Qatar: Real Estate Overview - GulfBase.com · 2012-11-27 · Source: Gulftalent.com d) Financing I. State of Real estate financing market in Qatar The steep demand in the real estate

Kuwait Financial Centre “Markaz” R E A L E S T A T E R E S E A R C H

Qatar: Real Estate Overview Executive Summary The recent growth of Qatar real estate segment is significantly aided by several structural factors. Till 2003, the Qatar GDP grew at a rate less than 8% p.a. Subsequent to this, the rate of growth has not dipped below 11%. The current account surplus doubled between 2004 and 2006 and the bank credit to the real estate segment touched QAR 5 Bn mark in 2006 from its 8 year low in 2002 at less than QAR 1 Bn. The real estate growth has also been supported by increasing disposable incomes. Qatar ranks among the richest in the world with per capita GDP crossing $66,000 (2006) from a modest $27,000 (2001). This has helped shape consumer preferences in a significant way. The opening up of the sector to foreigners to buy real estate albeit in selected areas has also helped matters. This had resulted in the demand supply gap to widen in the last three years. Currently, demand is outstripping supply in all the spheres of Qatar real estate – Residential, Commercial, Industrial and Retail. In the residential segment, our demand/supply estimation model calculates demand to reach approximately 250,000 housing units by 2010, while supply would be around 244,000 units during that period pointing to a break-even scenario from the current shortfall of about 40,000 housing units. In the commercial segment, the supply is estimated to lag the demand by eighteen months and the vacancy rates are its lowest as compared to other major cities in the region However, this growth has come at a cost. Qatar clocks the highest inflation rate in the region, thanks to increasing rentals. The inflation rates are hovering at around 15% mark for quite some time now, with no respite seen in the near to medium term future. The rent, fuel and energy price index is at its five year high in Q107. Similarly, the interest rates are at its five year high mainly due to an increase in credit off take and inflation. The possibility of demand easing out in the foreseeable future is limited due to the lag time on the supply front and the sustainability of the current economic growth mainly supported by Qatar’s ambition to triple its current LNG production levels from 20mn tonnes to 77mn tonnes by 2012.

September 2007 Research Highlights: Examining the trends and developments concerning the real estate sector in Qatar

Author MENA Real Estate Team +965 224 8000 ext. 1130 [email protected] Kuwait Financial Centre “Markaz” P.O. Box 23444, Safat 13095 Tel: +965 224 8000 Fax: +965 242 5828 www.markaz.com

R E A L E S T A T E R E S E A R C H September 2007

Kuwait Financial Centre “Markaz” 2

Discussion on components of the real estate market

I. Housing/residential segment

a) Structure Exhibit 1: Segments of real estate market

The residential real estate constitutes the major proportion of the real estate market in Qatar. Residential real estate sector accounted for 95% of the total completed buildings in 2005 and 63.5% of new building permits issued as at the end of 2005 (Refer exhibit 1). The new building permits issued to residential sector has grown at a CAGR of 16.8% to 3,889 permits over the period 2001-2005, exhibiting rising level of activity. In terms of preferences of consumers, apartments represented the majority of residential real estate market at 29.9% (Exhibit 3). In terms of geography, Doha dominates the segment followed by Al Rayyan. The majority of apartments (92.4%) and villas/palace (84.7%) are located within the municipalities of Doha and Al Rayyan. However, there are regional differences in consumer preferences. In Doha, apartments are the most common type of residential units with a share of 44% of the total residential units. This is in contrast to Al Rayyan, wherein Arabic popular houses and villas/palaces are in the majority at 61% of the total residential units. (Refer exhibit 4). Al Khor has a relatively balanced structure with almost the same number of Arabic/ popular houses and villas. In terms of purchasing power, apartments in Doha have been occupied mainly by mid-to-lower-income Asian and Arab expatriates, while Western expatriates have traditionally lived in rented villas.

The housing market accounted for 95% of total buildings completed in 2005 Doha and Al Rayyan dominate the residential segment

Office

Retail

Hospitality/Leisure

Industrial

Apartments

Arabic/Popular

house

Separate rooms

Villas

Part of establishments

Housing 63.5%

Commercial 36.5%



Exhibit 2: Segments of residential markets & occupancy trends

Housing occupancy by type 2005

3.1%

8.3%

24.7%

24.9%

29.9%

5.5%3.7%

Apartments VillasPopular/Arabic house Separate roomsBeach house/Others Part of EstablishmentsAdditional buldings

Source: The Planning Council of Qatar

Exhibit 3: Housing occupancy by cities (2005)

Source: The planning Council; * Includes Umm Salal, Al Khor, Al Shamal, Al Ghuwairiya, Al Jemailya, Jeryan Al Betna and Mesaieed b) Demand and Supply Demand, for both freehold and leasehold residential units outstripped the supply in Qatar in the past. For the year 2006, demand was estimated at approximately 195,000 units while supply was placed at 144,000 units, leaving a shortfall of nearly 55,000 units. We estimate Qatar will require approximately 250,000 housing units by 2010, while supply would be around 244,000 units (Refer appendix 13 for the methodology for our estimates). This would translate into an addition of 27,000 housing units every year on an average between 2008 and 2010. However, we expect the shortage ratio to narrow down going forward, as we expect Doha (Major housing market) to see more supply of housing units by 2010. According to an estimation of Property Weekly, Doha will have supply of 111,000 housing units by 2009, as against current supply of 80,000 units. This strong growth in demand is primarily attributed to the increased influx of expatriates in the last few years. This has led to a severe shortage of housing units in Qatar. Expatriates would account for approximately 75% (187,000 units) of the total housing units required. Secondly, the opening up of residential property market to foreigners has also fueled the demand for residential units. Consequently, municipalities issued more building permits - building permits issued to the residential sector surged by 27% YoY in 2005.

