The Gulf is going through a period of great economic turbulence and the region’s airlines have been at the center of it all. The International Air Transport Association (IATA) announced that the Middle Eastern airline industry is expected to suffer financial losses of $800 to $900 million in 2009. Regional airlines have cut international passenger capacity by nearly 5 percent. Despite this downturn, Gulf airlines are continuing to expand and, in total, are expecting to add 114 new aircraft to their fleet in 2009, 8 percent of global deliveries. This year’s launch of two new airlines, Fly Dubai and Wataniya Airways, has been an integral part of the continued growth in the region’s airline sector.

Whether the region is capable of soaking up all this extra capacity during these tough times, only time will tell. But what these ventures are certainly illustrating is the strong economic fundamentals of the region, and most importantly that lessons have been learned from the global financial contraction. These airlines, by very different methods, are focusing their business model on three basic pillars: price sensitivity, efficiency and sustainability; not practices the Gulf is traditionally known for.

Wataniya airways

Wataniya Airways, also known as Kuwait National Airways, is Kuwait’s third passenger airline and was launched at the beginning of this year. The main concept of the airline is to deliver a ‘premium’ service at the best price by ensuring that the fixed costs are as low as possible. The Kuwaiti Investment Project Company (KIPCO) owns 30 percent of the airline while the other 70 percent is owned by Kuwaiti investors. It’s first route was Kuwait to Dubai. In addition to the Dubai route, three other routes were quickly announced: Cairo, Bahrain and Beirut. The airline is run by George Cooper, the British chief executive officer of Wataniya Airways and a former managing director at British Airways. A return flight from Kuwait to Beirut on Premium Economy costs around $225 (including taxes and fees), while First Class costs around $362.

In line with Wataniya’s business model, the airline has reduced fixed costs as much as possible by employing two central concepts: leasing and outsourcing. Wataniya’s fleet of four Airbus A320s and the three more slated to arrive in 2010, are all leased. Leasing the airplanes means that Wataniya does not have to put down capital upfront while, at the same time, allowing the airline to downsize or upsize relatively easily.

Wataniya outsources maintenance, catering, information technology and engineering. The company also outsources accounting services from a center in India. Catering is the best example of how outsourcing reduces costs, as they only pay the catering company per passenger.

“If we don’t get the passengers on the plane we don’t have to pay for them,” says Cooper. “This is not the case for most of the major airlines, but as a smaller operation we have the flexibility to work in such a manner.”

To ensure that “premium” service is delivered on the flight, Wataniya puts extra emphasis on crew training. While many of Wataniya’s crew have previous training, Cooper says “we ignore this.”

“While most airlines undergo a training program of six weeks we have created a training program of eight weeks to ensure that our customers receive that extra service.”

Wataniya can also boast an almost exclusive terminal. On landing in Kuwait, Wataniya takes you to an almost empty terminal. A modernist building with gleaming metallic passport desks, Sheikh Saad General Aviation Terminal was opened this year to private and business charters and one commercial operator, Wataniya Airlines. The terminal has lounges with wireless internet, concierge service and a range of shopping facilities. The terminal also boasts a lounge for First Class passengers, ensuring a pleasant wait before the flight, a complimentary buffet and catering services.

The A320 in service with Wataniya is designed to hold 180 passengers, but Wataniya has decided on only 122 seats to create extra room. The difference is noticeable, as this reporter, who is nearly 2 meters tall, had more than enough space in premium economy, sitting in chairs that are all ergonomically crafted. Another highlight of the airline is the OnAir in-flight passenger communication service with the ability to use mobile phones and internet that allows passengers to stay connected while flying. Wataniya is the first Middle Eastern airline to introduce this service.

Fly Dubai

The other airline to launch in 2009 is Fly Dubai, the emirate’s first budget airline, which made its inaugural flight on June 1st from Dubai to Beirut. Fly Dubai is a complete reversal of the business model of Wataniya Airways. While Wataniya aims to lower fixed costs as much as possible, Fly Dubai bought 50 new Boeing 737-800 aircraft at an estimated cost of $3.7 billion.

