NAI Qatar

REAL ESTATE MARKET REPORT 2008

Market Overview

The global financial order has undergone sea changes in the last phase of 2008 and continues its momentum to
2009. The developed economies are in the midst of meltdown. Starting from United States, the widely spread
anxiety about the safety of money has led to panic among banks, depositors, politicians and working people
without any appropriate solution in the near future. The domino effect of this crisis has led a negative impact on
the GCC countries and is affecting strategy to diversify economic growth dear of the oil sector. The most seriously
affected sector is the real estate sector. In a major step to soften the markets from further hurting the investors’
sentiments, the Qatar Investment Authority announced that it was willing to buy stake in listed companies in order
to boost confidence in the market. The government also has allocated 10 per cent of expenditure to infrastructure
and introduced regulatory reforms allowing foreigners to own property. The results are obvious and Qatar is the
least crisis affected country in the Middle East.
The real estate sector in Qatar has flourishing amidst of the global financial meltdown. The double-digit growth
rate, the population influx including expatriates, an increasingly robust middle class and by granting foreigners
permission to build residential properties will invigorate an escalation in high-end real estate development in
recent years. The Qatari real estate investors are optimistic and will continue to seek a promising investment
opportunity, despite global financial crisis. In addition to residential real estate, large-scale investments are under
way to increase office space, retail space, and hotel room capacity in the country. Adequate liquidity in the region,
negative real interest rates, perceptions of high returns, and the government’s emphasis on diversification and
infrastructure improvement have encouraged ambitious public and private development projects in Qatar. The real
estate investors in Qatar have recognized this booming trend and are seeking to garner returns through smart
investments. According to the report of Statistics Authority, there are 1381 permits were issued in 2008 alone
with an estimated cost of QR 11,954,786,000.
Most of the large and small projects are on the move; the rates are also moving upward and this shows the
interest of the sellers and buyers in the country’s real estate sector. The demand source is the increase in number
of expatriates and their families in Qatar will keep the demand robust, while another contributing factor is the
increased interest in Qatar from residents of other GCC countries. The foreign ownership is limited by Law which,
came into effect in 2004 and permits expatriates to own property only in;

1 NAI Qatar|P.O.Box:12625 |Doha -Qatar |+ 974 4316717, 4316743 |www.nai-qatar.com/ Dr. Rajesh Krishna Nair
DOHA 2008

The Pearl-Qatar: spread over 4 square kilometers and has been developed at a cost of US$10 billion and it
comprises 16000 villas, 25000 apartments, 1,400,000 SQM office spaces, 600000 SQM retail spaces , 3 Luxury
Hotels, 4 marinas and other leisure facilities.
Al Khor: Located outside Doha spread over 5,459,168 Square Meters of development at the cost of QR 30 billion
and it comprises 24114 residential units, 250000 SQM office spaces, 2 Luxury Hotels and one being 5 star and
the other a four stars, 4 Schools, mosques and other recreational facilities. 30 percentage of the land is
dedicated to hold landscaped areas.
West Bay Lagoon: The project contains artificial land surrounded by artificial lagoons, extending more than 2
kilometer (1.24 miles) inland from the natural shoreline. It will be located at the entrance to The Pearl-Qatar and
next to Lusail City to its north.
Lusail: is a US$ 5.5 billion comprehensive development incorporating resort, residential and entertainment
offerings. Located to the north of Doha, the project covers an area of 35 square kilometers. The project is
expected to be completed by 2010.

Market Trends

Residential

The Rapidly soaring rental rates and large number of new and upcoming projects in Qatar is mainly attributes to
the influx of population to this country and resultant shortage of available apartments and villas in the market.
From 2004 to 2008 the population increased from744, 029 to 1,553,729. From the figure it is clear that the rate
of growth of population during these years is 109 Percentage. NAI Qatar Estimates that the population may touch
2 million in 2012.This high rate of growth of population has a significant impact on the real estate sector in Qatar.

