Land Price Is Key To Affordable Housing

Affordable housing assets could spin revenues of $125 million (Dh458.7 million) annually in the Gulf region if land prices drop to reasonable levels, analysts said. Consultancy A.T. Kearney came up with the figure based on "potential sales and asset management revenue" and proposed that developers adapt to volume sales rather than high margins in their business models. Kearney cited the experience of France's Phenix, Brazil's Tenda and America's Amcal and MDC in the 1950s to 1970s, as well as India's TDI and Thailand's Preuska in the following two decades. In the Mena region, pent-up demand justifies the switch to developing affordable homes, it said. According to Kearney's estimates, there is demand in Saudi Arabia and Egypt alone for 150,000 and 280,000 units, respectively. "Given that there are millions of people to satisfy, developers of adequately managed properties should plan on project returns in the 10 per cent range not the 20-plus per cent margins of high-end projects," said Olivier Laroche, principal in the real estate practice at A.T. Kearney Middle East.