VZCZCXRO3587
RR RUEHBC RUEHDA RUEHDE RUEHKUK
DE RUEHIHL #0092/01 3101334
ZNR UUUUU ZZH
R 051334Z NOV 08
FM REO HILLAH
TO RUEHC/SECSTATE WASHDC 1123
INFO RUCNRAQ/IRAQ COLLECTIVE
RUEHIHL/REO HILLAH 1196

UNCLAS SECTION 01 OF 02 HILLAH 000092 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON SOCI IZ
SUBJECT: CONSTRUCTION BOOMING IN AL-HILLAH 
 
HILLAH 00000092  001.2 OF 002 
 
 
¶1.  Summary:  Construction in Al-Hillah, particularly of homes, 
is booming.  Land values have doubled in the past year and in 
some cases increased even more.  Construction is fueled by 
Al-Hillah's strategic location, improved security, growing 
population and economy, and changing social customs. 
Al-Hillah's rapid growth will pose a serious challenge given the 
current lack of government enforcement of zoning and the absence 
of a master plan. 
 
Construction on the Rise in Al-Hillah 
------------------------------------- 
 
¶2.  Local businessmen and economists tell us construction, 
particularly residential construction, is one of the most robust 
sectors of the economy in Al-Hillah, the capital of Babil 
province. The Director of the Ministry of Planning's Provincial 
Statistical Office said the number of private construction 
projects, including new homes being built by contractors, is on 
track to increase by 500 percent from 2006-2008, having risen 
from 134 in 2006 to 235 in 2007 and with a projected 750 by the 
end of 2008. 
 
¶3.  Government construction permits for public projects also 
increased, albeit it at a slower pace, from 230 in 2006 to 315 
in 2007 and with a projected 350 by the end of 2008.  In 
conversations with three large local construction companies they 
said that while new home construction was doing very well, 
public sector projects were plagued by corruption, delays in 
payment, and poor planning. 
 
¶4.  Outside investors want to get in on Al-Hillah's housing 
market.  The Talia company, a construction firm with branches in 
London, Baghdad and Erbil, recently met with the Governor to 
discuss a proposal to build a residential complex with 2000 
apartments in Al-Hillah while a Lebanese firm is looking to 
develop 500 housing units. 
 
Land Values Increasing Dramatically 
----------------------------------- 
 
¶5.  Dr. Mejbel Rafia Merjan, Dean of the Economic Department of 
University of Babil, estimated that in the last two years land 
prices doubled in Al-Hillah.  While the greatest dollar increase 
was for high-value city-center property, the greatest percentage 
increase came from agricultural land on the city's edge being 
used for residential construction -- in some cases multiplying 
by 400-500 percent over the past two years. 
 
¶6.  Alaa Harba, the Chairman of the Babil Investment Commission, 
noted that raw land values have increased more rapidly than the 
cost of land with homes.  Part of the difference can be 
attributed to the fact that many buyers purchase old houses and 
immediately tear them down to build more modern homes.  Home 
prices range from USD 50,000 for a basic two bedroom, 
one-bathroom home outside of town to USD 100,000 for a similar 
home within the city center.  Larger homes, especially new ones 
within the city center, can cost up to USD 400,000. 
Construction costs generally fall between USD 400-USD 500 per 
square meter. 
 
Location and More Fuels Construction 
------------------------------------ 
 
¶7.  Al-Hillah's construction boom has been fueled by its 
location, growing population, improved security, more and higher 
paying jobs, lack of other investment opportunities and changing 
social customs. Al-Hillah's location in the heart of an 
agricultural region between Baghdad and Basra make it a natural 
spot for growth.  With a birth rate of 4.7 percent, the 700,000 
population needs almost 6,000 new housing units a year even 
without newcomers. 
 
¶8.  But newcomers are coming to Al-Hillah because it is seen as 
safe:  improved security has made the city a safe haven for 
Shias fleeing Baghdad as well as a magnet for rural inhabitants 
hungry for an urban lifestyle after years of instability.  While 
the unemployment rate remains murky, there is general agreement 
that employment rate and salaries are rising.  Local sources 
note that the number of laborers looking for day jobs has shrunk 
noticeably. 
 
¶9.  For those with extra funds available, land is the easiest 
and safest investment.  Anyone with the money can purchase 
property.  More significantly land values, unlike the interest 
on bank accounts, surpasses the inflation rate. 
 
¶10.  Changing social customs also contribute to the rise in 
residential construction.  Young married couples, who in the 
past often lived in the homes of one of their parents (usually 
the husband's), are now more likely to move into their own homes 
earlier, particularly when the couple both have jobs.  Because 
it can be difficult to obtain bank loans, and the price of homes 
has outpaced the rise in incomes, workers will often pool their 
 
HILLAH 00000092  002.2 OF 002 
 
 
salaries and take turns using the common fund to make down 
payments on land and build homes in stages. 
 
Uncontrolled Urban Sprawl Could be Problem 
------------------------------------------ 
 
¶11.  The PC recently rejected a draft master plan for Al-Hillah. 
 PC Planning Committee Chairperson Qusae Nadi Ali Hummadi told 
us the plan was filled with errors and planners hadn't engaged 
stakeholders in its development.  Qusae said that shortly after 
the PC passed a resolution rejecting the plan they were told by 
the Ministry of Municipalities that the plan would be used and 
that the PC lacked authority to reject it.  Qusae said the PC 
now plans to file a lawsuit challenging the plan, but admitted 
that the situation created a planning vacuum that may be 
difficult to fill. 
 
¶12.  Qusae said that while general zoning regulations existed 
they were largely ignored with increasing number of homes being 
built on non-residential zoned land.  The government's inability 
to enforce property laws is highlighted by the increasing number 
of squatters who build substantial homes on government property. 
 About a year ago a PC member entered a neighborhood of 
squatters and, with appropriate security in place, began loudly 
haranguing the homeowners for illegally building on government 
property.  The squatters vociferously objected to his presence 
and went so far as to file a complaint with the governor's 
office about his behavior.  The squatters, and their homes, are 
still there. 
 
¶13.  Security improvements have also had unintended consequences 
on urban development patterns.  Parking is often not allowed in 
the city commercial center in front of stores.  In response, new 
commercial districts have sprung up next to the highways on the 
outskirts of town, where drivers can park in front of stores, 
and some large residential lots have evolved into mini malls. 
 
Lack of Credit Slows Construction Somewhat 
------------------------------------------ 
 
¶14.  Loans from private banks to buy property or build homes are 
not easy to obtain.  The government real estate bank offers low 
interest home construction loans but the process is not quick -- 
an existing back-log of close to 1,000 loans means months before 
applications are considered -- and loans are slowly doled out in 
thirds after each stage of work is completed.  Three large local 
construction companies told us that while home building was on 
the rise, the difficulty in obtaining bank loans was a major 
impediment for builders and would-be home owners.  And in a 
recent survey of local construction businesses virtually all 
pointed to lack of credit as a serious problem. 
 
 
¶15.  Comment:  Construction, especially residential, is giving 
Al-Hillah's economy a short-term boost.  Still, rapid growth 
combined with a lack of government enforcement of zoning and the 
absence of a master plan will likely pose a serious long-term 
challenge for Al-Hillah. 
HILLAS