First fact is that the Public Authority for Housing Welfare (PAHW) will, within a few years, face a backlog of more than 150,000 housing applications. Second, this massive demand cannot be met without the involvement of a real estate developer. Third, no entity can meet this demand quickly, affordably, and with the required expertise, equipment, financial capacity, and strong government backing, except Chinese companies. And the fourth and final fact is that several parties oppose the entry of foreign real estate developers into the local market.
They have previously succeeded in blocking attempts by such developers, resulting in huge losses in both reputation and finances, as was the case with the Korean developer. A real estate developer is typically a large company with extensive experience and capabilities in land or property development. Their role goes beyond simply constructing homes, but it includes conducting market and feasibility studies, project planning, securing financing, overseeing design and construction, and handling marketing and sales. In some cases, the developer may also purchase the land, which could be provided by a government entity or investment body aiming to increase its value through development.
Residential projects under the real estate developer model are typically divided into three types. The first is a government-only residential project, similar to existing residential suburbs. The second is a private, mixed-use residential investment project that includes commercial offices, warehouses, workshops, factories, and other components, developed for long-term investment purposes. The third type is a residential and investment project in which the government provides land to a real estate developer to implement the project based on agreed-upon terms in a clear memorandum of understanding.
The government then sells the housing units to citizens and leases the remaining spaces, such as warehouses, workshops, and offices, for a specified period. The dispute in the third type of project typically arises between the government and the real estate developer over priorities. The government aims to maximize the number of housing units, while the developer often seeks to build the minimum number, using lower specifications to reduce costs. In earlier projects, the distribution ratio was around 70 percent for housing and public services and 30 percent for the developer. However, in more recent projects, this ratio has shifted significantly in favor of the developer, highlighting a risk in the real estate developer model. I have no doubt in the good faith of Minister Abdullatif Al-Mishari, Chairman of PAHW, or in his intention to divide the construction of the Al-Sabriya project into four or five segments and assign them to local companies, with local banks financing all their needs.
However, this approach, along with many other vital factors, will inevitably put pressure on the real estate developer, potentially leading to a reduction in the number of housing units, smaller unit sizes, lower specifications, or phased implementation of the project. The primary and fundamental objective of involving the major Chinese developer is not simply execution or cost savings, but rather saving time and achieving several goals, such as:
- Fulfilling the Amiri vision of cooperating with China on large-scale development projects
- Completing the project in record time
- Delivering the highest possible number of residential units
- Executing the project at the lowest feasible cost
- Avoiding complex financing arrangements, especially after the Chinese company, owned by the Chinese government, formally offered to invest the equivalent of 7 billion dinars in the project
- Ensuring that the workers’ cities project proceeds without disruption by entrusting this project to the Chinese developer Some of what I mentioned above may not necessarily be true, but the time factor remains the most important. It is also important to halt the signing of the illogical contract with the current consulting firm, whose role is to develop detailed plans for the project before its core concept has even been agreed upon, as it is still unclear.
By Ahmad alsarraf
email: [email protected]
