New land plots to increase labour accommodation supply

by  — 19 April 2016

The Qatari government’s recent move to reallocate 23 plots of land to private companies for developing temporary labour accommodation is not only expected to improve the living conditions of workers, but also reduce the cost of development, writes Nick Witty.

The government has taken the initiative to build more labour cities in partnership with private companies. Pictured here is the new Labour City that opened last year in Sanaya Industrial Area in Doha. (Image Getty Images)

On the back of a housing shortage in the country, construction companies have had to accommodate their workers in the unorganised housing sector, which often lacks proper amenities. In a bid to mitigate this, the government has taken the decision to allocate 23 plots of land across the country for the development of worker’s accommodation by the private sector on a build, operate, transfer (BOT) basis. The likely effects of this initiative will be reduction in both the costs of development and housing the workforce for the short term, and arguably thereby making the affordable housing segment more attractive to developers/investors, albeit only if the land is given free of cost, leased or subsidised.

Mohamad Sheikh Al Souk, deputy general manager, Construction Development Contracting and Trading, said, “Increasing the supply will definitely lower the demand and consequently the prices will drop. This is a very good initiative and must be continuously monitored in order to decrease these prices.”

At the moment, he said, there are many factors contributing to the inflation in Qatar but this step will definitely lower a major portion of the cost. Terming this a good opportunity for developers, Al Souk said that at least now they have the chance to tap into a market that is virtually non-existent.

There has been a clear gap between the demand and supply of quality labour accommodation which meets international standards. The industry experts see this as a significant step towards achieving Qatar’s objective to improve expatriate construction worker’s standard of living in the country.

The demand for workers accommodation has increased in Qatar since mid-2013, primarily as a result of the implementation of the National Human Rights Commission’s guidelines on the quality and size of accommodation.

The findings of the most recent April 2015 census are yet to be released; however, the 2010 census indicated that there were approximately 920,000 blue-collar workers accommodated in multiple locations in developments of varying sizes and quality across the country. Current forecasts suggest that there could be additional demand for between 500,000 and one million beds in the run-up to the 2022 World Cup.

Despite the increase in demand, it is widely reported that many private sector construction companies are deterred from entering the market for two primary reasons, the first being the cost of land; and the second being the increased costs associated with housing their own workforce.

Land in Qatar, like many Gulf countries, is traded as a commodity without the ultimate owners necessarily having any intention of developing it. As a result, land is often too expensive to develop into low-cost accommodation as the developer is unable to secure the returns they require. As such the focus is on higher end, higher quality products which command higher rents and in turn higher investment returns.


Public private partnership

The government initially took the lead by supporting the quasi-government developer, Barwa Development Company, in developing Barwa Al Baraha, referred to locally as Barwa’s Workers’ City. Located in proximity to Doha’s old industrial area in the west of the city, the development which extends to approximately 1.8 million square metres is capable of housing up to 53,000 occupants making it one of the largest workers’ accommodation complexes in the Gulf Cooperation Council. Facilities include a hotel, entertainment centre, mall, laundry, health centre, mosque, Islamic centre, police station, civil defence centre, fire-control centre, sports facilities, shops, restaurants and offices.

While there is very limited data released publicly, anecdotally, the availability of housing for lower- to middle- income households has been relatively limited despite the fact that those new labour compounds opened recently in Qatar. There is still a steady demand for affordable housing especially as the country continues to witness rental growth across all residential sectors.

Though given current land prices across the country, it is likely that this segment will remain unattractive to developers and it will fall upon the government and quasi-government developers to take a lead and perhaps subsidise accommodation.


Nick Witty is the director, Real Estate, Deloitte & Touche, Middle East.

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