Housing occupancy by cities

0 50

100 150 200 250 300 350

Apartments Palace/Villas Arabic/Popular house

separate rooms

00s

Doha Al Rayyan Al Wakra Others*

Demand outstrips the supply in the residential sector in Qatar Expatriates would account for 75% of the total housing units required



There has been shifting consumer preference towards demand for villas. Share of villas increased from 66.7% in 2004 to approximately 73% in 2005 (Refer appendix 11). This indicates increase in number of houses of higher value. The shift in consumer preference towards villas can be attributed to the increase in wealth and spending capacity of the Qatari population and growing number of highly paid expatriates in the country. On the supply front, Apartments witnessed the highest growth (62.6%) in residential units completed in 2005 (Refer exhibit 5).This is primarily attributable to the strong growth in expatriates in Qatar who prefer to live in apartments. However, this growth has not been sufficient to cater to the growth in demand. According to a recent survey conducted by Barwa real estate Company, Qatar is currently suffering from shortage of approximately 40,000 units. Exhibit 4: Completed residential units (2004-2005)

No. of residential unis completed

3609

658 298

2447

5868

3354

630 2960

1000200030004000500060007000

Apartments Popular house Senior staffhouse

Villas

2004 2005

62.6%

Source: The Planning Council Exhibit 5: Shortage of housing units (1997-2010)

Source: Markaz estimates

0

50000

100000

150000

200000

250000

300000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100%

5%

10%

15%

20%

25%

30%

35%

Demand Supply Shortage ratio

Qatar is currently suffering from shortage of 40,000 housing units



c) Prices and rentals The scenario of demand outstripping supply has ensured greater appreciation in prices and rentals. Land prices in the major housing projects such as ‘Pearl Qatar’ have witnessed over 100% appreciation in the last twelve months. Average annual housing rents have increased by 47% between 2003-2005. Doha witnessed the highest growth in rentals at 83% among the major cities in GCC region, between November 2004-November 2006. Rental level for a two-bedroom apartment in Doha in 2006 stood at $1,930 per month, which is almost three times of what prevails in Riyadh (Refer exhibit 7). This steep increase in rentals is having a negative impact on the inflation rates. The rent, fuel and energy index, which accounts for more than 20% of household consumption expenditure, rose 35% YoY in 1Q07. Qatar's inflation rate hit a record high of 15% in 1Q07. The expected undersupply scenario in the housing market is likely to keep prices and rentals firm, in the foreseeable future. Consequently, we also expect inflation to remain at higher level, going forward. However, to deal with problem of spiraling rents, government introduced Law No 4 of 2006 in February 2006. Under this new law, a cap was introduced on rent increases by landlords every year. According to the provisions of the law, rent increases are limited to a maximum of 10% on renewal of contract. Earlier, the rents were freely negotiable on renewal of contract. We believe the imposition of cap on rental increase could restrict the growth of rentals and yields, in the medium term. However, we expect the rentals to remain firm in the medium term with anticipated undersupply scenario in the housing market.

Exhibit 6: Average annual rent increase

Average Rent Increase, % Rise

(Nov 2004 - Nov 2006)

21%

24%

27%

29%

66%

83%

0% 50% 100%

Riyadh

Kuwait

Manama

Muscat

Dubai

Doha

Rent for Two-Bedroom

Apartment in 2006 (US$ per month)

680

700

710

860

1850

1930

0 1000 2000 3000

Riyadh

Muscat

Manama

Kuwait

Dubai

Doha

Source: Gulftalent.com

d) Financing I. State of Real estate financing market in Qatar The steep demand in the real estate segment has ensured high credit growth rates, despite high lending rates. Banks’ credit to housing and construction sector surged at a CAGR of 38.3% over the period 2000-2006. This has resulted in high percentage credit issued to housing and construction sector (out of total bank credit) at around 5.0% in 2006, compared to 0.7% in 2002 (Refer exhibit 8).

Rentals have increased by 83% in Doha between November 2004 and November 2006 The proportion of total bank credit to housing and construction sector increased to 5.0% in 2006



Commercial banking participation in the real estate finance is fairly high. Commercial bank loans account for majority of the financing for the housing and construction sector in Qatar. However, we should note that unlike Saudi Arabia (Real Estate Development Fund) there is no such government real-estate development fund in Qatar. However, the government provides citizens with interest-free loans to build homes in certain areas. While the 15 or so commercial banks provide funding for housing, only two banks (Qatar National Bank and Commercial Bank of Qatar) have direct mortgage finance products. It is not uncommon to take shorter-term consumer loans against salary and use this for housing finance purpose. Banks normally tie-up with a particular developer for a specific project. For e.g., Commercial Bank of Qatar has tied-up with Sabban Properties Investment Company for financing purchase of property in Sabban Towers in Qatar’s Pearl Harbor development. Similarly, Qatar National Bank has teamed with Dar Investments and Developers for West Bay Lagoon development.

Exhibit 7: Bank credit to housing and construction sector

0100020003000400050006000

2000 2002 2003 2004 2005 2006

QR

mill

ions

0.0%1.0%2.0%3.0%4.0%5.0%6.0%

Bank credit to Housing & Construction sector% of the total bank credit

Source: Qatar Central Bank

II. New developments in real estate financing The government is currently considering to set up a real estate bank. The bank’s sole function will be to lend investors in the country's real estate sector. The proposal to set up the real estate bank is awaiting the final approval from the concerned authority. The real estate financing in Qatar has also benefited from growth in private equity finance in the country. A number of key factors are driving the growth of Private Equity (PE) finance including massive infrastructure development and liberalization of real estate sector.

