COvER STORY

hot PRoPeRty hOW ’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, . 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, 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.

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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

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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. (Area #24) issue laws in order to attract foreign 10. and Bin Dirham (Area # 5) 11. (Area #26) investment in the local market. 12. (Area #27) 13. (north and south) (Area #28) a housing allowance given to single Westerners is from QR8,000 to QR12,000, whereas 14. (Area #38) to Western families approximately is allocated QR15,000, for senior staff possibly 15. New Mirqab and Al Nasser (Area #39) rising to above QR20,000 a month. 16. Doha International Airport (Area #48) “Singles and couples without children are struggling in finding a nice flat of 17. , & Al Qitar (Area #60, 61 & 63) adequate quality. There are two to three owners which have seen this demand years 18. Lusail, Al Kharij & Jebel Thiya (Area #69 & 70) ago and can provide this, including nice facilities, but sad to say most properties are

The Pearl-Qatar, a QR50 billion man-made infrastructure island is situated off the east coast of Qatar within close proximity to the area and short commute to the West Bay business district, is the first development in the country to offer freehold purchases to foreign investors.

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The Pearl-Qatar ECO Facts Another incentive to attract non- dredging The Pearl-Qatar (TPQ) used techniques which Qataris to invest is the right to have have not been used elsewhere in the Gulf to reclaim land. A coffer dam (or bund) was built around the a residence visa upon ownership. development to ensure that all dredging run off was captured. built ‘cheaply’,” adds Maurer. “It’s a shame for our agents to show these to clients, The areas were re-examined and it was discovered who know what great apartments they are renting in their home cities like Paris, that the once disturbed sea grass beds are now London or Frankfurt. If you spend EUR2000 (QR10,000) for an apartment, you get between 60 – 90 percent re-vegetated. really nice units, good finishing and layouts, in central locations.” In the commercial division, there is a minimal interest according to Maurer, Pollution which is witnessed in small offices and small medium budgets. The overall market TPQ monitors noise, dust, exhaust fumes and the figures might prove different, mainly because some government divisions and semi quality of water surrounding the Island. Twice a year government companies have taken huge areas of office space. In the private sector TPQ conducts full ecological surveys in the marine the request for office space is much lower though and due to the increasing numbers environs. Water is tested for quality every two weeks of universities, relocation of oil and gas companies in parallel to new contracts in the construction sector, the demand is higher for residential units. The popular areas for commercial leasing include C and D Ring road, West Bay, Waste Management [ENVAC System] Dafna and Airport road. On average per square metre the commercial rent in C and D The Pearl-Qatar is a ‘trash free island’. Waste Ring and Airport road is QR120 to QR150. In the prime towers located in West Bay is sucked at a speed of 70km/ph to the central and Dafna on average QR180 to QR210 per square metre in addition to a 15 percent disposal centre where it is compacted into circular service charge. containers of 10 tonnes each. The network consists of 36 kilometres of 500mm diameter piping buried THE PEARL QATAR two meters underground across the Island linking “When completed The Pearl-Qatar will be populated by 45,000 residents and each residential cluster and building with the solid we are making sure that all communities on the Island are operated effectively and waste disposal system and the waste is sent to a efficiently. The Pearl-Qatar is and will continue to be the kind of community residents landfill site 60 kilometres from Doha. want to call home,” says Abdulrahim Al Ibrahim, director of The Pearl-Qatar Central Authority Directorate. United Development Company (UDC) is the master developer of the total man made Infrastructure Island, The Pearl-Qatar situated off the east coast of Qatar within close proximity to the West Bay Lagoon area. It is the first development to have offered freehold properties to all nationalities. The project consists of 10 precincts residential districts, supporting amenities will include schools, clinics, recreation, five star hotels, retail, shopping areas, restaurants and cafes. The Pearl-Qatar is known to have the world’s longest promenade of 3.6 kilometres. Currently the total commercial area is completed with more than 125 retail currently operational and most of the residential areas are mostly developed. It is estimated to be fully completed by 2015. The Pearl-Qatar is becoming the most glamorous address in the Middle East. According to UDC, the current occupancy is more than 70 percent. The average selling price per square metre is at present in the region of QR10,000 to QR12,000.

GCC INVESTORS “There has certainly been very strong interest from GCC nationals in the Qatari property market. GCC investors are comfortable with property as an investment vehicle, and have traditionally been more attracted to property as an asset class than less tangible vehicles such as bonds and shares,” says McLoughlin. “ Investors from the Middle East find a sense of security in this particular aspect of property investment. Abdulrahim Al Ibrahim, director of The Pearl-Qatar Central Authority Directorate says the development is They like to be able to see and touch their investment, and in many ways a property the kind of community residents will want to call home. portfolio is a symbol of status amongst their peers.”

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While the majority of the investors derive from the GCC countries, there are also investors from Asia and the Western countries. Westerners seem to be interested, but due to the recent global recession are quite hesitant to sign purchasing contracts and therefore would rather wait and observe whether the market is stable to invest. Moreover, most banks lend money primarily to Qatari citizens, whereas foreigners require permission from their sponsor to obtain a loan. The current interest rates in Qatar is relatively high in comparison to England, Germany and the United States of America, were the mortgage interest is at three percent. Various sources in the real estate industry have mentioned that there are some additional fees that were not anticipated by the loan structure of Qatar, which seems to be slightly different in comparison to the West. The current down payment to purchase a property in Qatar is at 30 percent, which is high in comparison to Western countries.

MuSheIReB downtown Among the major high end developments around the Arabian peninsula, lays the Msheireb Downtown project, located in Mohamed Bin Jassim District, central Doha. A mixed use QR20 billion development which will comprise more than 100 buildings with a combination of commercial and residential properties, retail, cultural and entertainment areas. The project is intended to blend traditional Qatari heritage and aesthetics with modern technology, and focus on sustainability and harmony with the environment. Upon completion in 2016, Musheireb Downtown will be the landmark in Doha. “ It’s expected, that Qatar remains the fastest growing economy in the world. Fifa’s decision to host the 2022 World Cup in Qatar has boosted confidence in the local property market, but of course, investors are careful while investing in the local market property market and are looking more for long-term investments rather than any short-term speculations,” says Maurer. new aIRPoRt Finally, the New Doha International Airport is forecasted for maximum development from 2015 onwards. It is situated approximately four kilometres east of the existing airport and will be the world’s first airport to accommodate unrestricted operations by all commercial aircrafts including the A380, which is the largest passenger aircraft ever built. Phase one is expected to be completed by next year and host an initial capacity of 24 million passengers a year, to double to approximately 50 million when the airport is fully operational. Qatar’s economy has remained stable despite the recent global crisis, in addition the upcoming World Cup is an exciting and prosperous event for Doha’s future and history, and many new developments are either in the planning, construction or completion stage. New real estate rules have been enforced to ensure a fair and professional real estate market. No income tax is also an added incentive, which should also attracts foreign workers and investment. Indeed, despite ongoing challenges in the global economy and in the Qatari real estate and construction industries, the country seems to be set to continue be hot property in the coming decade and beyond.

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