Population 2004 -2012

2500000
2000000
1500000
1000000 Population
500000
0
2004 2005 2006 2007 2008 2009 E 2010 E 2011 E 2012 E

2 NAI Qatar|P.O.Box:12625 |Doha -Qatar |+ 974 4316717, 4316743 |www.nai-qatar.com/ Dr. Rajesh Krishna Nair
DOHA 2008

By the end of 2004 the average rent for a furnished villa was QR 7500. It was increased to QR 10500 in 2005.
The average rent was QR 16500 and QR 19300 in 2006 and 2007 respectively. The rental rate is soared to
21300 in 2008. This figure indicates that there is 184 percentage rate of growth of rental rate in the country.
Whereas, in the new CBD, west bay, the average rental rate for a furnished villa was QR 15000, and it soared to
QR 20000, QR 27500, QR 32500 & 39000 in the years of 2005,2006,2007 and 2008 respectively.
An Average rental rate for a three bed room apartment in the year 2004 was QR 4500 and it increased to QR
6500 in 2005 and soared to QR 9000 in 2006. In the year 2007, the average rental rate again increased to QR
10400 and in 2008 it reached new heights of QR 12300. From 2004 to 2008, the rate of growth of rental rate is
173 percentages. The Average rental rates for two bed room apartments are also followed the suit. The rate was
QR 3000 in 2004, and increased to QR 5800 in 2005. In 2006 the rates increased to QR 7650 and again
increased to QR 8800 and QR 10100 in 2007 and 2008 respectively. The growth rate is 237 percentages. For a
single bedroom fully furnished apartment, the average rental rate in 2004 was QR 1800 only. It increased to QR
4650, QR 5300, QR 5850 and QR 7500 in the years of 2005, 2006, 2007 and 2008 respectively. The single
bedroom apartment witnessed 317 percentage growths during the 5 year period. The demand remains high and
with a tight supply situation, the prices are going to stay high for the near future.

Residential Property Rates

25000

20000

15000 villa
3 BHK
10000
2 BHK
5000 1 BHK

0
2004 2005 2006 2007 2008

It is important to note that that the increase in rent for 2006 was largely due to the 2006 Asian Games. If the rates
may continue to increase, the companies struggle to provide housing for their employees and therefore there isn’t
any alternative to increase the prices of their products and services. This will ultimately lead to increase of inflation
and there will certainly be a good amount of inflation in Qatar as a result of this problem.

3 NAI Qatar|P.O.Box:12625 |Doha -Qatar |+ 974 4316717, 4316743 |www.nai-qatar.com/ Dr. Rajesh Krishna Nair
DOHA 2008

The main inflation driver is continued to be housing sector. So far, the Qatari government has been wise to stay
out of it altogether. A deliberate action to curtail the problem may result a good impact on the residential market
as well as inflation rate in the short-run. But in the long-run it will create bigger problem to investors in their
confidence to make an optimum investment in the real estate market. Moreover, If the rate may decrease by an
action by the government, in the short-run; it will attract the tenants and will create an increase in the demand of
residential units. This may create shortage in the supply side and thereby increase in the rate and inflation. Hence,
it is better to let the market mechanism to correct the problem and thereby create equilibrium.

Inflation
18
16
14
12
10
8
6 inflation
4
2
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
E E

The booming economy of Qatar will need more and more people to serve it, so it is not clear if the supply will be
able to meet the market demand. NAI Research Team estimated that the demand for housing units is very high in
the near future. Qatar requires and additional of 58,800 units in 2012 and 157,000 units in 2016

Office

Qatar’s rich natural resources coupled with strong economic growth in the last decade have led to the dramatic
change in office markets. Oil & Gas companies, banking and non- banking financial institutions and the
government and its agencies gave a boost to the office market in Doha. Doha is currently facing a strong demand
for office spaces specifically in the new CBD, the West Bay. Celebrated multinational and other prestigious GCC
companies are eying to open its offices in West Bay. This is because of the strong economic background of the
country and Qatar is the least crisis affected country in the Middle East.