The airline has been set up by the government of Dubai and although in the beginning will be supported by the Emirates Group, it will not be a part of it. The business model is a new twist to Dubai’s airline industry.

“We focus on trying to offer the lowest price possible and to make travel as uncomplicated and with as little stress as possible,” said CEO of Fly Dubai, Ghaith al-Ghaith, who was previously a vice president of worldwide commercial operations at Emirates Airlines. The company’s slogan is: “It’s that easy.”

The lowest fare on Fly Dubai is $100, one way, inclusive of taxes, from Dubai to Beirut. Fly Dubai, by the end of June, will also fly to Amman, Damascus and Alexandria with further plans to expand throughout the region and Eastern Europe, India, Iran as well as North and East Africa. To ensure the lowest fair is offered, passengers only pay for the extras they select. Luggage, for example, is seen as an extra. One piece of luggage costs $11, at a flat rate, up to a weight of 32 kilograms; the second bag $27, up to 32 kilograms. Normal sized hand luggage is free. Any ‘extras’ a passenger orders on board, such as food, is charged. The Fly Dubai experience is very similar to that of any American or European budget airline, but with a touch of Gulf luxury added in. All the seats are ergonomically designed, with the seat pocket placed on top of the seat instead of at the knees to maximize knee space.

One essential element to Fly Dubai is that it has Emirates by its side. Fly Dubai does not need to consider the methods Wataniya uses because Emirates group will ensure that all the IT, engineering, catering and maintenance is taken care of. As for the risk of buying 50 Boeing 737-800s upfront, Ghaith said it was the best way to deliver the kind of efficiency needed for low cost airlines, and that leasing could not possibly achieve the same results.

Ghaith is very confident that Fly Dubai is filling a gap in the market.

“In this region we are way behind when it comes to low cost,” he said. “Only 5 percent of total traffic is low cost, compared to Europe that is 20 percent and increasing. So Fly Dubai is in a good position to fill this gap.”

The open closed skies of the region

One of the main difficulties that Fly Dubai, Wataniya and all airlines in the region face is the open skies policies of the region. Currently they are opaque and lack uniformity. All Arab League members are expected to agree on an open skies policy by 2015, but so far only 11 countries have signed the policy. This has caused problems for airlines, which try to base their business model on travel in the region, especially for airlines like Fly Dubai and Wataniya.

Even those governments that have signed the open skies policy, such as the Emirates, have also not always upheld the spirit of the agreement. Wataniya, for example, has already started to run into problems in the Emirates, being told that they cannot fly over certain parts of the country, as other airlines have tried to scupper the progress of the carrier. While regional jealousies and protectionism have created hurdles to the region’s ambitious airline industry, the financial crisis has had both positive and negative impacts.   

Financial crisis?

The idea that there are positives from the global financial contraction for the region’s airline industry is hard to believe. It is even harder to understand how a start up airline could benefit from a market that is having its growth squeezed. Yet, Cooper claims that the financial crisis helped in many ways.

“The crisis helped us pick up talent from other airlines that were downsizing. Over half the pilots of Wataniya are American and victims of the downsizing that went on there,” Cooper said. “Also, because of the economic crisis, costs are low and we do not have to buy planes in advance as now there are no waiting lists.”

Fly Dubai’s al-Ghaith noted that the crisis has created opportunities.

“Airlines are part of the infrastructure and as everyone says, ‘what you need to do in a crisis is build up your infrastructure,’” he said.

But these airlines have, of course, not escaped the economic turmoil. Cooper does admit that, especially for the Kuwait-to-Dubai route, capacity is below the desired amount.

Ghaith also stressed that Fly Dubai is very much “a long term commitment.” Those launching the airlines are quietly confident that when the Gulf begins to boom again they will be more prepared than ever. The two airlines’ focus on price, quality and luxury is a welcome addition to the market. Price sensitivity has finally come to the region; let’s hope it’s just the beginning. 

