Hot Property How QATAR’S REAL ESTATE and CONSTRUCTION SECTOR IS Looking up Cover STORY
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COvER STORY hot PRoPeRty hOW QATAR’S REAL ESTATE AND CONSTRUCTION SECTOR IS LOOkING UP COvER STORY before the financial crisis, Qatar real estate was at a peak. but it has surged back, especially since Qatari legislators issued laws opening up the property market to foreign investors. erika Widén, looks at the current bullish status of the sector, examines some of the major developments in Qatar and investigates whether the local market is becoming more appealing to neighbouring nations rather than Western investors. atar is considered one of the most stable economies in the Middle East luSaIl cIty with the International Monetary Fund (IMF) forecasting the highest One of Qatar’s major attraction developments growth in the Gulf Cooperation Council (GCC) of 18 percent this year. under construction is Lusail City, situated on the east “Qatar’s property market is receiving a boost from the coast, approximately 15 kilometres north of Qatar’s successful World Cup 2022 bid. While there has been much capital, Doha. The masterplan is comprised with 37 emphasis on temporary accommodation for the expected one million football fans, square kilometres of waterfront land and planned into there is also the need for a large build-up of permanent residences in the lead up to 19 integrated and diverse mixed use districts. Its name the games,” says Niall McLoughlin, senior vice president of DAMAC Properties, is retained from the historical name for the area in the “Qatar will need to accommodate an influx of expatriate workers including north of Qatar. construction engineers, architects and project managers. The surge of expatriates Upon completion in the near future, Lusail will heading to Qatar will provide lucrative rental returns for property investors over the attract residents, business and visitors for its distinct next decade and beyond.” 21st century iconic development city, which embraces the cultural and geographic heritage of Qatar. econoMIc GRowth It will compromise residential, commercial, Qatar’s economic growth is partially attributed to its real estate sector. Major hospitality and retail, in addition to community needs real estate projects are either in the planning stage, under construction or completed, such as schools, medical, sport, entertainment and which has prompted Qatar legislators to issue laws in order to attract foreign cultural facilities and shopping centres. investment in the local market. Foreigners are entitled to purchase a property in Doha Non-GCC citizens are entitled to purchase in Lusail under Article 4 of the law, which states that non-Qataris are permitted to purchase City for a period of a 99-year leasehold. However, freehold properties in certain development areas such as The Pearl-Qatar, West Bay freehold is permitted to GCC nationals upon purchasing Lagoon and Al Khor Resort. In addition, Law No.17 of 2004 introduced Usufruct, which means non-Qataris are allowed of possession of real estate and residential units for an initial of 99 years, with the possibility to renew for an extended 99 years in 18 highlighted areas (see box overleaf). “Qatar is booming, the government is spending on infrastructure, and the World Cup is just around the corner. Global real estate services firms Jones Lang LaSelle is predicting the property sector may record up to US$14 billion (QR51 billion) of growth over the next 10 years, which could see prices rise by 30 percent in the next five years and 50 percent in the years leading up to its hosting of theWorld Cup,” adds McLoughlin. There has been some hesitation about the long term viability of Qatar’s real estate market, due to the potential for the World Cup event to distort long term supply and demand. However, McLoughlin feels that Qatar’s growth is likely to be strong and sustainable in spite of whether the country hosts the event or not, since Qatar is the world’s largest producer of natural liquefied gas (LNG) and with the increasing reliance on the cleaner burning fuel globally, Qatar’s future is all but assured. Another incentive to attract non-Qataris to invest is the right to have a residence visa upon ownership of a property, either on a freehold or leasehold basis. It is issued for five years and renewable only if the property is still under the same ownership name, however it is not applicable as a work visa. Current foreign owners are Business Square Tower, located in Lusail, comprises anxiously waiting for a near future change in the law in order for the residency visa to offices and residential units, developed by DAMAC be validated as a working one as well. properties and with completion expected in 2013. TheEDGE 53 COvER STORY would be organised and unscrupulous middlemen