Gulf Developers Eye Iraq's Housing Sector

On 23rd November 2009, Iraq's Parliament approved the first draft Amendment to Law No 13 of 2006 (the "Investment Law"). The Amendment is designed to encourage applications from foreign developers to invest in and develop new housing projects in Iraq through the availability of land ownership and other incentives.

The Amendment still requires the approval of Iraq's Presidential Council and will not come into force until it is published in the Iraqi Gazette. Nonetheless, given the relative lack of opportunities for new projects in the Gulf countries, many Gulf developers are already active in identifying and securing development opportunities in Iraq.

The Opportunity

Following the cessation of hostilities and the return to relative norm, Iraq is facing a serious housing shortfall. Iraq's National Investment Commission ("NIC") estimates that over three million new homes will be needed across the country over the next five years, citing a combination of the following factors:

High population growth rates: At present rates of 2.6% annual growth, the population of Iraq will reach 40 million by 2015, creating a need for almost two million new housing units. The return of refugees: The United Nations has estimated that 0.5 million of the 4.2 million refugees will return by 2010 if stability continues. Displaced persons: Internally displaced families will need new housing. Increasing urbanisation: Oil revenues, agricultural surpluses, and Iraq's various conflicts have all hastened the trend toward migration to the cities, especially to Baghdad and Basrah. The Government estimates that 85% of this home building will be carried out by the private sector. Whilst the Government built some housing projects in the 1970's and 1980's, residential development has since been undertaken by small-scale local builders. These builders have not yet developed the financial and technical capability to address the large-scale development now needed to satisfy the rising demand for housing. Ample opportunity therefore exists for large established foreign developers to participate in the housing construction boom that is expected to take place over the course of the next five years.

The emphasis is on "affordable housing", to be achieved through a combination of reconstruction and restoration works in Iraq's top five cities as well as greenfield development. The NIC perceives a need for "real estate developers that are capable of planning, designing, developing, and delivering planned community housing at the necessary price point...Foreign investment can bring new designs and techniques as well as efficient lower-cost building materials for planned communities and a wide variety of creative low-cost housing units". Whilst...