Posted on 10 February 2013.
By Omar al-Shaher for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.
The Iraqi National Investment Commission (NIC) is facing major problems in marketing units in the largest residential project in the country, despite the growing housing crisis in the capital of Baghdad. This raises questions about the benefit of the government’s investment in such projects.
Although the advertising campaign for the Besmaya [Bismayah] residential project (pictured) southeast of Baghdad was launched a year and a half ago, thousands of residential units are still available at the complex. This project represents the first step in the Iraqi government’s plan to build one million residential units over the coming few years.
The NIC, which is the official body concerned with the project, said, “The Besmaya project is spread over an area of 18 million square meters, and includes 100,000 residential units that can accommodate 600,000 people.” It explains that the contract for this project was awarded to Hanwha, one of the largest global construction companies of South Korea.
At the end of September 2011, the NIC offered through its website the project’s residential units directly to Iraqi citizens, and announced that work on the residential units will begin in early 2013. This came after it had previously promised that the project’s infrastructure would be established in 2012. However, 2012 has passed and the project’s infrastructure and residential units have yet to be completed.
It seems that the reason for this delay is that Iraqis are reluctant to join the project, which led to financing delays in the first installment, which participants were to provide, according to sources within the NIC.
The sources said that the financing plan requires participants to pay a quarter of the project’s costs before starting construction. However, weak demand has driven the commission to look for other sources of financing, primarily by borrowing from the government.
Controversy has surrounded the project site, particularly after Iraqi MPs said that it is radioactively contaminated and located close to an Iraqi army camp. However, the NIC said that it has thoroughly examined the site and confirmed that the project is habitable.
The NIC said that the project’s infrastructure includes schools as well as commercial, health and entertainment centers. Moreover, a modern road network is being built specifically for the project, linking it to the highway and thus connecting it to the Iraqi capital.
The project’s residential units consist of ten-floor apartment buildings and does not include homes or residential villas, which, according to real-estate experts, is sufficient reason for Iraqis to not join the project.
Abdul Wahab al-Bayati, manager of MENA Real Estate, located in the university district in western Baghdad, said, “Iraqis prefer stand-alone homes over apartments.” He added, “The people here view apartments as inferior property,” and “they want to own the land on which a house is built, not an apartment hanging in the air.”
Bayati added, “I asked several of my clients, those who do not have enough money to buy homes in Baghdad, why they wouldn’t consider Besmaya. The answer would be, ‘We want homes on the ground, not apartments in the sky.’”
Bayati expressed doubt over the feasibility of building these residential complexes. He said, “The government must help the people build homes, not large, unwanted complexes.”
However, the NIC asserts that this project may currently be the only means to ease the housing crisis in Baghdad, which has led to a significant rise in real-estate prices.
The Besmaya project offers three types of apartments: 100 square meters for $60,000, 120 square meters for $72,000, and 140 square meters for $84,000.
The commission proposed three payment options: payment of the full amount upon signing the contract, payment of half the amount upon signing with monthly installments over three years and payment through installments, whereby the buyer pays 25% of the apartment’s value upon signing the contract and the remaining amount through installments over 15 years.
In a recent attempt by the NIC to convince Iraqis to invest in this project, the value of the first installment in the third payment method was reduced to 10% instead of 25%.
Still, the move was not sufficient, and the authority is still trying to attract buyers for thousands of vacant units in the project. It seems that the project will not succeed until the people here start accepting the idea of vertical housing.
Omar al-Shaher is a contributor to Al-Monitor’s Iraq Pulse. His writing has appeared in a wide range of publications including France’s LeMonde, the Iraqi Alesbuyia magazine, Egypt’s Al-Ahaly and the Elaph website.