With low demand and oversupply of residential units in the market, real estate companies would be forced to reduce the rents by up to 30 percent in the near future, say industry experts.
Instead of reducing the rents, several leading real estate companies have come out with attractive packages such as free occupancy up to six months in a bid to survive in the market.
He said it is better to reduce the rents to attract customers than keeping the units vacant. An apartment being rented out at QR8,000 per month should have to be made available at QR6,000. Rents in the high-end category ranging from QR20,000 to QR25,000 per month should be reduced to QR15,000 to QR16,000. “ I would like to say that there will be less loss as long as the properties are rented out. There is more risk for investors and developers if the buildings are kept unoccupied, waiting for tenants,” he added.
“We as a real estate company are not competing with our rivals in reducing the rents of housing apartments due to falling demand,” said Abdul Rahman Al Najjar, SAK Holding Group Deputy CEO. “We offer free occupancy for two months, three months and in some cases up to six months. The move aims at protecting all real estate investors, developers because if one company is affected others will also be affected.”
“Now we are competing in providing better services. The rents have declined significantly in various areas. These days there is no increase in rents as it used to be in the past (like five percent or ten percent),” said Al Najjar.
The falling oil prices have a major impact on real estate properties. Land prices have fallen by about 25 to 30 percent in general and up to 50 percent some areas.
The least affected is the residential segment with a fall in rents by about 15 to 20 percent. Rents of office spaces have fallen by about 50 percent due to over supply, he added.
However, shops are still in high demand due to shortage of commercial streets. “Investors are hesitant in developing this segment because of high cost and risk. The prices of land at commercial streets have reached up to QR4,000 per sqm,” said Al Najjar. He said his company was developing housing units for middle and low income segments due to high demand in this category. “We did not jump into the luxury segment.
About 95 percent of our projects are focused on housing units targeting the middle income segment,” he added.
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