Five year old Edgar Enrique Hernandez in Mexico was the first confirmed case of H1N1 on April 2. “Swine flu” has now spread around the world, and by May 25 more than 12,000 people were confirmed to have contracted H1N1 influenza in 43 countries. 86 people have died.

Eighteen US soldiers in Kuwait were the first confirmed cases of swine flu in the Gulf Cooperation Council in mid-May. Around the same time, an Emirati citizen was diagnosed with the flu after having traveled to Canada and back. He became the first confirmed case of a GCC national contracting the virus.

In another a sign of the growing fear in the region, a journalist from Executive was even briefly detained by Syrian medical personnel as he was recently leaving Lebanon and examined for symptoms of influenza.

How these cases will affect the regional economy has yet to be seen, but the flu has already had severe economic consequences for Egypt, where pig farmers paid the biggest price for the outbreak (also read “A poor cull in Egypt” in the Comments section).

Economic costs of a pandemic

Mexico has felt the devastating economic cost of the influenza pandemic. In April, a five day suspension of all “non-essential” activities around the country occurred, creating dramatic sights of empty streets and football teams playing to empty stadiums. The economic cost was as much as $57 million per day in lost revenue, according to Mexico City’s Chamber of Trade, Services and Tourism. The peso also fell 4 percent against the dollar and the local stock market fell 3 percent. As for the vital summer tourist season, there is little hope of gaining anywhere near the $40 billion earned in 2007.

If the Mexican experience was repeated globally the economic consequences would be devastating. The World Bank predicts that if an outbreak similar the devastating 1918 epidemic — which killed more people than World War I — occurred now, then the global gross domestic product could shrink by 4.8 percent and cost $3 trillion. The most telling account of the possible economic cost is the SARS epidemic. Warwick McKibbin, an international economics expert at the Brookings Institute, argued that the SARS epidemic in 2003 cost the world $40 billion due to canceled flights, closed schools and panicked Asian markets. And that was a relatively short lived outbreak. McKibbin said a serious swine flu outbreak could be much worse.

“A mild scenario would cost the global economy about $360 billion and an ultra scenario up to $4 trillion within the year of the outbreak,” he said. “The mild scenario is estimated to cost the world 1.4 million lives, and close to 0.8 percent of gross domestic product and [approximately $330 billion] in lost economic output.”

McKibbin said that as the scale of the pandemic increases, so would the economic costs. In the most extreme, “ultra” scenario,” a flu based massive global economic slowdown “would kill more than 140 million people and cost the world economy $4.4 trillion.”

Already the H1N1 has had global economic consequences that have only added to the difficulties countries are facing with the global economic crisis. The economic and human cost of a full scale influenza pandemic would be frightening, but it is fear that is currently having the greatest affect on the global markets. The H1N1 virus has already made a significant impact on a fragile global economy. When news broke out about swine flu, tourism and airline companies stocks dropped steeply: British Airways stock fell nearly 17 percent, Lufthansa’s dropped by 12 percent at one point. Oil prices also slid in the wake of swine flu.

Possible affect on the MENA Economy

Officials in the Middle East and North Africa are taking steps to prevent swine flu from spreading (see box for full list of measures). It began with a GCC emergency meeting in Doha on May 2 that discussed ways to effectively face the dangers of the flu. Saudi Arabia and the United Arab Emirates also imported thermal monitors to scan airline passenger’s body heat for abnormally high temperatures.

When laboratory tests came back positive for the Emirati citizen traveling from Canada, the UAE Ministry of Health was quick to calm fears the flu might have spread to other passengers on the flight.

“Passengers who were on the same flight have not developed any H1N1 symptoms,” said Haneef Hassan, the UAE Minister of Health, according to Arabian Business.

“The patient, who arrived to the country on a flight from Canada, is recovering now at a government hospital after he has received a course of treatment,” Hassan said. “He will remain under observation and treatment for 10 days as medically recommended.”