Only two banks provide direct mortgage finance products PE finance is picking up in the real estate sector



e) Drivers of residential market

Demand Driver Signal Justification Population Positive Population increased at a CAGR of 5.1% in

last 10 years up to 2006 and the growth is sustainable till 2015- according to The Planning Council of Qatar.

Demographics Positive High proportion of young Qatari in age group 15-34 at 38%. Approximately, 10% of the males in the age group 25-34 move into a new house every year- (According to Zawya), which is expected to drive the demand for new housing units.

Influx of expatriates

Positive Expatriates population has grown at a CAGR of 6.6% in last 10 years up to 2006. Growth is sustainable as 570,000 foreigners including 120,000 professionals would shift to Qatar by 2011.

High per capita income

Positive Qatar ranks eleventh in the world in terms of per capita income. Per capita income (grew by 19% YoY to reach $66,408 in 2006) fostering demand for high end housing. The growth in per capita income is sustainable with oil price expected to remain firm.

Relaxed foreign regulation

Positive Opening up of the residential property market to foreigners likely to drive the demand for freehold property (Refer appendix 4)

Interest rate Negative The steep rise in the level of inflation is likely to result in an increase in the interest rates.

II Commercial segment A. Office The demand for the office space is outstripping the supply in Qatar. This is primarily due to increasing number of foreign companies entering in to Qatar, in the light of economic boom that the country is experiencing. In addition to the major oil and gas companies such as ExxonMobil, ConocoPhillips, Shell and Anadarko, multinational corporations, such as RAND, Microsoft, PricewaterhouseCoopers, McKinsey, Deloitte & Touche, Ernst & Young and Bechtel have set up their offices in Qatar. Consequently, Doha is experiencing strong demand for office space, with supply lagging by as much as eighteen months. According to Colliers International, the vacancy rates of the commercial offices in the prime locations of Doha stood at less than 1% at the end of the second quarter of 2006. This was very low compared to 2% in Riyadh and Abu Dhabi, 4% in Mumbai (India), 20.6% in Beijing (China), 15% in Kuala Lumpur (Malaysia), 6% in Manila (Philippines), 12.3% in Singapore, 7% in New York (US), and 9% in London (UK)( Refer exhibit 9) . The supply in the office segment has not been able to keep pace with growing demand. This can be explained from the fact that number of non-residential buildings completed in the major cities of Qatar, stood at 260 in 2005, compared to 870 in 2004 (Refer exhibit 9). Furthermore, the total supply of non-residential space in Qatar stood at 773,050 square meters in 2005, compared to 778,536 in 2004.

Demand drivers indicating towards favorable environment in the residential market, going forward Shortage of office space and low vacancy rates have led to the increase in prices and rentals



Exhibit 8: Non-residential buildings completed (2001-2005) 2001 2002 2003 2004 2005Non-Residential Buildings Completed 271 252 300 870 260 Source: The Planning Council The total office space in Doha is estimated at 330,000 square meters at the end of 2006. The supply of the office space is expected to increase up to approximately 500,000 square meters of Gross Leasable Area (GLA) by 2010. According to recent estimates, major part of the new supply of office space would come on stream only in 2008. This would keep the rentals firm in near term. However, the demand-supply gap is expected to narrow down between 2008 and 2010, causing rental prices to stabilize. Due to this shortage in supply of office space, rents and prices have risen significantly in the office segment. The average annual office rents in Central Business District (CBD) of Doha, has increased by 37% since August 2005. However, on an average annual price increase in the office segment have been lower than that in the residential segment. Exhibit 9: Office Vacancy rates across major cities (2Q 06) Cities Office vacancy rates Riyadh 2%Abu Dhabi 2%Doha 1%Mumbai 4%Beijing 21%Kuala Lumpur 15%Manila 6%Singapore 12%New York 7%London 9% Source: Colliers International Exhibit 10: Office rentals across major cities in GCC mid year 2006

Source: Colliers international

55.0 51.7146.88

31.62

22.60

39.47 36.77

27.83

17.66 17.28 21.38

43.50

0

10

20

30

40

50

60

Dubai Doha AbuDhabi

Riyadh Kuwait City

Manama

Class A net office rent Premium net office rent

Average annual rents in CBD witnessed an increase of 37% since August 2005 The office rentals are expected remain firm in near term

US$ (per sqm/year)



Drivers of the office segment Demand Driver

Signal Justification

Strong business environment

Positive Qatar has been enjoying strong economic growth primarily due to increasing hydrocarbon prices and gas exports. The country’s current account surplus accounted for 49% of its GDP in 2006, the highest in GCC region. Strong current account surplus on the back of rising oil price is expected to be invested in developing infrastructure and other sectors of economy. This has laid the foundation for strong business environment, attracting more foreign investments in the country. Qatar attracted the third largest FDI worth $1.5 Bn in the GCC region at the end of 2005.

New projects in the hydrocarbon sector

Positive Qatar has the third largest gas reserves in the world with proven reserves of 910 trillion cubic feet by the end of 2006. Rich availability of hydrocarbon reserves coupled with rising oil prices are expected to attract many foreign multinationals companies in oil and gas sector to set up their offices in Qatar.

