VZCZCXYZ0000
RR RUEHWEB

DE RUEHAM #2316/01 2181026
ZNR UUUUU ZZH
R 051026Z AUG 08
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 3262
INFO RUEHGB/AMEMBASSY BAGHDAD 6035
RUEHLB/AMEMBASSY BEIRUT 2885
RUEHEG/AMEMBASSY CAIRO 3739
RUEHDM/AMEMBASSY DAMASCUS 3939
RUEHRH/AMEMBASSY RIYADH 1991
RUEHTV/AMEMBASSY TEL AVIV 1276
RUEHJM/AMCONSUL JERUSALEM 5111
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS AMMAN 002316 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA 
 
E.O. 12958: N/A 
TAGS: EINV ECON PGOV SOCI JO
SUBJECT: KING'S HOUSING INITIATIVE FOR LOW-INCOME CITIZENS ENHANCED 
BY $250 MILLION INVESTMENT FROM OPIC 
 
REF: Amman 1103 
 
¶1. (U) Summary: King Abdullah dubbed 2008 the "Year of Housing" for 
Jordan, and has launched a housing initiative with the goal of 
building 20,000 units per year.  The initiative will include 
government-provided land and infrastructure, privately-constructed 
units, and bank-provided mortgages targeted at low-income 
Jordanians.  The program is designed to help meet growing housing 
demand and rising prices.  256 participants have been pre-qualified 
for the program, and the government hopes to approve up to 1,000 
before the end of the year.  In support of the initiative, Overseas 
Private Investment Corporation President and CEO Robert Mosbacher, 
Jr. signed on July 29 a memorandum of understanding lending $250 
million to three Jordanian banks so that they can offer extended 
mortgage terms and lower interest rates to qualified, low-income 
residents unable to obtain conventional mortgages.  End Summary. 
 
"Decent Housing for Decent Living" 
---------------------------------- 
 
¶2. (U) During his December 2007 speech to open parliament, King 
Abdullah announced that 2008 would be the "Year of Housing."  He 
subsequently launched the "Decent Housing for Decent Living" 
initiative which seeks to build 120,000 housing units across Jordan 
at a rate of 20,000 per year.  The units are designed to be 
affordable for low-income citizens, civil servants, Jordanian Armed 
Forces personnel, and civil servant and military retirees.  The 
initiative functions as a public-private partnership with roles for 
the government, developers, and banks. 
 
¶3. (U) The housing initiative has also been mentioned frequently by 
the King and by Prime Minister Nader al-Dahabi in reaction to 
complaints about rising costs of living.  Prices have risen an 
average of 13.3% in the first six months of 2008 and are 16.6% 
higher than June 2007.  The Consumer Price Average (CPA) estimates 
that 26% of household expenditures are for housing-related expenses 
including rent, repairs, home energy use, and furniture.  In the 
past 12 months, these expenditures have experienced 17.4% inflation, 
with most of the increase coming from 70% increases in home energy 
use costs; less than 2% has come from rent increases.  Despite 
rising costs, PM Dahabi estimated that Jordan needs an additional 
45,000 housing units annually to meet growing demand.  He further 
estimated that 66% of the housing is needed by Jordanians earning 
less than $425 per month, who will be the target of the housing 
initiative. 
 
Thousands Respond to Housing Initiative 
--------------------------------------- 
 
¶4. (U) While it continues to determine the number of housing units 
needed, the GOJ has already begun to identify beneficiaries. 
Minister of Public Works and Housing Sahel Majali noted that tens of 
thousands of families have responded to the 200,000 applications 
distributed in the spring (reftel).  During a July 29 press 
conference with OPIC President and CEO Mosbacher, Majali reported 
that 256 families have been notified of the approval of their 
mortgage applications and will soon receive housing units being 
built in Zarqa.  He estimated that an additional 1,000 mortgages 
will be made before the end of the year with 700 beneficiaries being 
announced shortly for housing units in Amman.  Majali also explained 
that the mortgages can be used to buy existing homes or one of the 
new homes being built as part of the government's initiative. 
 
¶5. (U) Concurrent with approving mortgage applications, the 
government has begun to contract with real estate developers to 
implement the initiative, and will provide the developers with plots 
of land and infrastructure free of charge in order to keep the final 
prices low.  Under the plan, investment projects will be set up to 
serve residential areas.  The projects will be managed by a special 
commission affiliated with the Housing and Urban Development 
Corporation (HUDC) and revenues will go to finance future housing 
plans.  HUDC Director General Sana Hikmat Mihyar said private sector 
developers will be responsible for building the housing units, 
ranging from 1,000 to 1,700 square feet, and ensuring that they are 
in compliance with all of Jordan's building codes.  The project 
blueprints feature parks as well as entertainment and medical 
facilities.  The total cost for the entire program was estimated by 
the press at $7 billion. 
 
Banking Sector with U.S. Assistance Actively Engaged 
 
--------------------------------------------- ------- 
 
¶6. (U) Mihyar explained that the government is also working with six 
banks to provide mortgages for the targeted residents.  Under the 
proposed plan, no down payment is required, the monthly payment is 
structured to be less than one-third of the low-income beneficiary's 
salary, and mortgage payments will be automatically deducted from 
participants' accounts.  Beneficiaries will not be able to sell or 
lease the units.  Mihyar estimated that the mortgages would be 
variable rate 9% loans.  Minister Majali told the press that the 
government is in discussion with Jordan's Islamic banks to reach an 
agreement to provide Islamic loans to program participants. 
 
¶7. (SBU) Three banks - Arab Bank, the Housing Bank for Trade and 
Finance, and Cairo Amman Bank - will offer fixed rate, 25-year 
mortgages at a rate less than 9%, made possible by $250 million in 
OPIC financing.  Mosbacher and the three banks signed on July 29 an 
MOU that will increase the amount of capital available for 
mortgages.  Note:  Banks in Jordan are capped at keeping no more 
than 20% of their capital in mortgages.  End note.  Targeted 
recipients of the OPIC-facilitated funds are otherwise qualified 
applicants whose monthly income is less than the $425 required for 
the GOJ program.  In separate meetings with Labor Minister Bassem 
Salem and Social Security Corporation (SSC) Director General Omar 
Razzaz, Mosbacher discussed OPIC investment in a private equity fund 
designed to address the housing needs of Jordanian families whose 
incomes exceed the cap for the GOJ initiative, but are insufficient 
to satisfy commercial requirements. 
 
¶8. (SBU) Minister of Labor Salem - who serves as the Chairman of the 
SSC Board - endorsed the various programs, but expressed to 
Mosbacher his concerns that the GOJ initiative has the potential to 
distort Jordan's land and housing market.  He said he would have 
preferred a system that subsidized the poor directly rather than 
subsidizing the land which could hurt the private sector land 
owners.  Mosbacher countered that OPIC has found that if the poor 
receive too many incentives or subsidies, they have no program 
buy-in leading to initiative failure. 
 
¶9. (U) The July 29 signing of the memorandum of understanding 
between OPIC and the three banks generated major and positive media 
coverage by local and regional outlets in print, broadcast and 
online channels.  Straightforward in tone, the coverage focused on 
the competitiveness of the new mortgage facility for consumers as 
well as OPIC's objectives of establishing a "best practices" 
approach to home mortgage lending. 
 
¶10. (U) OPIC has cleared this message. 
 
Visit Amman's Classified Website at 
http://www.state.sgov.gov/p/nea/amman 
 
RUBINSTEIN