Tuesday, July 10, 2007

Our Housing Problem




This lady is been protesting for more then 6 days now. She wants a place to live.
This is an extreme case which is not really typical, yet we should not have any of these cases. Bahrain is not that poor!! and this is not the first time we see this.
A typical case will be a Bahraini couple getting BD40,000 to buy a house form the government (Ministry of Housing). A typical livable (not even decent) house costs at least BD80,000. The BD40k comes with several rules, including; the house should not be more then 15 years old (or something like that), you cant buy apartments with it and you cant buy anything in Amwaj, riffa views or any such a development (like you really can with 40K!!) and the house has to be ready (not to be built).
So what does a person do? You say take a bank loan, alright lets try it. The only loan you will get is a personal loan because the house has to be mortgaged by the Ministry of Housing (for the 40k loan), so a typical couple will make around BD800-1200 (combined), 50% of your income is your max installment, now take out two car loans, if you are lucky you will be able to get additional BD10-20k. As a result now you have BD50-60k. The question is what can you buy with that???
There is a suggestion to increase government loan to BD60,000/- , guess what that will do?? Yes, increase property prices even further!! So we will be back to square one!!
Another suggestion is to introduce a law that allows 2nd mortgages, that might help a bit but it will also increase demand and the property prices will increase!!
So what is the solution???
I suggest the following: Ministry of Housing establishes a new real estate company ( a joint venture) with other banks. The new company is to build houses in the range of BD80,000, where ministry of Housing will pay the BD40,000 and the partner in the joint venture will be responsible for the other half. The house will be mortgaged under the new company (not the bank or Ministry of labor). This way the demand for housing will not increase because people get the houses directly (no shopping around is required) and supply of houses will increase. As a result, the property prices (at worst) will stabilize.

16 comments:

Ammar456 said...

the housing problem is a big one, and what needs to be looked at is property prices. with the opening of property sales to GCC citizens, the prices jumped up, and now opening them up to the international market shifted the prices up ridiculously. Now the locals cant afford it; market regulations need to be set to stabalize the prices and offset or deter these fluctuations, in order to let the average citizen be able to afford such housing.

SILVER said...

I agree with you, i think they should stop letting GCC citizens own land or properties in residential areas. The government can specify area where they can own like Amwaj and so on. The problem is that people in power are getting HUGE benefits from the raise in real estate prices.
They weird thing is the MPs are not even talking about it!!

LuLu said...

And that's why the United Nations gives us the urban development award.

PS. I agree w/u Silver & Ammar on the ownership issue.. this was my take on it
http://lulubahrain.blogspot.com/2007/01/lets-all-immigrate-to-mars.html

SILVER said...

This article was meant to suggest a solution for the problem instead of just criticizing. I value Ammar and Lulu comments who also suggested ways to tackle this problem. Now we need some MPs to do something about it.

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