would be out the brokerage business.” Qataris also commented on local social networking websites, expressing support towards to the new law as they hope thanks to it, real estate prices and rentals would stabilise. Qatar’s initiative to enforce the new law has also been praised not only by real estate licensed companies but also residents, as the law will ensure that the real estate market will run fairly and will be profitable for investors, tenants and property owners. “The real estate market is full of illegal middlemen and unlicensed real estate brokers that are ruining things The final view of the main entrance to Doha’s New International Airport, forecasted for maximum development from 2015 onwards. for respectful companies who pay high expenses to keep there business running and professional,” says Anthony Awkar, general manager of Capstone Property Services. SECONDARy MaRKet Qatar is considered one of the most 2008 it was a good year for purchasing residential units in major developments offered around Qatar. But stable economies in the Middle East this of course was before the global financial crisis, which has left a high speculation that secondary sales with the International Monetary are relatively high. Mirco Alexander Maurer, head of Fund (IMF) forecasting the highest real estate at Engel & Völkers emphasised that many developers have also reduced their prices as well. It has growth in the Gulf Cooperation also been claimed that some developers on the same price level offer units of differing quality and substance, Council (GCC) of 18 percent this year. although some investors have reduced their price significantly from the original purchasing price due to within DAMAC properties. The only disadvantage in Lusail is that the land is only problems in getting finance. available on 99-year-leasehold and many international investment funds need to “It is normal in emerging markets that people purchase on a freehold basis. speculate on real estate. Most Qataris bought properties DAMAC properties are currently developing low rise residential units called at an early point and are still in profit on current price The Piazza in addition to the Business Square Tower, which is of mix use and it levels or they have even sold with profit a long time is anticipated to be fully completed in 2013. The average price per square foot is ago,” says Maurer, “It’s more the foreigners who bought QR1500 for commercial and retail units and QR1100 for residential apartments. around 2008 at the peak of the market. These price “Business Square is ideally situated close to the West Bay area, within the Marina levels will not be reached for a long time and that is District, and The Piazza is conveniently positioned close to the planned metro station, why the investors try to get [out of] their investment, which will be important come the World Cup in 2011,” says Mc Loughlin. even with a high loss.” According to Maurer people who can afford their QATARI Real eSTATE BRoKeRInG LAW investment and have a long term view rather than just In late July it was published in all local newspapers a new norm issued a making a quick profit, are keeping their properties regarding Qatar’s real estate brokerage, the Law No, 13 of 2011 requires only or renting them to cover their monthly costs and are Qatari nationals to practice in the real estate brokering business and in case of any looking forward positively to the upcoming market, violation of any of the provisions of the law, a firm’s license will be suspended which will require a few more years to recover. from three to six months and a fine of QR50,000 will be imposed on firms engaging in business without a license. SuPPLY veRSuS deMand A company applying for the brokerage license can have a foreign partner stake not A few years ago there was a high demand for exceeding 49 percent. residential units, which were still under the construction A prominent local businessman, Ahmed Al Khalaf, commented to a local phase, but comprise now most of the current availability. newspaper of the decision that, “the situation in the real estate sector is chaotic and However many ostensibly are not up to the expectations there are cases where several middlemen try to sell a single property, now things of the clients, at least not at the asking price. On average 54 TheEDGE COvER STORY 18 leaSehold aReaS In QATAR 1. Musheireb (Area #13) Major real estate projects are 2. Fareej Abdul Aziz (Area #14) 3. Doha Jadeed (Area #15) either in the planning stage, under 4. Ghanem Al Qadeem (Area #16) 5. Al Rifa Al Hitmi (Area #17) construction or completed, which 6. Al Salata (Area #18) 7. Bin Mahmoud (Area # 2) has prompted Qatar legislators to 8. Bin Mahmoud (Area #23) 9. Rawdat Al Khail (Area #24) issue laws in order to attract foreign 10. Al Mansoura and Bin Dirham (Area # 5) 11.