B. Retail The retail real estate market in Qatar is buoyant with very low vacancy rates in malls and shopping centers. There is a building up of retail space (as a percentage of Gross Leasable Area (GLA) in Qatar, due to its limited availability compared to other countries in GCC region (Refer exhibit 12). Furthermore, the current organized and semi-organized retail space equates to just over 5 sq. ft. per capita which is much lower than the U.S. (20 sq. ft per capita) and Dubai (10 sq. ft. per capita). At present, Qatar has 450,000 square meters of GLA retail space. Approximately, 500,000 square meters of GLA retail space is under construction, which is scheduled for completion by 2010. Another 235,000 square meters of GLA is in the planning phase, which is estimated to be delivered beyond 2010.

Exhibit 11: Retail space distribution in GLA across GCC (2005)

43%

30%

10%

8%

7% 2%

UAE Saudi Arabia Kuwait Qatar Bahrain Oman Source: Retail International

Demand drivers indicating towards favorable environment in the office market, going forward There is building up of retail space in Qatar due to its limited availability Investment in the construction of malls and shopping centre is on the rise



Drivers of the retail segment Demand Driver


Consumer dynamics

Positive Economic boom has triggered the growth in per capita income and purchasing power of consumers. This has led to the increase in demand for western products, air-conditioned department stores and malls. Consequently, investments in construction of shopping centers and malls are on the rise, driving the demand in retail real estate sector.

Regulations Positive Qatar has been a member of WTO since 1996.In line with the WTO requirements, Qatar is expected to ease existing regulations concerning the establishment of international subsidiaries in retail sector, thus allowing foreign players to set up shops and malls directly in Qatar.

Demographics Positive Qatar has high proportion (38%) of young population in the age group 15-34. Furthermore, approximately 42.0% of the labor force of the Qatar falls in age group 15-34. Youth population in Qatar had a CAGR of 4.9% in the last ten years. According to Planning Council this growth is sustainable till 2015. Qatar’s rising number of youth population in the labor force has led to the increasing purchasing power of the youths. Consequently, there is increasing trend towards buying high-end retail products (Particularly western products) from malls. This provides strong foundation for investments in retail property such as shopping centers and malls.

C. Hospitality & Tourism The total number of international tourists visiting Qatar reached 900,000 in 2006, compared to 500,000 in 2004. The boom in tourism was mainly due to increased international demand and a healthy intra-regional market. The total number of hotel occupants have increased at a CAGR of 19.3% in the five year period from 2000-2005. The growth in number of tourists visiting Qatar, has led to the increase in investments within this sector. The current capacity of hotels in Qatar cannot handle the number of tourists that are expected to visit the country. Consequently, there has been thrust towards increasing number of hotel rooms in Qatar. This is reflected in the increase in number of hotel rooms available in Qatar to 7,398 in the first quarter of 2007 from 3,706 in 2004. Furthermore, the latest Hotel Benchmark survey by Deloitte suggests that during the first quarter of 2007, the average rate of occupancy in hotels in Doha stood at 84.4%, the third highest in the Middle East region after Dubai and Muscat. The higher occupancy rate indicates that the room capacity is currently undersupplied. To accommodate the large number of tourists visiting Qatar, the government has been encouraging investments in developing hotel infrastructure. It is expected that by 2009 the current inventory of hotel rooms in Qatar will increase to 10,000 rooms.

Investment in the construction of malls and shopping centre is on the rise Growing tourism in Qatar offers opportunity to invest in hotel infrastructure



Demand Driver


Strong government initiatives

Positive Government has been promoting the country as a tourist destination through development of tourism infrastructure such as National Museum, the Cultural Village, in addition to hosting the Asian Games in December 2006. The Qatari government has allocated $15 Bn across various projects in this segment. This is likely to fuel the demand in real estate and construction sector. However, much of the tourism currently is business related and would remain so for some time

Improving transportation infrastructure and services

Positive The hospitality and tourism sector in Qatar has also been boosted by improving transportation infrastructure and services within the country. For instance, government plans to develop new international airport at Doha at an estimated cost of $5.5 Bn. The first phase of the development is expected to be completed by 2008. Furthermore, major airlines such as Qatar Airways have been expanding their operations across the globe. Recently, Qatar Airways announced its route expansion program with three destinations joining airline’s network. Improving transport infrastructure coupled with major real estate developments such as Lusail, Pearl and Al-Khor are expected to boost the demand in real estate and construction sector.

D. Industrial segment The industrial segment in Qatar has primarily benefited from higher hydrocarbon prices and rich availability of gas reserves which have led to higher expenditure by the government in various industrial infrastructure projects. Qatar has positioned itself as a leading natural gas producer in a short period of time with proven reserves of 910 trillion cubic feet by the end of 2006. Qatar also plans to nearly triple its present Liquefied Natural Gas (LNG) annual production of about 20mn tonnes to 77mn tonnes by 2012. Consequently, the rapidly expanding natural gas sector in Qatar has been attracting huge domestic foreign investments. This has fuelled the demand for industrial property segment in the country. Qatar has also benefited from government’s efforts to diversify the economy and increase investments in other sectors. Qatar government has made investments of approximately $31 Bn in various industrial projects up to 2004. In the first three month of 2005, 2005, the Qatari Ministry of Energy and Industry granted a total of 68 industrial licenses. Of these licenses, 34 were distributed for the creation of new concerns,11 for expansion of current operations and 23 licenses for changes in existing concerns. The government of Qatar is also encouraging setting up of light, medium and small industries by offering various incentives. Within the industrial sector, foreign investments in infrastructural areas such as transport, logistics and