The US troops diagnosed with H1N1 in Kuwait were put under immediate quarantine, Kuwaiti officials said, adding they had left the country.

Yussef Mendkar, deputy chief of Kuwait’s public health department, said the troops “had no contact whatsoever with the local population,” and that Kuwait was free from the virus.

News agencies reported that the infected troops did not leave their base, located far from any population centers, and anyone who had contact with the infected troops had been put under medical observation.

The Kuwait and Dubai experiences highlight a huge issue in the GCC: whether it’s US troops, locals traveling abroad, transit passengers or the enormous migrant worker population, the region is highly exposed to a possible H1N1 outbreak.

But analysts say that with the measures taken by the region’s health officials, the flu’s economic impact on the region will be likely be from psychological reasons rather than physiological.

“I don’t think local investors have a coherent view of the likely impact of swine flu, but it’s more of a sentiment issue with regional stocks closely correlated to international markets,” Jithesh Gopi, head of research at Bahrain-based SICO investment bank, told Trade Arabia. “The flu scare will have a bigger impact on the stock markets than it will on the real economy.”

And although the flu might represent an apocalyptic scenario to some, to others it’s been a boon to business.

A mild Swine Flu scenario could cost the global economy $360 billion — ultra scenario $4 trillion

The profiteers of pandemic

To try to avoid getting hit by the flu, people around the world are taking precautions, like buying surgical masks, hand and surface sanitizers, flu kits and drugs. Some surgical mask manufacturers had to double production to keep up with demand.

“We’re operating at full tilt to try and produce as many masks as we can to take care of as many people as we can,” Andrew Whitehead, spokesman for surgical mask manufacturer Crosstex company, based outside New York City, told the Long Island Business News on April 30.

Whitehead told the paper that Crosstex had received orders for around 10 million face masks in the first days of the H1N1 outbreak, an amount the company said it usually handles in a month.

“Masks are going to hospitals, government agencies, the Mexican government,” said Whitehead. “We got a lot of requests from China, Australia, Europe, South America and, of course, Mexico.”

Pharmaceutical companies producing drugs for the flu have also seen positive market reaction as governments stockpile the drug. Tamiflu, produced by Roche, and Relenza, produced by GlaxoSmithKline (GSK), are the two biggest companies.

Roche saw its shares rise 6 percent, while GSK saw a 5 percent rise. Although both Tamiflu and Relenza are not vaccines, they have both shown to be an effective treatment against H1N1, but only if used within 48 hours of the symptoms developing

“Roche actually lowered production of Tamiflu due to a lack of demand in 2006,” said Martina Rupp, a spokesperson at the Roche Group.

Even more ironic is that the first quarterly report for Roche stated that they reported lower than normal seasonal Tamiflu sales in the US as outbreaks were less severe. Roche will not have to worry about lack of demand however.

In the US alone, health care marketing consultants SDI released data showing more than 250,000 prescriptions for Tamiflu pills alone were filled at retail US pharmacies in the last week of April, according to the Associated Press.

That’s figure was 34 times higher than just a week before and represented more than double the number of prescriptions from the 2008 winter flu season.

Relenza prescriptions saw a similar increase, multiplying 10 times in one week at the end of April, SDI data also showed.

Governments are also building up their stockpiles of Tamiflu. Roche said governments have built up enough stores of Tamiflu to treat roughly 220 million people. GSK declined to give out information on how many doses governments are purchasing. As governments build up their stockpiles of Tamiflu and Relenza they are doing well at being cautious about not creating an atmosphere of panic while confronting swine flu.

Should we worry?

Compared to common seasonal influenza (the flu) that causes 36,000 deaths per year on average in the US alone, the 86 deaths from H1N1 should not be cause for concern. Yet, the world’s epidemiologists have been on edge even since the H1N1 strain showed up in Mexico, and it’s also caused panic and a media storm throughout the world.

