Funds for the future: Regional resources are being aimed at social needs

In the interests of further economic integration and development, the GCC agreed to create a $20bn fund in March 2011 to develop Oman and Bahrain. Under the plan each state is to receive some $10bn in funding as part of the Gulf Development Fund. Independent of this money, Bahrain can also count on $2.5bn from the Kuwait Fund for Arab Economic Development over the next 10 years, and $448m from the Saudi Fund for Development for schools and housing, which is all intended to benefit society.

NEW TARGET: One of the mandates for the new funding is that it cannot be used to purchase land from the private sector or to improve existing facilities. The GCC fund aims to redirect its spending away from Manama and the waterfront properties that have been the focus of much private sector development over the past few years, focusing instead on other areas of Bahrain where the majority of its citizens reside. Some 46% of the funding will go to the development of social housing. According to the World Bank’s World Development Indicators, Bahrain’s population growth is about 2% per annum. As a result of this growth, the Deloitte report suggest that the affordably housing demand list expands by 3000 names each year. The government hopes to reduce the waiting time for social housing to less than five years by 2016. As of March 2013 there were 54,000 on the waiting list. Fast delivery is a key concern for all contractors. The government’s five-year strategy calls for the provision of 47,000 units.

THREE TIERS: Three types of social housing programmes are available in Bahrain. Households earning BD320 ($842) a month or less are entitled to a government apartment for which a nominal monthly payment is made, not exceeding 25% of total household income. For those households earning BD320-900 ($842-2370) per month, the provision of a townhouse or villa is available, for which the recipient also pays at most 25% of monthly household income. Finally, for those earning BD900-1200 ($2370-3160) per month, Bahraini nationals are eligible to apply for a variety of loans, including a subsided loan at the annual rate of 3% through Eskan Bank, the government’s mortgage bank.

TACKLING CHALLENGES: The Ministry of Works and the Housing Affairs Department have been seeking solutions to the housing crisis for many years. To meet the challenge, in January 2002 the ministry signed an agreement with developer Naseej to provide Bahrain’s first public-private partnership (PPP) in the housing sector at a value of BD550m ($1.45bn). The project initially involved the construction of housing units in three sites over a period of three and a half years.

Given limitations due to land prices and project delays, it might be more affordable for the government to simply provide apartments instead of houses to more of those waiting (although Bahrainis who have waited for nearly two decades to receive government housing would certainly be excluded from such reform). Nevertheless, there is still the inclination to provide individual housing units. “If we compare the situation with the US and other markets, we should recall that social housing was initially conceived as houses in outlying suburban areas, not apartments,” Robert Lee, CEO of Bahrain Bay, told OBG.

The remaining GCC funds will be spent on a number of infrastructure projects, particularly those that help connect Bahrain with the wider GCC. Some of the money may also go towards social facilities, such as the construction of a social welfare complex in Madinat Issa, the building of Bahrain Comprehensive Care and Rehabilitation Centre in the Ali district, and infrastructure projects related to the development of Salman Industrial City. Some $700m of the funding will be spent on 18 medical projects spread across Bahrain, including a BD8m ($21.05m) dialysis centre in the Southern Governorate, a BD8m ($21.05m) hospital in Muharraq focused on treating chronic diseases, and a centre for the treatment of diabetes. The funding from the GCC will thus be aimed at meeting Bahrain’s critical social housing needs, developing infrastructure and helping prepare the kingdom for further economic growth.