The Government of Abu Dhabi has allocated an additional Dh20 billion to construct residential buildings for expatriates in response to the emirate's housing crunch - bringing the total public investment to Dh56bn.
To oversee the expansion and run the housing complexes, authorities have also approved the creation of a new real estate firm, Abu Dhabi Commercial Properties, under the ownership of Abu Dhabi Commercial Bank (ADCB). The new entity will take over responsibility from the Administration of Commercial Building (ACB), which has been overseeing expatriate housing for the past 25 years.
Jasim Al Darmaki, general manager of the new company, said his company has set the end of August as its internal deadline to deliver all the scheduled residential buildings in Abu Dhabi. He added the firm will manage around 55,000 residential units.
Al Darmaki said the company has already taken over the administration of around 5,800 units, which account for 10 per cent of ACB's total buildings. The company is using them as test cases, he added, to try out the new firm's financial and administrative system. Abu Dhabi Commercial Properties, he said, will not increase rents and will apply the Executive Council's decision to reduce the rent cap to 5 per cent.
"The company will fully run the buildings, including maintenance. The buildings' maintenance will be offered in auction so that private firms can bid for it. This will enable the private sector to work in the real estate sector in Abu Dhabi," he said.
The company, he added, will offer 4,970 new residential units onto the Abu Dhabi market within the next few months. He said the ultimate solution for the scarcity of residences is the construction of more commercial buildings and he encouraged UAE nationals to invest in the real estate sector due to its high returns. "The ultimate solution is the construction of more commercial and residential buildings and stepping up the construction of on-going projects."
Abu Dhabi is suffering from a sharp shortage of residential units, which has been estimated to stand at 35,000 and 50,000 units for 2008. A total of 20 property firms are currently carrying out giant projects that will pump around 240,000 units into the market by 2012.
Al Darmaki said the government's decision to assign the running of commercial buildings in the emirate to ADCB gives a bigger opportunity to the banking sector to get involved in real estate and construct more projects to meet the large demand for commercial buildings and provide better investment opportunities for UAE nationals. He said the decision aims to consolidate link-ups between public and private sectors.
Speaking about the nature of the new property company, Al Darmaki said: "Our role as a bank and company is definite and known. It is related to finance and management. While social aspects are the responsibility of the government, approvals to construct new buildings come from the government. We implement the government's instructions and work in favour of the government and landlords. We have specific mechanisms to pay out loans. We will obtain rents from tenants in a suitable way according to laws. We will adhere to the new rent cap, not impose additional charges and try to consolidate the good relationship between the landlord and tenant."
He added Abu Dhabi Commercial Properties did not want ACB to turn over all of its buildings fully at one time so as not to disrupt the work done by the ACB and its staff.
As far as ventures to be constructed by the new company, he said that it is currently building 261 new residential buildings that are being financed by the Abu Dhabi Government. He added many of these are already finished. He also mentioned the company is set to inaugurate its own branches at Al Nadi Al Siyahi area, Khalifa City, Al Ain and the Western Region to facilitate communication with landlords and tenants. A client centre will also be opened.
Al Darmaki confirmed the financing will continue to be offered by the government. He indicated the emirate has laid down an ambitious work plan to finance commercial buildings with a value of Dh20bn during the coming period. Abu Dhabi Commercial Properties will also be in charge of the management of the new commercial buildings, he said.
However, there are still a number of steps that need to be taken for the new commercial buildings to be built. The process, he said, will begin with applications via the Commercial Building Finance Committee at the Finance Department in Abu Dhabi. The delivered applications will then be examined by a specialist committee. Afterwards, following conditions required for the financing being met, the approval will be granted and ADCB will be assigned to run the new projects.
Al Darmaki said ADCB organises auctions, brings in consultants and follows through with the construction until it receives the new buildings. Then it rents out the residential units via Abu Dhabi Commercial Properties and takes over responsibility for full management.
Al Darmaki said ADCB finances projects according to the adopted interest system, in case funds determined by the government were not enough. The move is aimed at keeping the construction process moving on commercial buildings and residential residences necessary for the booming real estate market in Abu Dhabi. ADCB has two real estate portfolios. The first one is the Bank Real Estate Portfolio, which represents projects financed and supervised by the bank. The second is the Commercial Building Portfolio, which includes the ACB's buildings belonging to the Finance Department in Abu Dhabi.
Meanwhile, Al Darmaki shed light on ADCB's role in the real estate boom in the emirate, such as the construction of Abu Dhabi Mall and Union National Bank along with financing infrastructure projects in the emirate's new industrial areas.
He said: "Our bank realises its responsibility to provide high-value and efficient financial and investment products that help push forward the real estate boom seen currently in Abu Dhabi. It also has a responsibility to attract private capital and foreign investment to Abu Dhabi and launch a lot of real estate projects to support the emirate's national economy."
In response to questions about the high residential costs in Abu Dhabi, Al Darmaki pointed to positive measures taken by the government to regulate and control the rental market.
Abu Dhabi gets Dh20bn housing boost