The global pandemic has caused devastation in all walks of human life. Regardless of how prosperous the country is, the ill effects of Covid 19 were felt. There was no person whose life did not change because of the dreadful virus. No less than 183 countries experienced the impact of the pandemic. Like all countries, Qatar, too, faced its own share of distress due to the pandemic. In a country with a population of 2.8 million, approximately a million people were infected with Covid 19. Qatar reported its first Covid-19 case on February 29, 2020, and the government declared a lockdown with strict social distancing norms.
Most of the real estate projects were either delayed or abandoned during the pandemic. Another factor for the negative impact was the loss of jobs, which were rampant. New and completed house properties remained unsold. This sluggish trend for lower demands for houses had an overall downward effect on the country’s real estate industry as a whole. This continued for almost two years before Qatar started lifting its Covid-19 related restrictions in October 2021.
Due to a decline in the demand for both residential and commercial properties because of the pandemic, the income from rentals went down for property owners. Also, more and more properties became unoccupied due to loss of jobs, pay cuts, and lack of affordability on the part of the potential buyers. This hampered cash liquidity and the servicing of loans on mortgaged properties became a challenge.
The continuing pandemic conditions resulted in hampered movements of men and materials in Qatar. This resulted in projects missing their deadline of completion. The disrupted workflow put a strain on the real estate developers for their funds, and the cost of construction rose exponentially. Many projects had to be abandoned. The projects which were at their early stage of construction had a lesser impact, as they still had the flexibility to change plans and reconstruct. But this was a real trying situation for the projects which were nearing completion.
The lending institutions also found it difficult to keep funding the ongoing projects, which had overrun their timelines. Also, a decline in demand for new properties slowed down the entire real estate sector and therefore the requirement of fresh funding took a hit as well.
As is evident, the short-term demands for real estate in the residential, as well as the commercial sector, took a nosedive due to a combination of various factors.
COVID, the speed breaker
In 2019, Qatar had almost 3.31 lac residential units. Going by the forecast, another 18,000 units were supposed to have been added to the count, taking the total population of residential houses to approximately 3.50 lac. The pandemic played spoilsport and the growth got stalled for more than two years.
Likewise, the country had commercial spaces of approximately 5 million square meters. Out of that, 50% was of Category – A standard. The demand was moving north with the economy thriving. The government policy of encouraging the private sector and allowing foreign direct investment had further helped in the growing demand for office space.
But with the onset of the Covid-19 pandemic in early 2020, the offices were closed, and work from home started. This directly impacted the demand for commercial properties in Qatar.
Qatar lifted its Covid-19 restrictions on October 3, 2021. As life started becoming normal again, with the workforce returning to their respective places of work, the economy too is expected to regain the momentum of growth. The economic activity and trends in the real estate business have a directly proportional relationship between them. Hence, gradual improvement in the economic activities in Qatar leads to the hope of the resurrection of fortunes for the real estate industry in the country.
It is forecasted and believed by the industry experts that trends in the real estate industry in Qatar will start looking better gradually, and 2022 may witness reverse trends. At the same time, there has been a realization that the new normal ecosystem has changed the expectation of the people.
In the post-Covid-19 era, there has been an incremental trend in remote working and the development of e-commerce. This trend has given rise to hybrid lifestyles, necessitating the real estate industry to recalibrate its game plans. As per a survey conducted by PwC in February 2021, only 7 percent of people prefer to have a full-time office. As things stand now, one may conclude that commercial properties and retail stores may continue to see a lower footfall in the conceivable future.
The recovery plan
To put the real estate industry back on track, the Qatar government has identified some growth engines to support the process of recovery. There are a few prime drivers of growth that have been identified by the Qatar government to correct the downward trend of the real estate sector.
Tourism is to lead the demand generation of real estate in the post-pandemic world. The travel and hospitality segment has always been a strong contributor to the economy of Qatar. In the year 2018, around 2.18 million people visited Qatar. The country boasts approximately of 27,000 accommodations. There were 107 projects which were under construction, which would have added another 21,000 rooms.
In order to boost travel and tourism, the national carrier of Qatar, Qatar Airways, offered incentives to tourists. With the advent of the pandemic, airports closed down, and the arrival of cruise liners into the port dried up. This impacted the revenue of airlines and cruise companies. As the hotel and hospitality industry is entwined with the logistics sector, the occupancy rates at hotels have come down drastically. Offices started the practice of work from home and teleconferences and video calls, hence the culture of business meetings started weaning off. The cost of booking hotels for business meetings became an avoidable expense.
The above trend had a negative fallout on the employees engaged in the tourism sector in Qatar. Loss of jobs and salary cuts became a rampant practice. To support this fledgling sector, the State of Qatar has adopted some corrective measures. The government has decided to infuse 75 billion Qatari rials to support the hotel and hospitality sector. Further, the government is encouraging banks to offer loans at low interest for businesses in this sector.
The government has also allowed a short-time moratorium on loans that have been shelved due to the prevailing situation.
The World Cup promise
The quadrennial showpiece tournament of the most popular team sports in the world, soccer, is going to be held in Qatar in 2022. The World Cup will be played in Qatar from November 21 to December 18, 2022. In this tournament, 32 teams from all over the world will be taking part. This is the first one to be played in the Arab world.
The FIFA World Cup 2022 is an integral part of the economic plan of Qatar. The tournament features in Qatar National Vision (QNV) 2030. The World Cup is going to ensure an inflow of tourists from all over the world. The influx of people would mean a boost for the fledgling hospitality sector. Qatar as a country would be showcased as an attractive destination for investment on the world stage. The World Cup 2022 is targeted as a catalyst of economic growth for Qatar even beyond 2022.
Another factor that will lead to the recovery is the upcoming PropTech firms. The word PropTech is an acronym combining “property” and “technology”. As the name suggests, the concept involves a marriage between technical innovations and real estate, or property.
The introduction of technology in the real estate industry can be a boon for Qatar. The property technology may act as a propeller of growth and sustainability in the real estate industry in Qatar.
It seems that the thought process is heading in the right direction with Barwa Real Estate Group entering into agreeing with Huawei. As a part of the agreement, Huawei shall provide for integrated Information Communication Technology systems for upcoming real estate projects. If the advantages of PropTech can be gained by Qatar, this will have a far-reaching positive impact on the economy of the nation.
Notwithstanding the effect of the pandemic that cast its spell over the real estate industry of Qatar, recovery is just around the corner. The rise in the price of oil and the resumption of economic activities in the country is working towards repairing the damages incurred. Additional impetus has been given by the FIFA World Cup 2022. Qatar’s preparations for the World Cup have already started getting global acclamation in terms of its commitment to innovation and sustainability.
Transitioning to a greener and more sustainable way of doing business and living daily lives is also likely to drive the real estate market to newer heights. Though the real estate industry suffers from the syndrome of resistance to innovation, it will not be out of place to mention that the growth of the real estate industry of Qatar will be laced with the presence of environmental, social, and governance (ESG) criteria. Qatar as a nation is taking a conscious decision to reduce carbon emissions. The three recent mega projects, namely Doha Metro, Lusail City, and Msheireb Downtown will require massive construction and will spark secondary demand. With a sustainable effort on the ESG front, the real estate industry of Qatar will surely move towards a modern, environmentally conscious, and progressive market scenario.