Building Bahrain

The number of projects in Bahrain that are underway or on the drawing board is growing rapidly.

Sakana, ANALYSIS, Projects

The number of projects in Bahrain that are under way or on the drawing board is growing rapidly, proving that construction is moving at a fast pace in this tiny kingdom, reports Shikha Mishra.

Bahrain is one of Gulf's most advanced economies, and according to the 2008 Index of Economic Freedom, its economy is 72.2% free, which ranks it ahead of the 17 countries in the Middle East/North Africa region and 19th in the world.

Bahrain's economy is considered ideal in several respects, such as tax and banking freedom.

Bahrain is seeking to reduce dependence on its declining oil reserves and encourage foreign investment by diversifying the economy.

Because of its communications and transportation infrastructure, regulatory structure and cosmopolitan outlook, Bahrain is home to many multinational firms that do business in the region.

One of the sectors the government is encouraging is construction.

The announcement of a number of residential and commercial projects, combined with the government's attention to infrastructure development, is making Bahrain on top of the list for real estate investments.

The Ministry of Works in Bahrain looks after the construction and maintenance of three major sectors: roads, sanitary engineering and is responsible for constructing government buildings, ranging from schools to health centres.

According to Nayef Al Kalali, the undersecretary at the Ministry of Works in Bahrain, the country is witnessing a revolution in terms of its development.

The Ministry of Works acknowledges that the infrastructure has to keep pace with the property development and drew up a long term plan in 2003 with a completion date in 2021.

"We have broken down what we want to achieve in terms of infrastructure development with short, immediate and medium term schemes.

For example, plans for immediate road construction will be complete by 2010, including major upgradation of the existing road networks, building flyovers and tunnels, and adding to existing roads," he says.

Bahrain is the largest country in the Gulf which provides sewerage connection to its population - with 87% of its population connected directly to sewage network.

"With sanitary engineering, we have the highest per capita of our population connected to the sewerage network," says Kalali.

Bahrain also has the national strategic master plan 2030 in place. "We are one of the few nations that have approved land use plans for all the investors, be it for residential, industrial or agricultural use.

With a master plan locked in, investors feel confident about putting in money into the construction sector," says Kalali.

In conjunction with the real estate market, the mortgage market in Bahrain is growing too. The current central bank statistics show the mortgage market at US $1.194 million (BHD450 million).

BBK, Shamil Bank, Kuwait Finance House, Ahli Finance House, Standard Chartered Bank, Reef, Bahrian Islamic Bank and HSBC are among the dozen institutions offering home mortgages in Bahrain.

Traditionally in the Bahraini market, mortgages were done by housing banks, under which subsidised homes were offered to Bahrainis under a government scheme.

But, as the cost of land and value of homes increased, the housing banks could not keep up with the demand and commercial banks and private mortgage lenders stepped into the fray.

"When freehold property began in Bahrain in 2002-2003, the opportunities for dedicated mortgage lending institutions opened up.

The market is driven by the fact that the price of buying property in Bahrain is less compared to other markets such as Dubai, Qatar and Kuwait," says R. Lakshmanan, CEO of Sakana Holistic Housing Solutions.

Sakana has registered an increase in business - with the company doing more than US $106.1 million (BHD40 million) worth of business since it launched in 2006.

"We began with primarily Bahraini customers, which has now grown to include expats too," says Lakshmanan.

Another factor that is leading to a boom in Bahrain's property market is its proximity to Saudi Arabia. A large proportion of the investors are the people who work in Saudi Arabia and live with their families in Bahrain, commuting across the King Fahd causeway during the week.

Despite the positive news, the Bahrain construction industry has been plagued by constraints and challenges.

The government has been cracking down on illegal immigrants which has led to a shortage of workers and inflation has driven up the cost of building materials.

According to recent reports, Bahrain will have to import 31,000 tonnes of cement from Turkey and UAE following export restrictions imposed by Saudi Arabia and the lack of domestic production of cement.

The other challenge is the geo-political issues, with trouble brewing in Iran and Israel. "The challenge in the Bahraini construction industry is the unstable political situation in the surrounding region and soaring inflation.

Also income levels have not kept up with the increase in the prices, so most people are unable to buy their own homes," says Lakshmanan.

Ongoing projects in Bahrain

Diyar Al Muharraq: Located on the northern shores of Muharraq, spread over 12 km2, Diyar Al Muharraq will provide residential and commercial properties with housing for over 100,000 people in around 30,000 housing units.

The project's anticipated total investment value is US $3.2 billion (BHD1.2 billion) with Kuwait Finance House (KFH) as the major investor. Diyar Al Muharraq will offer small, medium and large plot sizes to ensure that housing is available across all income groups.

The first facilities on the development are expected to be ready for use by 2010.

Dilmunia 'health island' project: Developed by Ithmaar Development Company on the north east coast of Bahrain, Dilmunia will be the largest health care, leisure and real estate project of its kind in the Middle East.

Other projects planned include the $1.5 billion revamp of Aljazayer Beach, one of Bahrain's oldest beaches and a chain of family-oriented hotels, beginning with a $175 million property to be located off Seef District.

Raffles City Bahrain: Being built on a prime waterfront location, Raffles City Bahrain will make up around 20% of the built up area on Bahrain Bay, in Manama.

The 43,000m2 development has an investment capital of $800 million and currently, the initial piling and foundation work is over 25% underway and on target for phased completion from the fourth quarter of 2010.

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