4 NAI Qatar|P.O.Box:12625 |Doha -Qatar |+ 974 4316717, 4316743 |www.nai-qatar.com/ Dr. Rajesh Krishna Nair
DOHA 2008

NAI Qatar Estimates that there are approximately 1,090,000 square meters of office spaces available or close to
complete in Doha’s new business district, West Bay. In the suburban areas, there are approximately 500,000
square meters of office spaces are available or ready to occupy or close to complete.
Low vacancy
The office market is under-supplied. There is a very strong demand for Class AAA (newly constructed) and Class
A (prime) office units in Doha especially in the CBD. Hence, the occupancy rate is very high and the vacancy rate
is only 2 percentages here, where as in the suburban areas, the vacancy rate is about 6 percentages. The CBD
remains the hotspot and there, the rate ranges from QR 250- QR 350 per square meter. Due to the high demand
for office spaces, there is a significant increase in the office rent in the last 5 years. In the year 2004, the average
rate/square meter for an office unit in Doha was QR 45/SQM. It was increased to QR 72.5/SQM in the year 2005.
Year 2006 witnessed a rapid demand in the office segment in Doha and the rate is almost doubled to QR
140/SQM. This soaring rate was largely due to the 2006 Asian Games and this event was a great leap forward to
the further expansion in the office market. In the year 2007, shows again a remarkable increase in the rate in the
office market. This year the average rate was increased to QR 190/SQM and in the year 2008 Doha office market
become one of the costly market in the middle east and the average rate increased to QR 225/SQM. NAI Qatar
estimates that the average rent for office space may increase to QR 275/ SQM in 2009 and QR 325/SQM in
2010.

Rent - Office
350
300
250
200
150 Rent - Office
100
50
0
2004 2005 2006 2008 2008 2009 E 2010 E

5 NAI Qatar|P.O.Box:12625 |Doha -Qatar |+ 974 4316717, 4316743 |www.nai-qatar.com/ Dr. Rajesh Krishna Nair
DOHA 2008

Retail

Qatar has a number of fascinating shopping spots in different style in different locations. The retail sector in the
Qatar market also has a spectacular growth. The retail markets comprise traditional hi- street shops to most
modern malls. The rent ranging from higher end shopping mall to high street shops is from QR 200/ SQM to QR
690/SQM. Currently there are approximately 475,000 square meters office spaces are exists in Doha and it is
estimated to be 2,200,000 in 2012.

Stores/ware houses

The economic boom of Qatar has led to a high demand from wholesalers, exporters and importers for
store/warehouse spaces in the country. In the year 2005, the average rent was QR 30/SQM. It was increased to
QR55/SQM in 2006. The rate again increased to QR 65/SQM in 2007 and in the year 2008 the average rate
reached a new peak of QR 73/SQM.
Land

The extra-ordinary upsurge in the Qatar real estate market with large and small scale projects has rooted a
soaring rate in the land value. In 2008 the average residential land value per meter square is QR 2925, while the
rate per square meter for land for commercial use was QR 6990. The Average rate for land for office use was in
the all time height at QR 16646/SQM. It is interesting to note that the value of land for residential, commercial and
official use was increased continuously.

Land Value
20000
15000
Value/SQM- Housing
10000
Value/SQM- Commercial Use
5000
Value/SQM- office use
0
jan feb mar apr may jun jul aug sept oct nov dec

