Qatar, whose energy wealth enabled it to spend its way out of the global downturn, may move to prop up real estate operators after bailing out its banks, sector experts believe.
The Gulf Arab state’s economy is expected to grow 16 percent thanks to new energy projects and its status as the world’s biggest producer of liquefied natural gas.
The government’s help for banks in 2009 included taking 14.4 million riyals ($3.96 billion) in real estate loans off their books to spur more lending.
Now more direct help for real estate firms may be needed as a construction boom fuelled by oil and gas income slows.
“The cloud on the horizon is the property overhang,” said a banking source, who asked not to be identified.
“At some point, after a property boom you get a bust.
“There is already oversupply in real estate,” said George Nasra, managing director of the International Bank of Qatar.
“There is a problem particularly in office buildings, but we are starting to see it in residential buildings as well.” House prices, off some 30 percent, are seen falling a further 15 percent in 2010, investment bank The First Investor Asset Management said in November.
Government support would likely be discrete, the banking source said, taking the form of equity investment or government take-up of rights issues.
“The government is already an equity investor through Qatari Diar,” Patrick Rahal, senior analyst, asset management at The First Investor, referring to the property arm of Qatar’s sovereign wealth fund.
“Qatari Diar is a major shareholder in several listed real estate firms,” he said.
Qatari Diar will own at least 45 percent of new Barwa group, formed after Barwa Real Estate’s planned takeover of Qatar Real Estate Investments (Alaqaria) “That is an implicit sign of the government’s support for the real estate market,” Rahal added.
“The government is showing some commitment, and this kind of commitment is good, I think.
It’s a tangible thing.” He said the government would likely retain or delay supply to the market to support the sector.
“The role the government plays here is really important,” said Blair Hagkull, managing director of Jones Lang LaSalle MENA, a property consultancy.
“The government can play a larger role in the roll-out than in Dubai.” Mike Williams, senior director at CB Richard Ellis in Bahrain, a property consultancy, said the Qatari government has the ability to bolster its property market.
“They certainly have enough money, and they are investing in infrastructure, which will help keep the construction sector going,” he said.
The willingness is likely there as well: The Qatari government was quick to act in bolstering its banking sector to relieve local banks of costly real estate investments.