With high end sales slow, Abu Dhabi developers are turning to affordable housing and government projects.
Builders find bread and butter work pays the bills
On a 180 hectare site near Abu Dhabi Golf Club, workers scurry over scaffolding and lorries bring in supplies for long rows of partly built villas.
In many places around the country, half-finished housing projects sit dormant as developers look for buyers and financing. But these 1,370 properties under construction by Sorouh Real Estate are already 100 per cent sold, with a long waiting list for vacancies.
The development, Watani, is a national housing project sponsored by the Government to provide homes for Emirati citizens. Started in January last year, it is the first government housing project for Sorouh, which is best known for its towers on Reem Island and luxury villas of Golf Gardens.
"We are trying to find other sources of business that will keep us going," says Fahad Saeed al Ketbi, the chief commercial officer of Sorouh.
With a glut of expensive units already in the pipeline, Abu Dhabi developers such as Sorouh and Aldar Properties are increasingly turning to affordable housing and government-sponsored projects such as Watani to expand their portfolios.
Sorouh expects to build 8,000 units for national housing worth between Dh20 billion (US$5.44bn) and Dh25bn in the next eight years, Mr al Ketbi says.
The homes will be distributed by the Government to Emirati citizens for free. Sorouh will earn a set fee for building them.
Abu Dhabi's Urban Planning Council is expected to announce more national housing contracts, as well as supply and demand data for affordable homes at this week's Cityscape property conference.
The move towards affordable housing projects is "the obvious next step" for developers, says Samia Bouazza, the marketing director for Tamouh, one of the master developers on Reem Island.
"The big buildings are not enough," Ms Bouazza says. "We need to balance supply."
Demand for affordable housing is quickly outpacing supply, according to data from the property consultancy Jones Lang LaSalle.
"The bulk of the demographic is really weighted toward the middle and low end," says David Dudley, the head of Jones Lang LaSalle's Abu Dhabi office. "But most of the product built has been targeting the high end."
By 2013, more than 52,000 housing units will be needed for low-income households but there will be only 28,000 units available, according to the consultancy's research. In the mid-income category, there will be only 66,000 units available compared with a need for more than 76,000 units.
"The bulk of demand is now in the middle and low-end market," Mr Dudley says.
Abu Dhabi projects targeting nationals are already finding success. Baniyas Investment & Developmenthas announced plans to proceed with the second phase of the Dh3bn Bawabat al Sharq, a master-planned development with 1,300 residential units in Baniyas, on the road from Abu Dhabi to Al Ain.
The first phase of the development, which is geared towards middle-income locals, has sold out, says Wael Tawil, the chief executive of Baniyas Investment. Homes in the second phase start at Dh650,000.
"Local demand is real," Mr Tawil says. "We know it is increasing."
Aldar is redesigning parts of the Raha Beach master plan to add more affordable housing units. The company is also building Al Falah, a 5,000-unit government housing project designed for middle-income Emirati families.
National housing projects do not offer developers huge profits, Mr al Ketbi says. But the fees, which are paid by the Government at set stages in the building process, provide developers with a steady cash flow.
The government involvement also means the developer does not need to raise financing or spend money on marketing, and the Government supplies the land.
"It is very low risk" for the developer, Mr al Ketbi says.