The fear of scientists is that the H1N1 strain of influenza is new. According to the World Health Organization (WHO), this means that “scientists anticipate that pre-existing immunity to the virus will be low or non-existent.”

Currently, the WHO has raised the pandemic alert to level five out of six for the H1N1 strain of the virus. According to the WHO, “the declaration of phase five is a strong signal that a pandemic is imminent.”

Causing panic or fair warning?

Governments are concerned about the fear that has been sparked by the WHO’s warnings about the virus. As considerations are under way by the WHO as to whether to raise the alert to phase six, declaring the first pandemic in 40 years, governments are urging caution. Currently governments are concerned about the misunderstanding of the levels of alert and want the WHO to take into consideration how deadly a virus is in its criteria and not just, as happens currently, how far it spreads, so as not to cause undue panic.

As the financial crisis affects the real estate sector in the region, Qatar is feeling the impact as well. Since the last quarter of 2008, sales have dropped considerably, the price of land and property has fallen and so have rents.

“There is an 80 percent decrease in the volume of sales,” says David Oayda, general manager at Asteco Qatar. Property prices have not decreased to the same extent, since most developers and landlords are adopting a wait-and-see approach — not selling or buying until the economic situation stabilizes and lending comes back.

Property prices have decreased by 30 percent, according to real estate services firm Jones Lang LaSalle, while others consider the plunge more severe. Land prices have been impacted as well with a decrease of around 50 percent in the suburbs and 30 percent in the capital Doha. Rents are witnessing a large decrease with new units available, and demand slowing due to fewer people entering the country.

As demand slows and prices adjust, Qatar is experiencing a healthy and necessary correction, which Seraj Al Baker, general manager of Mazaya Qatar Real Estate Development, says was inevitable.

“People know that prices increased more than enough. [the market] needed to correct itself, and the international crisis came as an excuse,” he says.

Rents roll back

The increased influx of expatriates in the last few years has caused a rapid increase in Qatar’s population. Expatriates currently account for around 78 percent of the country’s 800,000 residents. The supply of new units was not growing accordingly, which put pressure on housing rentals. Between 2005 and 2007, Qatar’s planning council recorded a whopping 154 percent increase in rents.

To control skyrocketing prices and near-record inflation of 14 percent in 2007, Qatar’s cabinet implemented a 2-year rent freeze in March 2008. This kept rents from increasing further as new supply came online. But with the financial crisis decreasing demand, and new units coming to their handover stage, the cap is no longer needed. Rents of both offices and apartments are softening, depending on the area.

According to Colliers International’s second quarter report, apartment rental rates at the higher end of the market have decreased by around 15 percent. Oayda thinks that in general, the drop in rental prices is around 15-25 percent, depending on the areas.

Office supply in Doha is also growing, especially in the West Bay. The absorption rate of the new offices has been slow, mainly due to the decrease in the number of new businesses being established in Qatar. According to Colliers, rental demand for new office space in prime West Bay has softened by 10 to 15 percent in the last four months. Asteco’s Oayda thinks it has decreased by around 20 percent. The demand for cheaper office space along the C Ring Road and other areas remains high, keeping rents stable.

Landlords are also becoming more flexible with rental contracts by renewing leases annually, offering tenants the ability to move to new office space or apartments after a short period of time. Property owners are also trying to attract tenants, or keep existing ones, by offering new payment schemes allowing them to make multiple payments throughout the year.

With new supply coming online, especially in the Pearl Qatar real estate project, rents are expected to decrease further, as many people will relocate, benefitting from competitive prices and better quality developments. Colliers estimates that 9,000 new apartments will be coming onto the market by the end of 2010.

The decrease in sales volume will also encourage developers to shift their strategy and offer units for lease rather than selling them at lower prices. This increases the supply side of the market and eases rents as well.

Prices feel the push

Sales of residential properties have been somewhat frozen, especially in the off-plan and the primary markets where buyers are reluctant to purchase homes because of the lack of financing and expected price decreases. Prices have decreased, much less than the more damaged markets like Dubai, for many reasons.