Growing investment in tourism infrastructure augurs well for real estate and construction sector The government has made investments of $31 Bn across various industrial projects up to 2004



telecommunications are expected to increase substantially. Strong government support to industrial sector is expected to attract more investments in development of industrial properties. Considering the level of industrial activity and the support offered by the government, industrial segments has a great potential to further boost the burgeoning real estate sector in Qatar. III. Stock market performance The real estate sector in Qatar is much smaller compared to countries like UAE, Saudi Arabia and Kuwait in terms of market capitalization. This can be observed from the fact that only Qatar Real Estate Investment Company features within top 40 real estate stocks (in terms of market cap) in GCC region (Refer appendix 12). Qatar real estate Investment Company accounts for only 1.4% of the total market cap of the real estate stocks in GCC region. The four companies- Qatar Real Estate Investment, Barwa Real Estate Company, Salam International investment and United Development Company represents the real estate sector in Qatar (accounted 6.7% of the total market capitalization of Doha stock exchange as on July 2007). On the performance front, real estate stocks in Qatar have outperformed the broad market index (Doha SM) during the last one year. However, the real estate stocks in the last one year proved to be more riskier than the benchmark index. While, Barwa Real Estate Company generated the maximum return, United Development Company provided lowest return. Barwa Real Estate Company proved to be the riskiest stock, while United Development remained less risky (Refer exhibit 13). The price of major real estate stocks witnessed upward trend during last one year, depicting the strong performance of the sector. In spite of the increase, the real estate stocks continued to trade at discount to the benchmark in terms of price to earning ratio (except for Qatar Real Estate Investment Company). The real estate stocks also traded at discount to benchmark index in terms of price to book value ratio.

Exhibit 12: Risk & Return chart for Qatar Real Estate stocks Real Estate stocks and Benchmark performance (1-July-2006 to 2-July 2007)

DOHA SM

Barwa Real Estae C.

United Development

Salam International

Qatar Real Estate Co.

-1.50%-1.00%-0.50%0.00%0.50%1.00%1.50%2.00%2.50%3.00%

0.00% 2.00% 4.00% 6.00% 8.00% 10.00%Annualised Risk % 1 year

Ann

ualis

ed R

etu

rn 1

yea

r %

Source: Bloomberg

Real estate stocks have proved more risky than benchmark during last one year



Exhibit: 14 Valuation landscape (2006)

DO

HA S

M

Qat

ar R

eal

Esta

te I

nvst

Barw

a Rea

lEs

tate

Co.

Sala

mIn

tern

atio

nal

Uni

ted

Dev

elop

men

t

DO

HA S

M

Qat

ar R

eal

Esta

te I

nvst

Barw

a Rea

lEs

tate

Co.

Sala

mIn

tern

atio

nal

Uni

ted

Dev

elop

men

t

D

OH

A S

M

Qat

ar R

eal

Esta

te I

nvst

Barw

a Rea

lEs

tate

Co.

Sala

mIn

tern

atio

nal

Uni

ted

Dev

elop

men

t

DOHA

SM

Qat

ar R

eal

Esta

te Inv

st

Barw

a Re

al

Esta

te C

o.

Salam

Inte

rnat

iona

l

Unite

d

Dev

elop

men

t

Source: Bloomberg

Dividend yield (%)

1.54%

5.19%

N.A N.AN.A.

Price earning ratio (X)

16 18.4

12.889.83

14.5

Price Book ratio (X)

3

1.5 2.36

1 1.61

% Price change 1 year

1.70% 4.90%

76.90%

0.70%

-23%



Appendix: 1 Projects plan time line Completion timeline (Q1 2007-Q4 2009) (Q1 2010-Q4 2012)

Project Name Type ClientProject

StartProject

Endvalue

(Qr mn)

Sq Mtrs (mn) Project Name Type Client

Project Start

Project End value

Sq Mtrs (mn)

NDIA - Doha International Airport - Infrastructure Packages

Commercial New Doha International Airport (NDIA) Steering

Committee

Q1 2004 Q1 2009 9,100 N.A PWA - Doha, Lusail and Dukhan Highway Projects

Commercial Ashghal - Qatar Public Works Authority (PWA)

Q1 2008 Q1 2011

3,640 N.A

Qatar Bahrain Causeway Commercial Ashghal - Qatar Public Works Authority (PWA)

Q4 2007 Q4 2009 10,920 40 km Salam Bounian - Lusail Development - Marina District

Towers

Commercial (office)

Salam Bounian Company Q1 2008 Q1 2010

997 N.A

Barwa Real Estate Company - Financial

Centre

Office/ Hospitality

Barwa Real Estate Company

Q4 2007 Q4 2009 2,184 N.A PWA - Primary Routes Project - North Road Phase II


Q3 2007 Q3 2010

3,640 280 kms

QDREIC - Lusail Mixed-use Development -

Infrastructure

Residential/ Hospitality/ Commercial/

Retail

Qatari Diar Real Estate Investment Company

Q4 2007 Q1 2009 7,280 35 Qatar Foundation - Digital Medical Care & Research Centre

Commercial Qatar Foundation for Education, Science &

Community Development (QF)

Q1 2008 Q4 2010

3,640 0.3

Pearl - Porto Arabia Residential Towers

Residential The Land Q1 2006 Q1 2008 2,002 3.25 Barwa Real Estate Company - Al-Dhahiya Housing Complex -

Phase I

Residential Barwa Real Estate Company

Q2 2007 Q1 2010

1,820 2.7

QDREIC - Doha Convention Centre & Tower (DCCT)

Residential/ Retail/ Hospitality

Qatari Diar Real Estate Investment Company

Q2 2007 Q4 2012

2,184 0.28

Al Faisal Holding Co - Al Faisal Office Tower

Commercial (office)

Al Faisal Holding Co Q1 2007 Q1 2010

255

QP - Head Office Building Commercial (office)

Qatar Petroleum (QP) Q4 2008 Q4 2010

1,001 1

QP - Ras Laffan Emergency and Safety College (RLESC)

