Though it prefers to take a more restrained approach to liberalisation and development than nearby Dubai, the state of Qatar is considered by many to be the entrepot-in-waiting of the Persian Gulf. After lean years in the late 1990s when oil prices were bottoming, the central bank reported a budget surplus of $1.58bn last year. GDP was up by 8.8% to $19.4bn, of which $10.27bn came from oil and liquefied natural gas (LNG) revenues. More of the same is expected this year, but rather than allowing the public purse to keep on expanding, Qatar’s rulers are keen to invest in economic diversification and to boost the country’s appeal for foreign investors.
Since the turn of the millennium, the government has assigned $3bn of public finance to upgrade the national infrastructure. As well as new roads, sewerage plants and a $750m expansion programme for Doha International Airport, the plans include numerous prestige projects designed to enhance Qatar’s cultural identity and to shake off dogged accusations that it is not an interesting place to live or work.
Arts and books
At $100m each, the Museum of Islamic Arts and Qatar National Library are two examples of the cultural developments underway. Designed by the architect who built the Louvre Pyramid in Paris, when it opens in 2006 the 45,000 sq metre museum will be filled with $1.2bn worth of artefacts procured by the government. The national library on Doha’s Corniche will also boast a repository of 800,000 books, and will sit atop three cylindrical towers designed by Arata Isozaki of Japan.
For those who require a little more action, Qatar has purpose built a 5.6km motor racing circuit to host the motorcycling Qatar MotoGP. But by far the greatest incentive to develop new leisure facilities is the need to prepare for the Asian Games that will come to Qatar in 2006. As well as upgrading the Khalifa Stadium to a Khalifa Sports City, housing various sports halls and facilities, a 365,000 sq metre site in central Doha is being developed into an Olympic village with accommodation for 10,000 athletes and officials. Once the games are over, this prime real estate has been earmarked for conversion into a medical campus.
As far as expatriate and overseas real estate investors are concerned though, the starting pistol fired on June 6 this year, when Emir Sheikh Hamad bin Khalifa Al Thani issued a decree permitting non-Qataris to own real estate in a luxury residential and tourism development – The Pearl Qatar. To ensure that properties are bought by end users and not just investors, owners and their dependent children have a right to Qatar residency visas that are valid until their property is resold.
Foreign ownership is also permitted at the West Bay Lagoon, and the signs are that foreigners will also be allowed to buy into two more developments – North Beach and Al Khor Resort. Both of these projects are still at the feasibility study stage, however, and legal clarification is not expected until 2006.
Launched in May, the $2.5bn Pearl Qatar project will eventually see 4m sq metres of land reclaimed from the sea and is the first development in the country to offer freehold rights to foreigners. Shaped in the form of three large coves with an island in the middle of each, the Mediterranean-themed development will support three five-star hotels, four marinas and 8000 villas and apartments to accommodate 30,000 residents. The first of these residents are expected to move in around September 2006, and the development of the 10 districts within The Pearl should be completed by 2009.
Starting at $268,000 for a one-bedroom apartment, prices rise to $1.7m for a four-bedroom penthouse in one of the 21 phase-one, 20-storey towers. When available, a one-bedroom townhouse is expected to cost $288,000, while a four-bedroom triplex with private beachfront is likely to require an investment of around $972,000. Later, six-bedroom villas will be the largest properties available, if you discount a limited number of small islands set aside for private palaces.
Development at the West Bay Lagoon began about 10 years ago and is characterised by private villas alongside canal waterways. Local banks such as Qatar National Bank (QNB) and Commercialbank offer finance schemes that are open to foreigners specifically for the construction of property in this area, which the government is keen to see developed as part of the Asian Games preparations. Plans for Al Khor call for an Al Fareej Resort development that will offer “Arabian-style chalets” in a family-oriented environment, while The North Beach Development & Entertainment City will contain 3000 villas and 12,000 apartments, plus hotels, golf courses and commercial space. Construction for both resorts will begin next year.
Aware that new skills are required if the economy is to expand beyond the borders of the oil and gas industry, the Qatar Foundation inaugurated a 7m sq metre Education City in Doha last year. Sheikh Hamad said then that the city “surpasses in its significance any other industrial or economic project… because it is the foundation and pillar that will secure the success of every future project”. Three US universities promptly moved in – Texas A&M University to provide engineering courses, Weill Cornell Medical College for medical science courses, and Carnegie Mellon for computer science and business courses. Other foundation projects include the Qatar Academy day school and the Qatar Science and Technology Park (QSTP) – Qatar’s first free zone.
When it opens at the end of 2005, QSTP’s objective will be to provide the Middle East’s premier location for the development and commercialisation of technology. As the emphasis is on development, tenants may undertake commercial trading from the park, but they must demonstrate that their activities also include research into new technologies and their practical application. Leases will be provided on a non-profit basis, and 100% foreign ownership is permitted in a jurisdiction that levies no taxes or customs duties. So far ExxonMobil, Microsoft, Shell and Total have announced that they will set up in QSTP, and the government hopes that these firms and future arrivals will eventually employ the graduates being educated elsewhere on the Education City campus.
Back in central Doha, the corporate demand for new towers has been augmented by a government decision to lease rather than build any more properties for its ministries and departments. Construction cranes work round the clock, and 150 towers will dot the skyline of the West Bay area by the end of 2007. The Qatar Tourism Authority has engaged Bechtel to undertake a development master plan for Doha that will be ready by the end of the year, and anticipates that the number of three- to five-star hotels in Qatar will leap from under 20 now to over 40 by 2010, providing a total inventory of over 6000 rooms. This in turn will more than triple the number of tourism-related jobs created to 35,000.
If there’s one major caveat for potential real estate investors now, it’s that foreign property ownership is still so new to Qatar. The fact that all 456 apartments released in the first tranche of Pearl sales this October were reserved in just 24 hours probably says as much about availability as it does about the project’s long-term appeal. With rents spiralling upwards and developers focusing on up-market properties rather than affordable housing, there could also be a price correction looming for those who buy to let. Qatar’s population remains around 800,000, and while marketing efforts are underway to promote the country overseas, it has not yet built a global brand to rival that of Dubai.
Highest Gulf GDP
But what makes Qatar different, the bulls say, is that real estate growth is a sign rather than a cause of economic growth. Whereas real estate projects in Dubai and Bahrain are part and parcel of necessary strategies to boost the service and trade industries, Qatar can afford to develop at its own speed. UDC, the development company for The Pearl, says it received strong interest from Europe and South Asia for its first three towers. With a per capita GDP of $32,000, the highest in the Gulf, there should be plenty of Qataris able to buy new properties even if foreigners don’t or can’t.
Looking to Qatar’s future, annual LNG production has already reached 18m tonnes and is expected to rise to 27m tonnes in 2005. If it can achieve its goal of 36m tonnes by 2008 Qatar will outstrip Indonesia as the world’s largest LNG exporter, and the revenues from the 650,000 barrels per day of crude oil it’s currently pumping will become an added bonus rather than an economic mainstay. For foreign real estate buyers, keen for assurance that their investments will be safe and likely to enjoy capital gains backed by economic growth, those statistics could hardly look much better.