Housing: Iraq is continuing to forge ahead with multi-billion dollar housing projects as it strives to meet the demands of a sector decimated by war and years of underinvestment. While risks to investors remain high, the lure of major contracts is attracting a growing number of developers to this burgeoning industry. Furthermore, the government has announced plans to build 2mn housing units by 2014 to cater for growing demand for low income housing. The recent award of the US$11.3bn Sadr City contract to a Turkish consortium is both an illustration of Turkey's growing presence in Iraq's construction industry and an example of the scale of the projects on offer for developers willing to brave the risks. The project forms a key part of Baghdad's development programme which aims to invest US$10bn over the next ten years in the Sadr City slum. Moreover, with Iraq's housing deficit standing at an estimated 2-3mn, the potential for new projects is vast.
The growing focus on infrastructure in Iraq will continue to present substantial opportunities for those construction companies willing to price in the sizeable risks and enter the market. A lack of capacity and ability among local construction companies has the led the government to call for international participation in rebuilding Iraq’s infrastructure.
Driven by demand for infrastructure, BMI forecasts that Iraq’s construction industry will post 5.4% yearon-year (y-o-y) real growth in 2010, and 6.0% in 2011. In our newly-extended forecasts, industry growth is expected to reach 7.0% by 2015. This growth trajectory is also reflected in our forecasts for the Iraq’s construction industry value (IQDbn). We are estimating construction industry value to reach IQD8,818bn in 2010, before climbing to IQD10,435bn in 2011 and more than doubling present value to reach as high as IQD18,014bn by the end of 2015.
Despite the growing opportunities, there are also considerable risks in the country. Iraq’s Infrastructure Business Environment Ratings serve to highlight the risk/reward trade off and Iraq scores very low for risks (34/100) compared to rewards (51/100). Ongoing concerns over violence and security risks are the major barrier to entry, as well as a complex and unsophisticated regulatory and legal environment.
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