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Iraq tackles housing challenge

Faced with a steady population growth – which peaked at 2.9% in 2012 – and a huge lack of housing after decades of war, as well as up to a 100% increase in rents and sky-rocketing prices for real estate, Iraq finds itself in a severe housing challenge. In order to counter such developments, the government has announced that it will increase the capital of the two state-owned banks, Rasheed Bank and Rafidain Bank, from about USD 23m to USD 360m in next year’s public budget. An informed source in the Iraqi Ministry of Finance further added that the capital of the two banks will be doubled again in 2015. This increase is a step taken to support a credit scheme for citizens wishing to build their own home, said Ibrahim alMutlaq, a member of the Parliamentary Economic Committee. Bassem Jamil Antoine, an Iraqi economic expert, stated that “the decision to increase the capital of the two banks came because of a similar increase in private banks, which will increase their capital at least by 250bn Dinars (USD 218m) this year”

Also associated with the government plans to support private housing projects is the ‘100 salaries’ credit, a loan given to civil servants that is equivalent to 100 nominal, monthly salaries. However, the ‘100 salaries’ scheme has resulted in such high demand that it has had to be temporarily suspended due to a lack of liquidity. Aside from the lack of liquidity on the side of the citizens, Iraq needs to build many more housing units than it has actually been able to, owing to a lack of financial allocations and suitable land. According to Wahda al-Jumaili, a member of the Iraqi Parliament’s Services and Reconstruction Committee, Iraq requires around 2 million new housing units, but has so far only built 300,000. Thus, it is expected that the private sector will most likely account for around 80% of the future housing projects, and most of these required investments will need to come from abroad.

Iraq is an emerging market where successful investments could mean high returns for real estate developers and investors. In order to succeed, companies must determine how to provide their products or services in an environment that may not necessarily adhere to familiar institutional of legal norms. However, Iraq provides an open landscape for investors to develop projects that will fill the needs of Iraq’s expanding and demanding population while offering the opportunity to develop new, mutually beneficial business connections.