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Real estate sector faces a pivotal moment

Real estate is a success story in Qatar in terms of scale and quality. But there is a risk of unused capacity and diminishing returns without policy reform. The inaugural Qatar Real Estate Forum addressed the challenges

The first Qatar Real Estate Forum was inaugurated on June 4 by HE the Prime Minister and Minister of Foreign Affairs Sheikh Mohamed bin Abdulrahman bin Jassim al-Thani. The two-day event brought together around 1,500 delegates to discuss the issues facing a growing sector able to report significant progress and potential – but also challenges.

The extent and quality of real estate, both residential and commercial, has improved significantly in Qatar in the past decade, alongside infrastructure modernisation in preparation for the FIFA World Cup in 2022 and beyond.

The extent to which this will generate strong returns for investors in a direct way, and encourage economic development, is still uncertain, however. The forum provided an excellent opportunity to discuss progress, opportunities and areas for policy development. HE Dr Abdullah bin Abdulaziz bin Turki al-Subaie, the Minister of Municipality, reported that the current value of real estate transactions was QR20-30bn annually. He sees it reaching QR100bn within five years, which is a very ambitious target – it would require scaling up the infrastructure, including legal infrastructure, and implies significant economic growth to support the resulting population growth.

A passive policy of ‘build it and they will come’ is unlikely to be sufficient as a strategy for the real-estate sector, and this was recognised at the forum. In practice, different policies and government and business strategies have to come together to maximise the potential.

There is a trend of vacant properties, with an estimate in the tens of thousands of vacant units in Qatar for sale or rent. Around 45,000 units have been rented out by the government, in part to do with the World Cup, so additional units may come back onto the market after some time, and there is a large pipeline of real-estate projects due to be completed in the next five years. Independent research agency ValuStrat has conducted its first 2023 review of Qatar’s real estate market, recording a market correction in all rental sectors of the property market after rental growth in 2022. “The increase in oversupply is contributing to pervasive market corrections. As the overall real estate sector evolves in 2023, we are projecting the downward adjustments to continue,” ValuStrat reported.

Some speakers at the forum called outright for the development of new projects to stop, given the oversupply. This was echoed by the president and chief executive officer of Alfardan Group, Omar Hussain Alfardan, who said that there should be a pause on new developments – instead, the sector should heavily market current offerings and those in development.

He observed how the real estate sector was a ‘driving force’ behind economic development.

He also emphasised the importance of taking a long-term view. A drop in demand after the World Cup was only to be expected, and Qatar remained an excellent destination for real estate investors. Current high interest rates shouldn’t deter buyers, he added; it is more realistic to look at the average rate during the full tenure of the loan, during which interest rates will fluctuate. When the market is in a downturn, this is often a good opportunity for developers to buy, if they are able to take a long-term view, and then sell when the market has improved.

Engineer Nasser Hassan al-Ansari, chairman of Just Real Estate Company, raised an anomaly in that a purchaser of an expensive luxury vehicle does not have to pay a downpayment, yet when buying a property of similar value the downpayment can be as high as 40% - even though property is far more likely to appreciate in value than a car, so banking regulations in regards to real-estate financing need to be reviewed, and aligned with other markets.

Conference speakers and delegates discussed three types of investors: Local citizens, expats who are residents and overseas investors, some with a view to move to Qatar and others seeking suitable investment opportunities.

There is much focus on last of these three categories – the overseas investor or incoming expat. But regulation needs to be harmonised: At the moment, residency is not needed in order to purchase a property, but it is necessary for you to access the basic utilities, such as electricity and water, which is an anomaly that needs addressing. To attract a significant number of overseas investors, there have to be enough jobs or opportunities to build businesses to support the population growth.

Some attendees reported that to support the current and expected stock of real estate, the population would need to increase from 3mn to 5mn.

Also, it was highlighted that developers should look at projects from the end user’s needs.

This means paying attention to aspects such as green space, children’s playgrounds, availability of car parking and so on. Too many developments are put up in an unco-ordinated way, without consideration for such matters, and then investors/owners complain that it is difficult to find tenants.

There is an imbalance, in that many of the new houses and apartments are pitched at the upper end of the market, and there is a need to meet the needs of middle and lower income groups. Al-Ansari proposed that 30% of units on developments should be affordable housing.

Some ageing developments from the 1970s and 1980s could be modernised, with facilities added, as an alternative to all-new projects.

The ability to develop opportunities for growth without being dependent on major government-led projects is ultimately the way in which the real estate sector can boost sustainable economic development, in turn offering further opportunities in the sector.

A request made at the forum by some delegates was for greater consistency on regulations – there have been too many changes to requirements relating to water and electricity, and use of security cameras.

Attending to both macro-economic issues and regulatory detail offers the best chance of growth. While issues such as over-supply, along with higher interest rates and inflation, are likely to be temporary phenomena, these have to be addressed alongside the structural and strategic dimensions. The right policies need to work both in the short-term and in the long-term.

For a detailed perspective on the property market, visit: Qatar - Real Estate Review Q1 2023