Friday, January 28, 2011

Iraq’s Housing Program Isn’t Panning Out

According to the Iraqi government and outside experts Iraq needs between 2-3 million new houses in the coming years. That’s largely due to a 3% annual population growth rate, and the hundreds of thousands of people displaced during the civil war. The problem is that Iraq doesn’t have the money to pay for that many units, and was hoping that with improved security, foreign investment would begin flowing into the country and help to meet this need. In early 2010 the National Investment Commission said it wanted bidders on 1 million new houses worth $50 billion. Since then the government has made several claims about contracts being signed, but nothing much has actually materialized.

By the 3rd quarter of 2010 Iraq claimed that it had signed deals with 35 international firms to build 1 million housing units, but little of that panned out. The government said companies had agreed to construct 244,000 units in Baghdad, 100,000 in Mosul, and 80,000 in Basra, amongst others. In May, after a meeting with Prime Minister Nouri al-Maliki, authorities announced that Jordan’s Amwaj International would invest $238 million in houses and hotels. Nothing has happened since then. In September, the National Investment Commission told the media that it had closed deals with two United Arab Emirates construction companies for $66 billion. Since then, no contracts have been signed. In November, the Investment Commission proclaimed that it had signed a memorandum of understanding with a South Korean company for 500,000 housing units. The Korean company later denied that story. All of these examples highlight the bad habit that Baghdad has fallen into lately. It is increasingly releasing statements about deals being signed, development plans moving forward, etc., but then months later nothing becomes of them.

The press has reported several reasons for why companies have been stand-offish towards Iraq. One major problem is Iraq’s laws. In 2009 parliament passed a new bill to allow foreign investors to buy land. The legislation didn’t explain how prices were to be determined however. Officials claim that the cabinet is supposed to come up with rules for valuing plots for sales and rentals soon, but until then, the head of Baghdad’s Investment Commission said this issue is a major detriment to companies entering the Iraqi market. Other factors were the prolonged government formation process that is still not over ten months after parliamentary elections, corruption, security, and the lack of infrastructure.

That may mean that the government will have to rely upon itself to develop its housing industry. The Deputy Housing Minister said his ministry will allocate $230 million for housing in the 2011 budget. The Housing Fund is also supposed to build 15,000 new units, and the mayor of Baghdad claimed that $1.5 billion has been earmarked for housing as well. The new spending bill hasn’t been passed yet however, which means nothing can move forward on these plans yet. Even then, the amounts being talked about are a fraction of what the country needs.

Iraq’s infrastructure is still a mess after years of wars and sanctions. The government wants to turn the corner now that the civil war has ended, but investors outside of the energy sector have not been as enthusiastic about Iraq as hoped for. That hasn’t stopped Baghdad from announcing every negotiation it’s had, whether that leads to an actual deal or not. That may give the impression that progress is being made, and that the housing crunch will be addressed, but so far that hasn’t happened. Iraq’s ministries cannot handle this burden alone, so the laws and regulations have to be changed to encourage outside financing. This may take a lot longer than hoped for since the new cabinet hasn’t been finalized yet, and there are no committee heads yet in parliament either. Until then the country’s housing plans may be on hold.


Kami, Aseel, “Iraq needs billions to meet growing housing shortage,” Reuters, 1/12/11

Kami, Aseel and Benham, Jason, “Baghdad needs $100 billion for new homes: mayor,” Reuters, 11/29/10

The National, “Iraq housing foundations remain rocky,” 12/7/10

Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/10

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