Building for the needy

Gary Wright on whether affordable housing can turn a profit

Gary Wright
Gary Wright

Affordable housing will be on every developers' brief – but can it turn a profit?

Who would have thought there were 7,000 people on a waiting list for social housing in the UAE?

I wouldn’t until this week. I was fortunate to be chairing a meeting with some of the region’s most knowledgeable and experienced housing people.

The panel was made up of Maysa Sabah of the MENA Affordable Housing Institute, Gurjit Singh, the chief operating officer from Sorough, MattBaldwin Engineering design manager for Grocon, Andrew Jeffrey director of capital projects at Deloitte, Mona Salem VP of rw Armstrong and Wael Allan MD (ME) of Hyder Consulting.

Put simply every person on the planet has a basic need for shelter but I had always imagined that the UAE was in a simple situation: if you were a foreigner living here, you worked, and therefore had to have a home, or you left the country.

And as far native emirates went, I’d always assumed the very culture of Arab-Islam, along with the country’s enormous wealth, provided a safety net where no one would be homeless.

I was wrong. While nobody was suggesting the UAE had a homeless problem comparable with either Europe or the USA, nor some of the war and poverty stricken nations across the world, there is an issue.

What is most important to the construction industry as a whole is, if there is a need for social housing, how can it be achieved with a profit margin for the developer?

What was clear was that there is no way the UAE can provide homes to buy at discounted rates for those classed as in need. Put simply if they were sold below market value, they would quickly be sold on again for profit.

In other parts of the world legislation ensures home builders have to provide social housing. In Britain developers get permission to build if they provide around 30% (which matches the country’s owned:rent ratio of 70:30).

The UK model has no place in the UAE. There main roads and rail lines drive desirability down. In Dubai the opposite is true. But how can developers make money from a need for ‘affordable rent’?

Gurjit Singh allowed the group to explore several ideas, effectively discounting the idea of a percentage ratio but encouraging builder to consider build-to-rent-to-sell over a longer timeframe.

One idea was build a quality building with a superb façade but fit out for rental, say over a 10-year period when the property is established, infrastructure is working, then refit the interior and sell.

People are fond of saying the property market in the UAE has matured. But it still has a way to go, especially in the way buildings are managed and maintained in the longer term. These lessons are still being learned and part of the continued maturity will be providing homes for everyone at all income levels..

On 27 March the Construction Week Infrastructure Conference takes place at the Westin Mina Seyahi, Dubai (see p46) and one of the highlights is ‘How contractors can capitalise on affordable housing’. It is a vital part of any big developer’s future plan.

I’ll be there.

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