Industrial Qatar Foundation for Education, Science &

Community Development (QF)

Q1 2008 Q1 2010

473

Higher Committee for the Co-ordination & Pursuance Executive Committee - Doha Port Relocation

Industrial Higher Committee for the Co-ordination & Pursuance

Q2 2007 Q1 2010

10,920 N.A

PWA - Primary Routes Project - North Road - Package IV


Q1 2008 Q2 2010

225 280 kms

Qatar Real General Insurance & Reinsurers - World Trade Centre

Commercial (office)

Qatar Real General Insurance & Reinsurers

Q2 2007 Q4 2010

728 0.14

Barwa Real Estate Company - Al Khor Development

Residential/ Tourism

Barwa Real Estate Company

Q3 2007 Q1 2012

5,096 8

Doha City Centre Expansion Hospitality Shaikh Faisal bin Qassim al-Thani & Sons

Q3 2004 Q4 2010

1,201 N.A

Damac - Lusail - Fox Hills District - Piazza

Residential/ Commercial

Damac Properties Q3 2007 Q1 2010

810 1.6

Gulf Ware Housing Company - Logistics Village Qatar

Industrial Gulf Warehousing Company (GWC)

Q2 2007 Q1 2011

2,184 N.A

Masraf Al Rayan - Smart Industrial City

Industrial Masraf Al Rayan Q1 2008 Q1 2010

7,280 5

Total 31,486 46,094 Source: Meed Projects/Markaz



Appendix: 2 Bank credit by economic activity QR Mn Economic activity 2000 2001 2002 2003 2004 2005 2006Public sector 10,661 16,530 16,815 19,932 18,470 18,650 21,537Merchandise 4,507 4,047 4,727 5,532 6,116 8,184 11,553Industry 420 607 937 750 1,060 2,419 2,078Housing & Construction 733 718 247 1,444 1,658 3,358 5,121Land 487 415 1,041 1,894 4,054 6,183 10,624Personal 9,181 8,882 9,640 11,503 14,085 24,731 35,177Services 477 1,065 812 1,865 2,384 2,942 7,246Others 1,448 1,747 1,750 437 468 900 1,437% of Housing & Construction to total credit 2.6% 2.1% 0.7% 3.3% 3.4% 5.0% 5.4%TOTAL 27,913 34,011 35,967 43,356 48,294 67,366 94,773 Source: Central Bank of Qatar Appendix: 3 Macro Economic indicators

2001 2002 2003 2004 2005 2006Real GDP (QR Mn) 63,840 68,394 70,781 85,524 90,726 96,805GDP at current market price (QR 63,840 70,484 85,663 115,512 154,464 202,324Population (in Thousands) 649 682 718 756 796 837Nominal per capita GDP (QR Mn) 98,367 103,349 119,308 152,794 194,176 241,725Nominal per capita GDP in (US$) 27,024 28,393 32,777 41,976 53,345 66,408Inflation Rate (%) 1.4 0.2 2.3 6.8 8.8 9.0Money Supply (QR Mn) 28,754 32,147 37,223 44,865 64,271 77,327 Source: Central Bank of Qatar Appendix: 4 Regulatory Developments The amended real estate law ((No 17 of 2004, Article 3) relating to Foreign freehold ownership of property has the following salient features: 1) The amended law allows non-Qataris to buy and own real estate properties in selected housing projects such as Pearl Island, West Bay Lagoon and Al Khor Developments. 2) The amended law also allows non-Qataris to own leasehold real estate properties and residential units in above mentioned projects, on lease basis for maximum 99 years, which can be extended for another 99 years . 3) In another regulatory development (new law passed in February 2006), GCC nationals are permitted to own land and residential units in three designated areas – Lusail, Al Kharayej, and Jebel Thiyab. It also permits GCC nationals to lease the property for 99 years in 18 areas across Doha. 4) Qatar has started offering permanent residence visas to foreigners who buy freehold properties in selected housing projects.



Appendix: 5 Contribution of real estate, Building & construction sector to GDP

7.92% 7.98%7.32%

8.50% 8.89%8.21%

5.36%5.70%5.50%5.39%5.01%4.55%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

2001 2002 2003 2004 2005 2006

Real estate and Financial services Building and Construction

Source: The Panning Council Appendix: 6 Price Index of major commodity group 1Q 07-06

2002 2003 2004 2005 2006 1Q 07General Household consumption 100.24 102.51 109.48 119.13 133.23 145.42Food, beverages, & tobacco 101.21 100.86 104.22 107.48 115.36 119.18Garments and Footwear 98.30 96.77 104.60 101.81 114.46 123.21Rent, Fuel & Energy 101.75 120.06 139.55 176.19 221.94 267.31Furniture, Textile and Home appliances 97.13 98.61 101.91 106.45 110.87 114.82Transport and communication 101.06 92.59 95.98 99.71 101.56 103.17Entertainment, Recreation & Culture 95.90 99.35 109.10 102.16 104.53 107.31Miscellaneous goods & services 105.24 105.98 110.34 114.89 130.51 135.25 Source: The Planning Council

Appendix: 7 Interest rate movement in Qatar

6.99 7.33 7.26

9.42 9.15 9.13

8.098.52 8.49

5

6

7

8

9

10

Dec.2004 Dec.2006 1Q 07

(%)

Lending rate for loans <1year Lending rate for loans 1-3 years

Lending rates for >3 year

Source: Central Bank of Qatar



Appendix: 8 Qatar Population

Source: The Planning Council Appendix: 9 Qatar Population by age group (2006)