First, the supply shortage has given developers the luxury of not having to decrease their prices substantially since they have already sold most of their units. “They have sold enough,” says Oayda. “Developers have to do one of two things; either reduce their prices or hold their properties and possibly lease them at delivery.”

Another reason why property prices have not plummeted is that the small Qatari market is less speculative, which keeps the affect of distressed sales minimal. As is the case around the region, many speculators exited the Qatari market because of falling prices.

“If you bought yesterday and you want to sell tomorrow, it is very bad news for you,” says Al Baker. He adds that speculators do have a role to play in a booming market, but too much speculation becomes harmful. “Speculators are like the spices. You put a little bit. It is not the meal, but you need it there,” says Al Baker.

Even though most developers are reluctant to lower prices, some are feeling the pressure since new supply is coming online and there are fewer takers in the market.

In the suburbs prices were especially hard hit because owners outside the city excessively inflated prices, thinking that after the boom in Doha, the demand would shift to the suburbs.

“Land owners were asking for 150 or 200 QR ($41 to $54) per square meter [outside Doha] which was crazy,” says Al Baker. Land always decreases faster in value than built up property, mainly because it is non-income generating and leveraged owners sell it rather quickly.

A survey by Aswaq.net of Al Arabiya Television states that prices decreased more than other estimates. Using prices supplied by a number of real estate brokers, the survey says prices of real estate in Qatar are down 40 to 70 percent since September 2008. Oayda says that’s not realistic. He says he “couldn’t possibly agree” with Aswaq’s analysis.

As rents are expected to decrease with new units coming online, the same is expected of sales. Pearl Qatar is one example. The multibillion dollar man-made island project will eventually house 41,000 people. At the beginning of May, the development’s first units were handed over to their owners. Analysts say as more Pearl Qatar units are put up for sale, rents and prices are expected to decline further.

A flight to quality

As the flood of expatriates into Qatar happened rather quickly and over a short period of time, finding  good quality apartments became a problem. As units came online they were almost immediately occupied, which drove up rents. The low competition made developers less keen on delivering high-quality products.

“In the last couple of years, products that came to the market were terrible,” says Al Baker. Now with the market correction and a surge of new units, experts believe that quality will improve. The financial crisis is also creating more competition in the market and encouraging developers and landlords to improve quality to attract more buyers.

Asteco’s first quarter report suggests there will be a ‘flight to quality.’ Consequently, as better developments come onto the market in the next few months, lower quality developments will be hurt most.

Liquidity flows in and out again

In the last few years, the share of real estate sector credit as a percentage of total banking sector credit has increased considerably, rising from 4.3 percent in 2003 to more than 13 percent in the first six months of 2008, according to a Global Investment House report.

Even though the banking sector in oil and gas rich Qatar has not been severely affected, loans and mortgages have become hard to obtain. Banks have adopted tighter lending policies, making fewer applicants eligible for loans, and consequently decreasing demand in the real estate market as buyers become more scarce.

Many projects have been put on hold as developers are having trouble obtaining financing for their projects, according to a real estate executive who asked not be named.

“Some banks stopped lending even if [the developer] started building already,” the executive says. At the moment, credit is becoming easier to obtain.

“Lending is a problem, but we are seeing a reverse” says Al Baker. But the share of credit for real estate growth is expected to decelerate, since banks will still adopt a more conservative lending policy in the uncertain market situation.

Companies in the real estate market

This year will be one of the most challenging for real estate companies as they deal with a lack of financing, investors’ decreasing confidence and the cooling property market. After companies watched their stock value plunge since mid-2008, it seems values are beginning to rebound. For example, the price of Barwa Real Estate Company stock rose by some 58 percent in the last 3 months. Ezdan Real Estate Company stock also rose by 69 percent in the same period.

Even though the financial situation of the Qatari companies is considered better than their counterparts in Dubai, there are signs of consolidation in the market. There may be big mergers on the horizon.

