Rich Benefitting From Building Boom

The capital of Iraqi Kurdistan is seeing a building boom, as developments go up at around the same rate as real-estate prices rise. Despite all the construction, though, the average citizen still can’t afford their own home.

At times Erbil resembles a building site. Construction sites, both residential and commercial, dot the cityscape. Yet the city still suffers from a housing shortage. Despite attempts by the local government to subsidise low-cost housing and encourage building, real-estate prices continue to escalate beyond the reach of Erbil’s poorer citizens and there still doesn’t seem to be enough accommodation to go around.

In 2006, the regional government of the semi-autonomous state of Iraqi Kurdistan passed the Kurdistan Investment Law, meant to encourage investment in the region. The law basically treats foreign and local investors and capital equally. Out of the 323 investment projects begun after the passing of the law, 104 were housing projects.

And over the past 11 years, Erbil authorities say that more than 100,000 pieces of land were sold or otherwise given to builders in the capital city of Iraqi Kurdistan.

However, as local investment analysts have pointed out, the costs of buying into the most recent residential projects remain prohibitively high for many locals, especially those on lower incomes. Often in Erbil housing projects consist of small, planned communities that resemble scenes out of American suburbia; the communities come with persuasive names like the English Village, American Village, Dream City and Royal City. And the prices appear to be just as aspirational as the developments’ names.

For example, a house in the Italian Village ranges in price from US$300,000 to US$500,000. In Vital Village prices go from US$400,000 to US$500,000 and in the even pricier Karin Land, prices start at US$600,000 and can go up to US$1 million. Meanwhile the Kurdish Globe reports that the average salary for anyone employed in the public sector works out at between US$4,000 and US$5,000, which makes home ownership a distant dream for many locals.

“These deluxe houses are built for rich people. I will never have the chance to live in my own house,” Hana Mohammed, 23 and father of two, told NIQASH.

Mohammed is employed as a cleaner for houses in the English and Italian Village developments and he felt that: “Both the government and the investors only care about profits. They don’t care about poor people like me and they are not interested in providing us with any solutions.”

Real-estate prices are also being driven upward by migration into Iraqi Kurdistan. There is an increasing number of Iraqis from elsewhere in the country who are choosing to relocate to Iraqi Kurdistan, tens of thousands according to local government statistics.

The semi-autonomous region, which defends its own borders and has its own military, has been quick to recover from past conflicts and is generally more safe and economically prosperous than the rest of Iraq.

Foreign companies investing in Iraq also tend to see Iraqi Kurdistan as the best base for their operations in the country for the same reasons – and again, they are driving prices up as they are prepared to pay more for housing in the area.

Kamal Shafiq, the owner of a local real-estate firm, confirmed this. “Increased demand on residential units and land has led to increased prices,” he told NIQASH. “Land that was being sold for US$20,000 three months ago is now being sold for US$23,000. And prices are expected to keep going up over the next few months.”

“Most of the residential units and villas are bought by the rich people,” Hussein Yusuf, an investment broker who has been working with the housing project investors for four years now. “Even the smaller housing units, which are sold for low prices are monopolized by wealthy buyers and their relatives and are often purchased to sell on later, at higher prices.”

Local taxi driver Rashid Mahmoud, 34, was shocked when one of his passengers told him that he owned large houses in three separate residential developments, all fully furnished and luxurious by local standards. “I move from one house to the other any time I want to,” the young man told the taxi driver as they went to one of the houses he was boasting about.

Mahmoud himself is still renting a small apartment. And he knows that with the income he earns he will never be able to afford an apartment in one of the new residential complexes.

However it does seem that the local government is aware of the issues around housing. Recent public opinion surveys have suggested that housing is at the top of the list of concerns for locals. And the oil-rich state has a housing fund, through which it subsidizes residential projects.

According to Yusuf, the government has realised that it should be encouraging smaller residential units at lower prices as well as encouraging the larger, wealthier investments. It has taken steps toward this by subsidizing housing units that cost US$50,000. The Fund pays half of the cost and the other half is repaid like a mortgage over a long period of time by the home owners.

However Yusuf believes that for these measures to be successful there needs to be changes made to the 2006 Investment Law and more specific instructions issued by the government. Architect Dara Hadi, director of the Investment Commission’s department of licensing, agrees. He told NIQASH “prices of residential units should be reduced and the reductions should be determined by the housing fund. This would encourage companies to build smaller, more affordable units.”

The regional government is also offering home builders loans of around US$17,000 (IQD20 million) as well as selling them cement at half of the market price. The move is popular, said Ayden Arsalan, head of Erbil’s cement distribution: “Every day we receive requests for cement and construction projects are on the rise.” Officials report that 6,350 citizens have been provided with cement.

At which stage the next big problem for Erbil’s building booms looms: the absence of water, electricity and paved roads.


(Source: NIQASH)

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