May 14 2011
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Iraq: Housing projects don't benefit lower-income families
"What percentage of people can dream of buying a house for half a million dollars?" Qadir asked. "I was expecting that these projects were aimed at helping out the poor and reducing the housing problem in the Region, but what I see is a different picture."
Since the legislation of the Kurdistan Region's Investment Law in mid 2006, and among hundreds of investment projects implemented by the private sector in all three Kurdish provinces, more than 100 housing and residential projects have been licensed and put into implementation phase.
By April 11, 2011, the total number of residential units licensed by the Board of Investment was 84,872 units, out of which more than 11,000 units have been completed.
As the housing issue has been major problem in the Region, Parliament and the government took some steps to address this issue. As part of the efforts, the government encouraged investors to work on residential projects. The government has also allocated $300 million for the housing fund under the control of the Investment Board, which was used to finance part of the cost of purchasing residential units in the residential projects licensed by the board, provided it would be given in the form of a long-term loan, payable over 10 years.
A survey conducted by the Kurdistan Institution for Political Issues released on Jan. 13, 2010 showed that the cost of housing in the Region is people's No. 1 concern. The survey was carried out in the three provinces of the Kurdistan Region: Erbil, Suleimaniya and Duhok. Of those surveyed, 24 percent said housing is their main concern, with similar but smaller numbers focusing on inflation, poor electricity supply and unemployment.
Based on these statistics, this fund was used to finance around 20,495 units, out of which 7,405 units have been completed. Out of those, 2,179 units are in Erbil Province, 4,672 units in Suleimaniya Province and 554 units in Duhok Province.
The majority of the remaining units, after those sold under the board's financing project, are sold at high prices. These prices are too high for lower-income families and the middle class, for whom the projects were intended. Observers and the general public question whether these projects ease any part of the housing shortage in the Region or if they only benefit those with a higher level of income and the wealthy.
Qadir told The Globe that instead of building affordable housing for the public, companies are building luxury villas and apartments and sell them at an unbelievably high prices to those who already have several houses. "Those projects have worsened the situation by driving prices up everywhere in the Region, which again hurts the poor and benefits the rich," added Qadir.
Experts believe the real estate prices are not in balance with the income level in the region. As the average salary level in the public sector, the major employer and the major source of income in the Region, is around 400,000 to 500,000 Iraqi dinars ($350 to $425) per month, and average house price is around $7,000 to $10,000, and in some housing projects, prices reach $500,000. It would seem difficult, if not impossible, for lower- and middle-income families to own a house, especially with the lack of long-term mortgages and financing.
While some see this as a bad planning or misdirection of efforts by the government and think such investments would not be in the best interest of the Region's population and economy, Dr. Kamaran R. Mufti, Director General of the Directorate General for Promotion, Assessments and Licensing of Projects at the Board of Investment, states that not all projects are designed for the rich.
According to Mufti, there are three categories of housing projects in the Region that have been licensed by his directorate and board: "Category A is for the low income level, category B is for the middle income and category C is for the high income people," Mufti said in an interview with The Globe. "However, we are not in a position to discriminate among those categories and are obliged by the Investment Law to license any of such projects as long as they have all the requirements and are designed according to the regulations and standards of the Investment Law and Investment Board."
It is the investor's decision, according to Mufti, to choose which category to build. "Besides, it would not be reasonable to only build low-quality and low-price houses, especially in the city centers and the capital, as we also do care about the beauty of our cities and luxury. Our cities need luxurious properties, too."
One of the reasons why prices have gone up in the recent years is the increasing demand from foreign organizations and businesses with a presence in the Region.
Miran Baker, a real estate agent based in the Italian City, one of the luxurious villa compounds in Erbil, explains that the majority of his clients are foreign companies renting or purchasing properties in the newly constructed residential compounds, both for offices and residential buildings for their expat staff.
"They are paying a lot," Baker told The Globe. "Whatever the conditions and the quality of the properties are, they don't care and pay up. You know why? Because they feel the potential of future business opportunities and the resulting increase in demand and prices. They are sure they will not get the same thing for the same price this time next year."
According to Baker, people build or buy property with rental income in mind. He says they care about the location, condition and quality that businesses are looking for, just to guarantee a high income and a high-yielding investment.
Mohsen Ibrahim, a resident of Erbil who has leased his villa to a foreign oil company, says the number of foreign companies renting properties like his has increased greatly, as have rents. This, he believes, has encouraged owners to lease their houses to businesses and buy or rent another property elsewhere for their own use.
"I realized all my neighbors have left the area and companies have surrounded my house, I thought that life was more difficult for my family in a business area, and I needed to relocate," said Ibrahim as he was showing his house to a Turkish construction company that was interested in leasing it. "Besides, the rent offered is so tempting that I can rent a very good property somewhere else in the city at half the rent and use the money I save for something else."
Ibrahim also said the value of his property has increased by more than 300 percent since he bought it around three and a half years ago.
Baker suggests that government should have some procedures in place to control prices to a reasonable level to control inflation and reduce housing problems.
Mufti, on the other hand, says they have no price-control plans in place in Erbil and Duhok for the residential units constructed and sold under the Investment Board.
"In Suleimaniya there is a price control for those projects, but this was initiated locally by the board's branch in Suleimaniya and it is not regulated by a law or a set of regulations or procedures from the Ministerial Council or the Investment Board," said Mufti. "However, we are planning to regulate that by issuing a set of regulations that would apply to the whole Region."
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