“It is a good time to do it” says Oayda. “It is a cost-saving exercise, working as a stronger team.”

In January, the government ordered a merger between Barwa Real Estate and Qatar Real Estate Investments Company (Alaqaria). The companies appointed financial advisors in order to meet the requirements for the merger, which is supposed to take place by the end of the year. Ezdan Real Estate Company also said in March that it is considering a merger with the Group of International Housing Company.

“Some are listed and haven’t really explored or touched upon the issue of the value of shareholders in some of these mergers,” says a market analyst concerned about the fact that shareholders’ interests do not seem to be the main driver behind the merger. The analyst addes that it is unknown “at what sort of ratio does the merger occur, and what sort of effect does it have on the shareholders.” The analyst asked not to be named because he is not authorized to speak to the media.

A delayed IPO

In August last year, Mazaya Qatar announced plans to raise $137 million in an initial public offering (IPO). The company’s license, which was issued in March 2008, dictates that the IPO has to be launched within two years. The exact date of the IPO was not declared, but since the announcement was made, the move is still on hold.

“Because the crisis took place, it was wise to postpone” says Al Baker. However, it is not the company who decides when to go public, but the Qatar Financial Centre Authority (QFCA), which is responsible for regulating the market. Mazaya Qatar was in queue after Vodafone. With the Vodafone IPO taking place in April — one of the largest IPOs in Qatar — it is Mazaya’s turn next.

Even though the final decision lays with Qatar’s financial authority, Mazaya would not launch the IPO blindly according to the authority’s decision. Both would collaborate in order to identify the appropriate time for the company to go public.

“It is true that we [only] have two years, but it is not the appropriate time,” says Al Baker. “The issue will be addressed when the market is appropriate.”

Government support

What triggered the massive growth in the Qatari real estate sector in the first place was large government expenditure made possible by high oil and gas prices. Even though prices have decreased, Qatar is still expecting huge revenues because of the increased exports of liquefied natural gas (LNG), of which Qatar is the world’s largest exporter. In April, the government approved a budget of $25 billion for the fiscal year 2009-2010, slightly lower than last year’s budget, but still considered healthy under current conditions.

“The budget illustrates Qatar’s keenness to achieve the targets set in the 2030 National Vision to support economic and social development,” said Qatari Economy and Finance Minister Yousuf Kama, according to the Qatar New Agency.

The plan aims to sustainably transform Qatar based on the pillars of social, economic, environmental and human development. It calls for huge government investments, with the construction sector expected to grow 17 percent in 2009, according to the organizers of Qatar International Real Estate and Investment Exhibition 2009. This is expected to encourage significant private sector investment in the Qatari real estate market.

The government is also undertaking other initiatives to support all sectors of the economy. For example, the Qatar Investment Authority (QIA) revealed plans to acquire 10 to 20 percent ownership in each of the local banks. At the end of March, the government also acquired $1.8 billion dollars worth of local banks’ investment portfolios. In late April, it announced plans to pump cash into companies outside the banking sector.

Upbeat expectations

Despite the massive investment the government is making in infrastructure and development, the market still represents a small pool of investment. The price and rent adjustments have come at a time when the Qatari market is still in the first stages of its development, and when the role of speculation in the country is minimal, keeping it safe from the panic selling that has crippled Dubai’s market.

“I think we are at the bottom of the market,” says Oayda. He adds that prices will not decline anymore, but will rather stabilize. “I think that by the end of this quarter (the second quarter) the sentiment will change, the confidence will get stronger,” Oayda says.

On the other hand, Al Baker is uncertain about the short term.

“I am not sure if we hit the bottom or not, there might be… room for the market to go down,” he says.

As for the long term, Qatar seems to be a promising market, with the clear sense of direction in its development through the Qatar 2030 National Vision, and the backing of a deep-pocketed government to help sustain and increase the country’s growth. Consequently, Doha is expected to still emerge as an attractive destination for expatriates to work, live, and invest, which will contribute to the sustainability of the real estate market.