Few developers in the capital have announced affordable housing projects, despite the Abu Dhabi Urban Planning Council (UPC) directing at least 20 per cent of new residential property to be set aside for middle-income earners, according to a top real estate analyst.
“It is indeed the government’s policy, but to date, we have not seen many developers announcing projects that meet this criteria.
“This gets to the root of the problem with affordable housing – if you speak with the developers they will tell you they just cannot provide housing at the rentals stipulated by the Urban Planning Council and still make an acceptable economic return,” Craig Plumb, Head of Research Mena, Jones Lang LaSalle (JLL), told Emirates24|7.
In July 2010, UPC had said at least 20 per cent of new residential property in Abu Dhabi needs to be set aside for affordable housing with rents for a studio to start from Dh25,200 per annum.
The council then had said more than 73,000 new homes were scheduled to be built in Abu Dhabi by 2013, which meant that almost 15,000 apartments would be kept aside for middle-income earners.
The new rule, however, was applicable to all developments larger than 75,000 square metres.
Following the announcement, Abu Dhabi-based Aldar Properties and Sorouh Real Estate said they are working on affordable housing projects.
Mubadala, the Abu Dhabi Government investment arm, and Pramerica Real Estate Investors, too announced plans to invest into mid-market housing in the capital.
In a report titled ‘Why affordable housing matters’, released on Sunday, JLL said shortage of affordable housing was lower across the GCC countries with a current shortage of 20,000 units in the UAE, around 40,000 in Bahrain and 15,000 in Oman.
While the shortage focused on the needs of the local population (nationals) in Oman and Bahrain, the greatest need in the UAE is for more affordable housing for low- income expatriates.
The largest current shortfall was concentrated in Egypt with 1.5 million units, Iraq with one million units, Morocco with 600,000 units and Saudi Arabia 400,000 units.
According to the report, low-income households are typically ones who do not have access to mortgages or other long term sources of housing finance and are therefore, effectively confined to the rental sector in most markets.
"Even in relatively mature markets such as the UAE, a minimum monthly household income of around Dh20,000 is required to access housing finance in the form of bank loans and mortgages, while 45 per cent of households in the UAE currently earn less than Dh15,000," it adds.
Asked if decline in prices and rents across Dubai property sector had made housing affordable, Plumb said: “The shortage of affordable housing has certainly reduced in Dubai over the past two years – as changes in prices/rentals have made projects such as International City, Discovery Gardens much more affordable.
“The shortage of affordable housing in the UAE is focused on Abu Dhabi – where prices have not adjusted to the extent they have in Dubai… it’s not such a major problem in Dubai (or in the Northern Emirates).”