Lack of Low-Cost Housing in Dubai

Dubai's private developers have recently announced that erecting low-cost housing was not their first priority. High land rates in the emirate have prevented them from taking up low-range housing assignments. According to Ahmad Al Abdullah, chairman of New Dubai Properties that has constructed 22 projects worth over $7 billion across the emirate, high land rates are forcing developers into projects that involved building luxurious apartments, office blocks and Dubai hotels. These bring back far better returns on investment as compared to what the affordable housing may deliver. There is already a shortage of three and four star hotels in Dubai that many construction companies are trying to make business from. Nobody dares announcing low-cost housing projects on the other hand though.

According to various estimates 40% of the project amount is normally required for purchasing lands while the rest goes in undertaking construction plans. This means low-cost housing in Dubai may never be profitable in the present-day scenario. There are only four apartment blocks apart from twelve commercial towers and six Dubai hotels that New Dubai Properties has constructed so far. Dubai's government has failed in checking down its land rates until now, thus causing inflation in the real estate sector. This has also affected the market of affordable hotels in Dubai in a negative way. There is no dearth of the expensive hotels in Dubai on the other hand though, and many native and offshore players are lining up to build many new five star hotels in the emirate.

Expensive real estate prices in Dubai is why many people have decided to live at Sharjah and spend up to three hours traveling down to and up from Dubai on a daily course. While Dubai hotels and furnished apartments may be the right place for high-flying executives, CEOs and holidaymakers to reside, there are many who still can't afford to have accommodation in apartments or hotels in Dubai. Governmental efforts of encouraging low-cost housing projects have always stood non-starters. The desire of having the largest, tallest and the most advanced infrastructure has escalated Dubai's cost tremendously. While it may indicate a boom time for the tourism sector, there are many who would think otherwise. The need of saving money to send back home may not allow many expatriates to buy accommodation in today's scenario, hence they have to move elsewhere facing large scale hurdles.

Dubai's government will have to find out a way of having a balance between lavish and affordable housing projects. A segment of the free land should be given away at low rates to make this reality. It shouldn't be ignored for too long, since a large expatriate workforce keeps arriving at Dubai on a daily basis. There is a fear; the lack of affordable housing may slow down the region's overall growth. More and more expatriates are finding it hard to buy accommodation in Dubai today. Some construction firms have already moved away to other areas within the UAE with an aim at having low-cost housing developments there. This has a potential of inflicting Dubai's economy severely unless checked by the authorities soon.

Pankaj Mohan is an Ahmedabad, India based freelance writer who often writes on Dubai hotels, apart from other issues.

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