Bahrain to expand social housing stock

A number of new developments, initiatives are deepening Bahrain's pool of government housing

Image used for illustrative purpose. Visitors look at a model of a new state-of-art property development plan for Bahrain at the Bipex 2008 property fair in Manama

Image used for illustrative purpose. Visitors look at a model of a new state-of-art property development plan for Bahrain at the Bipex 2008 property fair in Manama

REUTERS/Hamad I Mohammed
24 November 2016

A number of new developments and initiatives are deepening Bahrain's pool of government housing, offering opportunities for a wide range of investors and industries.

In early October Prime Minister Sheikh Khalifa bin Salman Al Khalifa announced that the construction of 5000 units at the East Sitra housing project would begin before the end of this year, though no date for a contract tender was set.

The project, which is being implemented by the Ministry of Housing (MoH) and funded by foreign agencies, will eventually include parks, shopping centres, amenities and services alongside education and health care facilities.

A funding tranche of $250m from the UAE was allocated in June last year for reclamation works at East Sitra, part of a $2.5bn grant issued by the UAE government in 2013 under the Gulf Development Programme. Reclamation has been ongoing since a $236m contract was awarded to National Marine Dredging Company in April 2014, and was 95% complete as of May, according to local media reports.

The prime minister’s announcement came just days after the government launched a tender for the construction of 1246 residential units, part of the initial stage of the Al Ramli affordable housing project – which is also being funded by the $10bn Gulf Development Programme – and will eventually include 3720 housing units.

A tender for associated infrastructure work will be launched before the end of the year, followed by a second tender for the next stage of housing construction, officials said.

Social housing

The Al Ramli project is part of a wider programme to provide housing for those on a restricted income.

Under a directive from King Hamad bin Isa Al Khalifa, 40,000 residential units are to be added to Bahrain’s social housing stock, with 25,000 to be delivered by 2018.

While fast-tracking these units will not fully clear the waiting list of those seeking housing assistance, it should help bring the backlog of applications – currently about 53,000, with 4000 new applications made each year, according to the Bahrain Economic Development Board – down to manageable levels.

Importantly, the programmes will also allow Bahrainis on lower incomes to accumulate equity, which can potentially be used as a springboard to gain access to finance or purchase other assets or real estate in the future.

The government has been working closely with the private sector, adopting a public-private partnership model, which it has recently used for social housing contracts.

In 2012 the government inked an agreement with real estate and infrastructure developer Naseej to build almost 3000 residential units, a number of which were delivered earlier this year.

Last year the MoH sealed an agreement with developer Diyar to deliver 3100 units, a project valued at $1bn, with handover scheduled for the end of 2018. Under the agreement, the state will buy the units and their associated infrastructure upon completion, ensuring smooth cash flow for the developer and timely completion of the project.

Affordable finance

Easing access to finance is another prong of the government’s current housing strategy. In 2013 it rolled out the Social Housing Financial Scheme, known locally as Mazaya, to provide easier access to mortgages.

According to Abdulla bin Ahmed Al Khalifa, undersecretary at the MoH, the introduction of this new financing model represents a shift in state policy.

“The Mazaya programme provided a way for people who were on the waiting list to buy directly from an approved list of projects,” he told OBG.

Under the programme, eligible applicants making between BD600 ($1590) and BD1200 ($3180) monthly can obtain mortgages with repayments capped at 25% of their income. The state then finances the difference between the borrower’s monthly payment and the amount required by the lender. Under the programme, applicants can purchase a housing unit approved by the MoH or from an accredited developer.

The programme has assisted the delivery of much-needed residential units, strengthened partnerships between the public and private sectors, and boosted growth in the construction and related industries, according to Khalid Abdulla, general manager at Eskan Bank.

“The Mazaya programme has been a big success in attracting private sector developers to get involved in social housing, enabling the kingdom to quickly accelerate the rate of handover on new units in the last few years,” he told OBG.

© Oxford Business Group 2016

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