6 NAI Qatar|P.O.Box:12625 |Doha -Qatar |+ 974 4316717, 4316743 |www.nai-qatar.com/ Dr. Rajesh Krishna Nair
DOHA 2008

Hospitality

Doha witnessed a great spurt in the Hospitality Industry due to the influx of tourists. The number of luxury hotels
and rooms were increased considerably. In 2005 there was 31 star hotels and 4 five star hotels in Doha with 3503
rooms of which 1241 were contributed by five star hotels and it increased to 6 five star and 33 star hotels and
5792 room of which, 1487 were contributed by luxury hotels. In 2007, the number of hotels increased by 43 and
7 of them are five star hotels. Total numbers of rooms increased by 4356 and 1783 rooms were contributed by
five star hotels. In the year 2008, the total numbers of luxury hotels are increased to 13 with a room capacity of
3248. For accommodating the anticipated influx of tourists, there are many luxury hotel projects are in its train and
up to 2010 there shall be around 11,668 new luxury rooms provide by 38 luxury hotels. Also, 13 luxury hotel
projects are proposed in the country and expecting to open in the year 2012.

Availabe Luxuary Hotel Rooms

25000
20000
15000
10000 Availabe Luxuary Hotel Rooms
5000
0
2005 2006 2007 2008 2010 E 2012 E

No. of Tourists
1600000
1400000
1200000
1000000
800000
No. of Tourists
600000
400000
200000
0
2002 2003 2004 2005 2006 2007 2008 2009 E 2010 E 2011 E 2012 E

7 NAI Qatar|P.O.Box:12625 |Doha -Qatar |+ 974 4316717, 4316743 |www.nai-qatar.com/ Dr. Rajesh Krishna Nair
DOHA 2008

Limiting Factors

 Even if Qatar's real estate sector is passing through its brawny phase, the input supply side is a serious
concern because of the cost of raw material increased 60 to 100 percentages from the past five years.
(But this supply side snag doesn’t affect the large projects yet. The development of large projects
continues and the important thing to notice that investors remain interested and have not been overly
concerned about increasing costs). This may affect the small investors of real estate market.
 There is a deep concern of borrowers defaulting among the banks and this has lead to tighten the entire
banking system. Banks have revised their lending policy and cut back on their lending to individuals and
businesses. This has lead to create a panic among the people who involved in the business activities.
 Amidst the positive signs of the real estate sector, The Qatar Central Bank (QCB) has taken some drastic
steps such as a mandatory deposit up to 35% is imposed by the banks for mortgage finance and the local
banks are now not allowed from extending more than 15% of their equity as finance to real estate to
ensure that the local banks are not overexposed to real estate. This move may affect the small investors of
real estate market.
 The total mortgaged properties in 2008 were crossed 100 billion, but the transaction in the past three
years was around 87 billion (86,823,219,600) only. In case, the mortgaged property owner failed to repay
the defaulted amount after receiving three notices from bank, the only option for the bank is to sell the
mortgaged property, which currently worth around 30-40 percent less than the mortgaged amount. This
situation sooner or later leads financial turmoil in the banking sector.

Qatar – Nut shell

Population : 1,553,729
GDP (PPP) : 108,391 Million (2008 Q3)
GDP Per capita : US $ 87, 600 (2007 est.)
Inflation : 15.8 (2008 Q3)
Labor Force : 827,802 (2007 est.)
Unemployment : 0.42 % (2007, between 15 -60 age groups)
Export : 42.02 billion f.o.b (2007 est.)
Import : 19.86 billion f.o.b (2007 est.)
Revenue : US$ 27.12 billion (2007 est.)
Expenditure : 22.55 billion (2007 est.)

8 NAI Qatar|P.O.Box:12625 |Doha -Qatar |+ 974 4316717, 4316743 |www.nai-qatar.com/ Dr. Rajesh Krishna Nair
NAI Qatar- Build on the power of our network

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This report is for information only and should not be a substitute for professional investment advice.
Duplication of the contents of this publication is prohibited without prior approval from NAI Qatar. The
estimates and information made available herein are made by NAI Qatar in its best judgment and from
available resources from various sources. Albeit. NAI Qatar guarantees to the precision of the report and
renounce any liability for errors and omissions made in respect of providing such information.

9 NAI Qatar|P.O.Box:12625 |Doha -Qatar |+ 974 4316717, 4316743 |www.nai-qatar.com/ Dr. Rajesh Krishna Nair