Affordable Housing in Bahrain – Market Size and Developer opportunities


It is widely recognised that there is a deficit in the provision of housing in Bahrain that the man in the street can afford.

In theory, therefore, there is an opportunity for developers both local and international to build properties to meet the needs of this chronically under supplied and increasingly desperate sector.

However, before they enter this market, developers need to know how big the market is, what the market wants and what the market can afford.

What is Affordable Housing?

At the outset it is important to define what is meant by “Affordable Housing” in this context as it is a very loosely defined term, this is especially the case in Bahrain where different types of Government assistance are provided to households earning less than BD400 per month and those earning between BD400 and BD1,200 per month.

The first category of housing (for those earning under BD400pm) is known as “social housing” and the waiting list of households waiting for a Government-provided home now numbers around 53,000.

This is a sizeable shortfall in an economy where the total number of houses already built amounts to only around

The next groups of households by salary bracket are those who earn between BD400 and BD1, 200 per month. This group is able to access Government subsidised loans with an equivalent annual profit rate of 3%. This group can be considered to require “low-income affordable housing”.

In the next group of affordable housing we have (fairly arbitrarily, admittedly) chosen those Bahrainis whose salaries fall between BD1, 200 and BD2, 000 and labelled this group “middle-income affordable housing”.
1.3 Low-Income Affordable Housing

The low-income affordable housing set does not include low- income expatriates. This group of expatriates has very little interest in buying a home in Bahrain because they are very much focused on repatriating their salaries to dependants in the country of their origin.

As a consequence, the potential market size for “low-income affordable housing is drawn from the Bahraini population only.

According to LMRA data, around 46% of Bahrainis in employment fall into this category, which given a total Bahraini population of around 590,000, means that around
270,000 Bahrainis fall into this group.

It is difficult to say how big the average Bahraini household size is at present. This is partly because the last full census on the Bahrain population was conducted in 2000 and the results of the recently conducted partial census have yet to be released.

The size of Bahraini households is likely to vary by socioeconomic group so it is very difficult to uniformly apply one figure to the entire population but if we chose six (per household) for example, the total number of Bahraini households in this category would be around 45,000.

From data that we hold regarding the number of mortgage loans outstanding in this sector we estimate the size of the market for “low-income affordable housing” to be around 20,000.

Now, that really covers the demand side but, naturally, there are numerous other issues, such as the ability to raise the necessary equity, the size of the subsidized loan and the cost of the housing.

Due largely to land price speculation in Bahrain and Bahraini preferences for a townhouse or villa, it is very difficult for developers to meet the desire of this market sector for a townhouse or villa with a price that suits. At the moment, there is an impasse, the size of the subsidized loans simply don’t match up with the cost of housing that developers can build.

What the developers need is cheap land and what Bahrain has very little of is – cheap land.

Middle-Income Affordable Housing

Using broadly the same process as with the low-income group, we estimate this group to comprise around 5,000 households. Even in this salary category there is very little appetite for property arising from the expatriate population.

Naturally, this group can afford to support more expensive house prices and are more likely to have some equity to put down, but unfortunately they are also more likely to have their own home already.
The size of this group is probably around 2,500 households/ units in terms of demand. However, this group is unable to access cheap, Government-subsidised loans and with the additional cost of finance, their ability to service significant levels of debt is severely compromised.

Mortgage Affordability

This is naturally key to the whole debate. At different income levels, households can afford different levels of debt. In Bahrain, this issue is slightly confused by the subsidised mortgages extended to those earning up to BD1, 200 pm.

The interesting anomaly in the table and chart above occurs at a household income of BD1, 500 pm. Households in this bracket are unable to access subsidised Government loans and are obliged to obtain the entire loan at commercial mortgage rates. These rates typically vary between 8% and 10.5% at the moment (we have used 8.5% in the calculations above).

Naturally, this presents an opportunity for financiers interested in this sector. The demand is enormous and is largely being held back by the significant cost of finance.

The process above is merely a crude exercise to raise some of the key data and issues in the “affordable housing” sector. However, developers need to know a lot more about the market in terms of locations, the preferences of Bahraini buyers, sizes, layouts and so on.

The demand for “social housing” and “affordable housing” in Bahrain is reaching crisis levels and combined, have reached almost 80,000 units. This presents a sizeable opportunity, especially, if we consider that this shortfall is actually growing each year by another 4,000 or 5,000 unit.

The subject is highly complex and has deep socio-political implications. It urgently needs addressing but many developers do not know where to turn or how to embrace this topic. There are advisors in the market who can help, formally or informally, with advice, market reports, feasibility studies and even available land. Naturally, CB Richard Ellis is able to assist on virtually all aspects of this important opportunity.

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