Affordable housing could lead a recovery in Bahrain's depressed real estate sector, says Saleem Elias, chief executive of Al Enma'a Real Estate, developer of the $150 million Ishbiliya project
What are the main challenges associated with private sector affordable housing schemes?
The biggest challenges are the elements of land and associated infrastructure cost, which make it difficult to develop a product within a reasonable cost range. I believe we should have stronger government support for the private sector in terms of infrastructure construction.
Does the government have the appetite to provide such support?
The government recently announced that for affordable/social houses, infrastructure will be built by them. These are positive signs, we just need a more prompt response in this regard.
What is the total cost of the Ishbiliya project?
The project cost approximately $150 million. The capital structure included both equity and Sharia-compliant financing.
How many units have been sold to date in Ishbiliya and what is the average transaction price?
More than 50 per cent of the project has been sold to date, with an average transaction price of BD135,000 ($358,000).
How did fluctuating material costs impact Al Enma'a's 2011 financial performance?
If anything, they had a positive impact. Construction material costs decreased over the period.
How can Ishbiliya succeed in a depressed local real estate market?
We provide affordable housing with facilities that are tailored to customer needs. The fixtures provided with the houses and related infrastructure and community centre create a niche and increase living standards for families.
Why did Al Emna'a move into affordable housing?
The first quarter of 2011 was dominated by civil and political unrest in Bahrain. There is an oversupply of developed properties in Bahrain's real estate market. However, we believe there is an immediate need for affordable housing, and we are already working towards helping the sector recover through more focused products and strategies. The real estate sector not only plays an important role in boosting the economy but also affects many other related businesses and industries, for example furniture, sanitary, building materials and electronics. There is no major overhaul required for real estate developers like us to move into affordable housing. However, the private sector needs more prompt and focused support from the authorities.
How can investors be confident in the long-term viability of projects like Ishbiliya?
Confidence is built up by private-government sector partnership and an even more focused product which directly appeals to the customers.
Is the Ishbiliya model based on any similar projects in the GCC?
This project was not influenced from any existing project in the GCC. We envisaged the project ourselves.
What are the main target markets for investors, and how are you promoting the project in those markets?
The target investors are Bahraini end-users and GCC [Gulf Co-operation Council] residents, for which we have also formulated financing products in consultation with Kuwait Finance House (KFH)-Bahrain. The project is available to all GCC nationals by default as they can buy any property anywhere in Bahrain. However we are working closely with the authorities to get approval to make it available to other nationalities.
What is the thinking behind an open community concept such as Ishbiliya?
The concept of building an open community was to provide an environment where residents feel comfortable in interacting and at the same time have an increased sense of ownership of the project and vicinity as their own. There is no fee and no regulations as such.
The moment the customer moves in to the villas, they have all rights and returns associated with the villas and related facilities. At the same time, infrastructure maintenance will be the government's responsibility.
Could the 'affordable housing' model be adapted to commercial real estate?
It is difficult to replicate the model in commercial projects, as there is a niche that you want to create for your commercial project. The returns for commercial projects are also higher to support higher amounts expended.
© The Gulf 2012
