Sharjah’s real estate and construction sector could be in for a welcome boost as the government looks to address the shortage of affordable housing in the emirate. And while lower prices in neighbouring rental markets could have a knock-on effect, the emirate’s prospects for real estate growth in 2012 are promising.
With a relatively young and growing population, local demand for affordable housing is on the rise, with estimates putting the shortfall in accommodation at around 5000 units a year.
Added to this is the government’s plan to replace some of the emirate’s existing housing stocks, which further increases pressure on the market. To aid families living in residences designed for demolition, a special $5.4m fund created in January by Sharjah’s ruler, Sheikh Sultan bin Mohammed Al Qasimi, provides assistance until new housing is completed next year.
The emirate’s government has a history of stepping in to provide housing for residents. On March 2 Sharjah’s Housing Department announced it had provided some 10,000 residential units valued at more than Dh4.5bn ($1.2bn) over the past 30 years. In the past decade the agency handed over the keys to more than 4500 units, well up on the 2592 residences delivered between 1990 and 1999. So far in 2012 almost 80 local families have taken possession of government-funded houses, with hundreds more set to move in by the year’s end.
The government is continuing to support state housing via a new agreement between the Sharjah Housing Department and the Emirates Islamic Bank, in which Dh650,000 ($177,000) grants are offered to potential homeowners.
“The grant will be given as a loan to applicants on monthly instalments over a period of 25 years,” Khalifa Musapah Al Tinaiji, the head of the Sharjah Housing Department and a member of the Sharjah Executive Council, told local media on March 4. “All those who earn less than a Dh15,000 ($4000) salary are eligible to avail [themselves of] this grant.”
According to Al Tinaiji, while the repayments for the loan for individual transactions is up to 160%, the Sharjah government will meet the bank interest and fees, leaving borrowers to repay only the principal.
Though generous, there have been calls for the state funding provisions to be increased, with Hussein Al Midfa, a member of the Sharjah Consultative Council, proposing in early March that the support base be lifted to Dh1m ($272,320), arguing that it was difficult to build a quality single-storey home for just Dh650,000 ($177,000).
“At present a lot of things are expensive and a number of people have had to dip into their pockets to complement funds for the finishing of their houses,” Al Midfa said.
In its most recent analysis of the Sharjah market, international property agency Cluttons said that a downturn in the regional property sector could have a knock-on effect on the local sector. Having long served as a dormitory suburb for Dubai thanks to its more affordable rents, Sharjah has instead seen some of its inhabitants move across the border in recent months as neighbouring property prices have fallen by as much as 60%.
However, the Cluttons’ report says that this outflow could be offset by developments in the local economy. According to the report, the growth of the business sector within Sharjah means there are more locally employed residents, which generates greater domestic demand. Meanwhile, the relatively stable rental costs mean that price-conscious consumers will likely continue to prefer Sharjah. The report states that the property “outlook in Sharjah is encouraging and progressive”.
With the number of homeowners in Sharjah increasing all the time, the domestic property arena should see more movement in the years to come, as the level of local ownership increases equity in the market. This is the long-term goal of the government and one that could see homeowners looking to upgrade in the future.
With the emirate continuing to offer a cost-effective alternative to more expensive markets, the upper property brackets could also see renewed investment, giving further impetus to a sector that has steadied and is showing signs of greater maturity.