UAE developers eye Pakistan housing projects

June 10, 2009

A number of UAE property developers are considering investing in the construction of 6 million low-cost homes in Pakistan as part of a government-backed plan to ease the housing shortage in the country.

The Pakistani government has allocated 20,235 hectares of land across four provinces and is hoping to attract investment from five UAE firms.

Under the deal, the government will provide land for the development, while the projects will be financed through a public-private partnership (PPP).

Waqar Ahmad Khan, the minister of investment for Pakistan, said yesterday he had held discussions with Ruwaad Holdings, Enshaa, a company partly owned by Emirates Investment Group in Sharjah, Fortune Group and Majid Al Futtaim Group and the developers were at the due diligence stage of the process.

Schon Properties in Dubai was also considering investing in the same project, Danial Schon, the company´s vice president, confirmed.

The companies could either invest directly with the government or pool their resources with local developers, he said. Representatives from the prospective investors are due in Pakistan over the next couple of weeks to visit the sites planned for development.

"With a population over 170 million people, there is a dire need for housing in Pakistan," Mr Khan said. "There are tremendous opportunities here and we have pledges of investments from several investors."

Mr Khan declined to say how much the potential deals were worth, but estimated the cost of building one house at 1,215,000 Pk Rupees (US$15,000). The construction programme will be phased over several years, with overall spending estimated at $89 Billion

Al Maabar – a joint venture between Abu Dhabi´s Aldar Properties, Al Qudra Real Estate, Sorouh Real Estate and Al Reem Investments – has also been invited to participate, although Yousef al Nuwais, the managing director, admitted it was not going to happen tomorrow. "We have not had any serious talks," he said. "When we have the opportunity and time, we´ll look into it then."

About four million homes are planned for construction in Punjab, Pakistan´s most densely populated province.

Danial Schon, the vice president of Schon Properties, said that despite the slowdown in property markets globally, the government´s support for low-cost housing and the economy´s raw fundamentals spelt opportunities for investment.

"Pakistan has a major shortage of housing and the government is definitely providing some good incentives to developers," he said.

"The population is there and the demand is there from local people who need homes to live in, so the property sector is not dependent on foreign investors or expatriates." While political instability in Pakistan may deter investors, those keen to invest in the housing initiative say the country is a strong market for long-term investments.

"Despite being at a political crossroads, strong fundamentals keep Pakistan´s economy buoyant and the current low asset valuation offers excellent opportunities for medium and long-term investors," said Raza Jaffar, the vice chairman of Emirates Investment Group.

So far, Emaar Properties is the biggest UAE developer in Pakistan, with two projects in Islamabad and one in Karachi. Majid Al Futtaim is also building shopping and leisure projects in several Pakistani cities.

Limitless, a company owned by Dubai World, had planned to build Karachi Waterfront, but is no longer going ahead with the project. A spokeswoman for the developer said the project did not go beyond a memorandum of understanding and the firm was continuing to assess opportunities in the country.

"It appears to be a high-growth market, but to announce an investment and actually doing it, is quite different," said Sana Kapadia, a property analyst at EFG Hermes. "Also, you would expect these places to have scale-backs in light of the tighter liquidity conditions."

Mr Khan said foreign investment this year in Pakistan was expected to reach $10 Billion by September, while investment in the country´s energy sector was expected to reach $2 Billion.