Qatar's booming real estate sector is set to have its own bank. Plans to establish a real estate bank were announced recently by Prime Minister Hamad bin Jassem bin Jabor Al Thani and are expected to soon get the go-ahead by the emir, Hamad bin Khalifa Al Thani.
At present, the central bank restricts banks from lending more than 15% of their credit portfolio to the real estate sector. The new bank will deal exclusively with real estate, and in doing so, it is expected to serve the needs of the sector and the investor better.
However, not everybody is convinced of the merits of such a proposition. Ahmed al-Shaer, president of ERA Real Estate, told OBG a real estate bank is not what is needed. "We need to take a look at models that have been used worldwide, not a stand-alone bank. We need to use tools that will reform the mortgage system. Another option is to use real estate trusts. I don't see the point of a real estate bank when so many of the banks are already involved in the sector," he said.
Some industry experts, such as al-Shaer, believe that the model of a real estate bank is obsolete and is used in underdeveloped countries that rely on a centralised form of control. "This can negate the entrepreneurialism that is required, especially for a sector that holds such potential and is still in its early stages of development," he told OBG.
The announcement of the new bank comes as the real estate sector in Qatar is expected to get a further boost with the completion of a number of investment-oriented commercial and residential properties over the coming few years.
On June 6, 2004 the government relaxed rules on the purchase of property by expatriates and non-residents in specified areas. There is still lively debate within the sector whether the market will be completely opened to foreigners in the future.
One such project that is open for investment is UDC's $10bn development called The Pearl. It is a four-square-kilometre island that will hold 7600 high quality dwellings, offering non-national investors an opportunity to purchase property while also giving residential status to them and their family.
Khalil Sholy, managing director of UDC, told OBG, "People now see the great investment opportunities that lie in residential properties in Qatar. Our terms of re-sale on The Pearl stipulate that we must have the first buy-back option. That's because we believe the prices are going to continue to increase and we can make money on the units in the future."
The vast majority of interest with high-end residential investment is coming from professional expatriates. Pierce Moerland, vice-president of 1st Qatar Real Estate Development, told OBG that many are looking at the real estate sector in Qatar with hopes of making lucrative returns. He said, "Over two-thirds of our buyers are either resident expatriates or buyers from abroad and they see the real estate sector here offers return on investment like no other sector."
Another freehold property that will offer such investment opportunities is the 32-square-kilometre Lusail development just north of Doha. It will include 3000 villas, 12,000 apartments, 300,000 sq m of retail shopping, and 6m sq metres of commercial space. Lusail will come online in phases and by 2020, it is expected to accommodate up to 200,000 residents, at an estimated cost of $20bn. In contrast with the 100% freehold status of The Pearl, the maximum legal ownership rights for non-Gulf Co-operation Council nationals will be 99-year leases at Lusail.
Hesham al-Emadi, chief executive officer of Energy City in Lusail, told OBG it is a very important project for Qatar strategically. "I believe it will have a great future and will be a good candidate for solving some of Doha's current infrastructure problems," he said.