Qatar: A burgeoning real estate sector

Many of the cranes that appear to be a permanent fixture on the Doha skyline reflect the feverish construction activity arising from the ambitious and far-reaching infrastructure investment programme being implemented by the government. In 2007/08 alone, for example, the government has allocated some $7.3bn, or 10% of its projected expenditure for the year, to infrastructural investment.

Showcase infrastructure projects in Qatar range from ambitious initiatives in the transportation sector such as Doha’s new international airport, 32 new road projects and the causeway linking Bahrain and Qatar, through to a series of important developments being planned by Qatar Electricity and Water Company. These include the largest power generation and water desalination plant ever constructed in Qatar, a $3 billion project that will have a capacity of 2,600MW of power generation and 55 millions of gallons of water per day. Qatar has also been at the forefront in promoting the development of a number of other independent water and power plants.

Doha’s ever-expanding cluster of cranes, however, also reflects the boom in the Qatari real estate market that has been an inevitable by-product of the spectacular growth of the economy in recent years and the surge in demand for residential as well as commercial property that has emerged as a result.

The recognition that economic growth would be inseparable from demand for real estate led the Qatari government to start liberalizing its laws on property ownership well in advance of a number of other Middle Eastern economies and to rescind Law No 5, passed in 1963, which ruled that non-Qataris were nor permitted to own real estate. A key breakthrough came in June 2004 with the announcement of a new law that allowed non-Qataris to own real estate in the three showcase developments of Pearl Island, West Bay Lagoon and Al Khor resort. More specifically, Law No 17 of 2004 permitted non-residents to acquire real estate at these three locations on 99-year leases, extendable for a further 99 years.

Further legislation on the sale and lease of properties by foreigners was enacted in February 2006, allowing GCC nationals to own land and residential units in the three designated areas of Lusail, Al Kharayej and Jebel Thiyab. At the same time, the list of designated areas in which foreigners were permitted to lease properties for 99 years on an extendable basis was expanded from three to 18. Another important piece of legislation supporting the local property market was Law 2 of 2006, which authorizes the Qatar minister of the interior to issue entry visas and residence permits to non-resident investors in the local economy.

Increased demand for housing has accompanied the sharp increase in the population in recent years, which has been driven by the strength and increasing diversity of the economy. According to the latest census published by Qatar’s planning council, the population grew by 42.5% between 1997 and the end of 2004, from 522,000 to 744,000. More recent estimates published by Qatar National Bank put the population at 920,000 in December 2006 rising to a forecast 980,000 by the end of 2007.

Qatari nationals make up about 25% of the total population, although this is expected to fall because of a rising inflow of expatriates. A report on the Qatari real estate sector published in November 2007 by Kuwait-based Global Investment House observes that "industry sources estimate that the number of families expected to shift to Qatar in the next two to three years would exceed 200,000, while around 500,000 families at least are expected... by 2012. Moreover, industry sources are suggesting even higher figures as all indicators are shifting towards an impending population explosion. For example, one of the companies with a significant base in Qatar, Shell, has announced that it will have 250,000 employees coming into Qatar in the next five years."

Qatar’s demographic trends will also have an important impact on the property market, reckons Global. Its report points out that "the high intensity of [the] youth population bodes well for the medium-term demand for housing. The proportion of male population in the age group 25-34 is 25.5% of the total male population. One could conservatively expect 10% of the males in the age group 25-34 to move into a new house every year."

The rapid growth of Qatar’s population, twinned with the government’s commitment to improving living standards and the aesthetic appeal of urban regions, has created challenges as well as spectacular investment opportunities for developers and investors. The opportunities arising were spelt out, for example, in the memorandum that accompanied the private placement of Global Investment House’s GCC Real Estate Fund in March 2005. "In Qatar, there exists a housing shortage in Doha and its suburbs, owing to the demolition of old buildings in some areas like Al Bida, Rumaila and Al Rayyan for the state-sponsored beautification drive and to build modern structures," this explained. "Rents have sky-rocketed due to the shortage of residential flats. Soaring rents – in some areas even half-yearly rent hikes are being seen – [are] causing people to share flats, including Arab families. In Al Rayyan, an old complex comprising some 60 houses has recently been taken over the by the state for [the] beautification drive and this has led to the displacement of a large number of single workers. In the posh Al Sadd area, a 2-bed apartment was available for about QR1500 per month until two years ago and is now going for a monthly rent of between QR3000 and QR4000. Villas in several areas that were available for around QR2500 to QR3000 are now being rented out for up to QR7000."