Affordable housing is the ‘catch phrase’ for housing projects/schemes these days. Governments across the world are focusing on affordable housing projects and builders are also focusing on them. In fact, the first question – whether you are keen on a LLC Company setup Dubai or a Freezone business setup Dubai or want to start a business in UAE – is where to stay? The housing question is intrinsically linked to relocation.
And, while on one side, Dubai is seeing huge investments in luxury housing category, there is a shortage of affordable homes. The foreign staffers on middle income range are being increasingly pushed to the less-glamorous areas of the city far from their office locations. This has got the local government to think and act.
Interestingly, land is traded as a commodity in Dubai and is subject to inflation. There are massive swings in property prices and rising pressures on rentals, leading to expats getting accommodation in prime locations tough to afford. As per latest data, 70,000 new homes will be completed in Dubai by the end of 2018; this is more than double the number in 2013-14. But, this is still below the peak of 90,000 homes seen in 2007-08. A report by Jones Lang LaSalle (a premier real-estate agency group) in 2015, says that only 22 percent of new homes being built fit the definition of affordable housing for the middle-income group.
Now what? There’s a need for Dubai to go the way of affordable housing, which it is doing now and moving slowly away from its image of a real-estate luxury market. Here’s why?
As most firms in the region are doing away with the housing allowances, the need for expats to have access to affordable housing will be even more ‘emphasized’. To retain the same quality of staff as before, with reduced wages and housing allowances being slashed drastically, employers and firms will need to increase wages/bring back the housing allowance. In a not-so-exuberant economy, this might not be possible and hence, the clamour for affordable housing [supported by the government and the builders] is growing.
Due to a shortage of proper and affordable housing, expats are moving out to less posh areas, further away, sometimes as far away as Sharjah. Sharjah allowed foreign UAE residents to buy property in selected development projects since last year. This has somewhat eased the pressure in Dubai but this is not a feasible solution. The offices and client offices are still in Dubai and staying in Sharjah means more time being spent on the commute. Also, the living experience in Sharjah is not the same as being in Dubai and will disillusion a lot of expats.
On the other hand, there is pressure on developers to build affordable housing, which might not offer the same profits margins as seen in luxury housing projects. It is tough to blame builders for not showing more interest in affordable housing earlier, since they are guided by their shareholders and have a responsibility for generating profits for them.
Also, as per the latest rules and regulations, in a bid to do away with the speculative buyers, the minimum mortgage deposit has been raised to 25 percent over the last two years. Also, the property sales transaction fees have been increased to 4 percent. This means that the amount of money that needs to put down for buying a house has also increased. This complicates the already complicated housing scenario of the region.
The urgent need of the hour is to focus on affordable housing catering to the middle income group and now we know why!