22.5%

38%

39.5%

0-14 15-34 34 years & above Source: The Planning Council

1400.0

838.1 744.0

616.7557.3510.4

0 200 400 600 800

1000 1200 1400 1600

1996 1998 2000 2004 2006 2015E

Thousands

CAGR: 5.1%1996-2006



Appendix: 10 Number of building permits issued

33683874 3911

4821

6124

0

1000

2000

3000

4000

5000

6000

7000

2000 2002 2003 2004 2005

Number of buildings permits

Source: The Planning Council Appendix: 11 Completed buildings by type and municipalities 2005

Type Doha Al Rayyan Al Wakrah Umm Slal Al KhorVilla 938 1997 112 180 127Senior staff house 180 78 5 29 4Popular house 51 432 19 117 11Multi-storeyed buildings 259 22 5 2 2Other 13 13 1 0 4Total Residential 1441 2542 142 328 148Govt. buildings 7 5 1 1 2Commercial 65 6 0 2 9Workshop/factory 116 1 0 0 16Other 5 14 2 6 2Total Non-Residential 193 26 3 9 29Total completed buildings 1634 2568 145 337 177 Source: The Planning Council



Appendix 12: Comparative matrix of real estate companies

Large Real Estate Companies in GCC

Name Country

Market Cap (Mn

Dollars) Close (Lc)

% Price Chg 1Y PE (x)

P/B (X)

Price to sales (x)

Dividend yield (%)

EMAAR PROPERTIES UAE 20169 12.15 2.53 11.52 2.47 5.29 1.65

EMAAR ECON CITY Saudi 3456 15.25 N.A N.A 1.53 N.A N.A

ALDAR PROPERTIES UAE 3283 7.01 12.74 8.74 3.69 77.63 1.14

SOROUH REAL EST UAE 2784 4.11 7.92 17.40 N.A N.A 2.44

UNION PROP UAE 2531 3.34 22.79 15.29 2.04 3.68 0.00

NATL REAL EST Kuwait 1516 0.59 11.23 11.96 2.06 7.93 5.15

MAKKAH CONSTRUCT Saudi 1505 34.25 -63.95 30.86 2.59 22.58 3.50

MABANEE CO Kuwait 1487 1.18 123.79 42.24 6.25 35.34

COMMERCIAL R.E. Kuwait 1441 0.29 2.60 11.31 2.09 15.56 3.90 Small Real Estate Companies in GCC

ARAB TECH CONST UAE 975 5.99 92.42 15.84 4.57 1.27 2.17

SAUDI REAL EST Saudi 968 30.25 -50.75 31.84 1.24 22.48 2.48

RAK PROPERTIES UAE 948 1.74 -7.45 7.50 1.36 14.99 N.A

TAMDEEN REAL EST Kuwait 695 0.59 43.90 44.03 1.30 11.04 1.92

QA REAL EST CO Qatar 681 34.50 5.85 20.64 1.47 8.03 N.A

SALHIAH REAL EST Kuwait 616 0.49 -14.62 3.45 1.32 4.86 7.72

KWT REAL EST Kuwait 544 0.19 -12.84 N.A 1.13 20.68 0.00

THEMAR Kuwait 471 0.13 -2.90 17.70 1.30 116.66 5.97 RED SEA HOUSING Saudi 464 58 N.A 16.07 4.75 4.20 1.42

GRAND REAL EST Kuwait 461 0.37 -24.48 8.73 1.65 6.46 2.28

UNITED REAL EST Kuwait 447 0.19 -12.90 8.23 1.26 11.03 7.12

INTL INVEST PROJ Kuwait 378 0.18 -32.59 N.A 2.39 N.A 0.00

INJAZZAT RE EST Kuwait 287 0.28 4.31 7.96 1.54 6.20 4.96

ARAB REAL EST CO Kuwait 276 0.17 10.26 21.77 1.12 9.79 0.00

AL ENMAA REA EST Kuwait 244 0.18 -11.64 1.88 1.27 2.34 5.56

AJIAL REAL EST Kuwait 236 0.41 28.86 16.66 0.85 49.30 4.69

TIJARA& REAL EST Kuwait 235 0.18 -24.79 8.70 1.25 31.55 6.82

AAYAN REAL EST Kuwait 187 0.30 -14.29 11.00 1.93 9.99 3.03

KWT R.E.HOLDING Kuwait 160 0.15 -28.70 21.18 1.16 9.80 0.00

JEEZAN REAL EST Kuwait 157 0.20 -29.82 N.A 1.35 N.A 0.00

GRND RE TOUR DEV Kuwait 145 0.14 -10.58 166.27 1.91 46.65 0.00

UNION REAL EST Kuwait 138 0.21 9.20 12.65 1.10 11.51 4.81

PEARL REAL EST Kuwait 137 0.17 4.88 286.67 1.48 29.41 0.00

AL-MASSALEH R.E. Kuwait 135 0.18 -8.08 N.A 0.89 9.36 2.75

ARKAN ALKWT R.E. Kuwait 129 0.18 N.A N.A 1.57 121.93 2.63

AL KHALEEJ DEV Kuwait 128 0.28 15.45 5.20 1.21 3.23 8.38

UNITED PROJ CO Kuwait 120 0.42 18.46 13.38 1.53 5.69 2.16

TAMEER R.E. INV Kuwait 110 0.13 -5.71 N.A 0.87 25.51 3.79

AQAR REAL EST Kuwait 102 0.14 1.49 38.42 1.22 86.25 0.00

SANAM REAL EST Kuwait 67 0.29 13.93 4.26 1.99 34.48 N.A

AL MOWASAT HLDG Kuwait 62 0.22 N.A 16.68 1.29 1.46 N.A

GULF HORIZON Kuwait 49 0.47 N.A N.A 3.73 57.09 N.A Source: Reuters as on 25th June 2006



