demand for affordable housing is estimated to be high across all the member states of GCC," reads a report by the Kuwait-based Al-Markaz Financial Center.
"The total demand for affordable housing in the Kingdom of Saudi Arabia is estimated for more than 3 million in 2014 with approximately 82 percent of this demand pertaining to urban areas. In Qatar, almost the entire demand for affordable housing is expected to remain concentrated in the urban region." The report said that the growth in demand for housing is driven by the high population growth, workforce and the high GDP per capital.
"The GCC population is estimated to have reached 49.3 million in 2013 and poised to grow at a higher rate than developed and developing countries. This, combined with a growing workforce in the region, puts severe pressure on matching supply and demand for affordable housing in GCC," added the report.
"The high GDP per capita of the nations is also translating into rising demand for housing, including affordable housing. The commitment of GCC economies towards diversification to usher in future growth of the region, will eventually create more demand for low cost housing, as the people from lowest income groups find themselves able to afford a house of their own." Al-Markaz pointed out that the ever widening gap between the demand and supply of affordable housing in GCC countries is pressing the governments in the region to have an urgent look at the issue.
"The GCC affordable housing industry faces many challenges, such as tough credit markets terms, volatility in the prices of building materials, and the shrinking margins of developers, "Moreover, the supply side bottlenecks in the form of lack of housing finance, delays in approvals, inefficient urban planning system, high-cost construction priority (such as villas & high-end apartments), and long waiting lines of government housing schemes pose additional pressure on the sector to deliver." Al-Markaz, however, noted that the recent initiatives by the governments are encouraging, where governments are coming forward to provide land in good locations and at reasonable prices.
"GCC governments also provide incentives to developers, as well as formation of Urban Development Bodies in the region. There has been a higher acceptance of PPP in the GCC, in recent years, due to the enhanced ability of the private sector to execute housing projects on a large-scale.
"But prospective developers need to feel confident of generating stable income flows from low-cost housing schemes. Consolidation of industry players through mergers and acquisitions will improve economies of scale, and serve to address cost and margin issues in low cost housing projects. Also, it will lead to easier access to liquidity for the developers than most competitors worldwide, and enable effective and quick implementation of the projects.
The report stressed that the issue of affordable housing in GCC is serious and needs to be dealt with on an urgent basis.
"An effective plan of action needs to focus towards integrating economic, social and cultural issues along with physical planning and development by the adoption of a national housing policy that considers providing accommodation for future population growth in large cities and encourages their decentralization towards other organized suburban centers," it said.