Appendix 13: Markaz Methodology for Demand Supply Estimation General assumptions/ Key parameters considered 1. Population: - Previous and current population, - Percentage of expatriates and locals - future growth rate, forecasted population (2007-2010) 2. Family size of expatiates and locals 3. Contribution of housing and construction sector to the country’s GDP and its growth

Housing Demand

Housing Supply

Source: Markaz analysis

Qatar Population

Local

With family

Without family

Size

Size

Housing units required by expatriates

Size

Housing units required by locals

Expatriates

Opening stock of housing units

(1997 base year)

Additions

Closing stock of housing units

(Supply)



Methodology explained For the purpose of forecasting housing demand, we have broadly taken into account several macro economic variables. The variables are: Population growth (Qatari/expatriate), population structure, and average unit size in Qatar. To arrive at the total housing demand: (a) we forecasted the total Qatari and expatriate population on the basis of rational assumptions and data available on the website of Qatar Planning Commission. Similarly, (b) we forecasted the average household size of Qatari and expatriates population. Key Assumptions:

a) Expatriates in Qatar formed 67. 1% the total population during 2002-2004 which we expect to come down to 65.8% by 2010.

b) Total population is expected to grow at an annual average rate of 5.9% over 2007-2010 (based on Qatar Planning Commission estimates).

c) The average size of expatriates household with family is assumed to be 3 (A couple with a child)

d) The average size of expatriates household without family is assumed to be 4 (Since we believe expatriates household without family to live in shared accommodation of 4 persons)

e) We expect average size of Qatari household to come down from 6.7 persons in 2004, to 5.7 persons in 2010.

To arrive at the supply of total housing unit, we have forecasted the addition (new housing units) to existing supply since 1997. Key assumptions:

a) To forecast the new supply, we have taken in to account the growth rate of contribution of housing and construction sector in Qatar to the country’s GDP.

b) According to the 1997 census, total inventory of housing units in Qatar stood at 93,302. According to Qatar Planning Commission report for 2006, number of residential units added in 2003, 2004 and 2005 amounted to 4763, 7045 and 10179, respectively.

c) We used the growth in housing and construction sector contribution to GDP to back-calculate the additional housing units between 1997 and 2002.

d) Based on the total demand and supply figures, we arrived at the total shortage each year.

e) Going forward, we expect shortage ratio to come down as we expect more supply of new housing units to come on stream across the country, especially in Doha.



Disclaimer This report has been prepared and issued by Kuwait Financial Centre S.A.K (Markaz), which is regulated by the Central Bank of Kuwait. The report is intended to be circulated for general information only and should not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction. The information and statistical data herein have been obtained from sources we believe to be reliable but in no way are warranted by us as to its accuracy or completeness. Opinions, estimates and projections in this report constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinion of Markaz and are subject to change without notice. Markaz has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn. This report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Kuwait Financial Centre S.A.K (Markaz) does and seeks to do business, including investment banking deals, with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.



Markaz Latest Published Research S No Title Release Date Research Highlights

1 GCC Equity Funds: The Asset Allocation Challenge

September 2006

Issues behind asset allocation for GCC equity funds. The report examines the asset allocation pattern among GCC equity fund managers.

2 GCC Leverage Risk: How real it is?

November 2006

Examining the risk behind increased exposure of the GCC financial system to stock market. The report considers four key variables: Size, Asset Intermediation, Cross border activity and Capital market representation. The report also analyses the linkage between bank credit growth and interest rate margin.

3 GCC for fundamentalists: A top-down framework

December 2006

Establishing a framework involving fundamental variables affecting GCC stock markets. The report examined nine important variables: economic factors, valuation attraction, economic liquidity, fund managers average, earnings growth potential, moving average, investor sentiment, geopolitical developments and market liquidity.

4 Managing GCC Volatility: Strategies and Tactics

February 2007

Devising risk-based portfolio strategy to benefit from the high-risk environment of the GCC stock markets. The report discusses four strategies: Relative vol, Contrarian, Technical and Options-based strategy.

5 Derivatives Market in GCC: Cutting a (very) long market short

March 2007

Examining the need for introduction and growth of derivatives market in GCC. The report examines the limitations of GCC capital markets and how introduction of derivatives can overcome some of these limitations.

6 To Leap or To Lag: Choices before GCC Regulators

April 2007

Examining the evolution and progress of GCC capital market structures relative to MENA and BRICS. The report benchmarks GCC capital market regulatory progress vis-à-vis MENA and BRIC countries and provides a road map.

7 Syria: Real Estate Update April 2007 Presenting an overview of Syrian real estate market including the demand and supply drivers.

8 GCC Asset Allocation Since June 2007 (Monthly)

Presenting asset allocation strategy for GCC stock market using an in-house proprietary model. The report also analyses the performance of GCC equity funds.

9 Markaz Volatility Indices (MVX) Since June 2007 (Monthly)

Computing and disseminating series of indices to cover GCC and other important capital markets focusing on market volatility

10 A Gulf Emerging Portfolio: And Why Not?

June 2007 A Study on Saudi, Kuwait, and UAE for Portfolio Enhancement

11 Saudi Arabia: Real Estate Overview

July 2007 Detailed review of real estate segment of Kingdom of Saudi Arabia including demand/supply analysis and other drivers propelling the market.

To obtain a print copy, contact: Kuwait Financial Centre “Markaz” - Client Relations & Marketing Department Tel: +965 224 8000 Ext. 1804 Fax: +965 2414499 Postal Address: P.O. Box 23444, Safat, 13095, State of Kuwait Email: [email protected]

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