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Housing Sector in East Jerusalem, a

Market Opportunity Analysis March 19th 2015

In the Framework of

Submitted to

Real Estate and Housing Sector

Opportunity Assessment

Al-Quds Economic Forum and the Office of the Quartet

East Jerusalem Market Assessment

Funded by

3

Table of Content

Real Estate and Housing Sector Opportunity Analysis - Al-Quds Economic Forum and the Office of

the Quartet.

Section Overview Page

1.6 Obstacle to Housing Development 34

1.6.1 Planning 35

1.6.2 Zoning 35

1.6.3 Infrastructure 35

1.6.4 Land Parcel 36

1.6.5 Land Registration 36

1.6.6 Access to Finance 37

2 Stakeholder Analysis 38

2.1 Stakeholder in the Private Sector 40

2.2 Stakeholders in the Governmental and Non

Governmental Sector

57

3 Value Chain Scheme of the Housing Sector in East

Jerusalem

75

4 Case Studies 78

5 Conclusions and Recommendation 87

6 Annexes 91

Section Overview Page

1 Market Analysis on the Housing Sector in East

Jerusalem

4

1.1 Demographics 5

1.1.1 Population 6

1.1.2 Population Movements 7

1.2 Characteristics of the Current Housing Units 9

1.2.1 Housing Stock 10

1.2.2 Housing Density 11

1.23 Housing Size 12

1.3 Affordability 14

1.3.1 Housing Cost and Selling Price 15

1.3.2 Ownership 22

1.3.3 Affordability 22

1.4 Housing Supply and Demand 25

1.4.1 Construction 26

1.4.2 Housing Supply and Demand Market

Analysis

28

1.5 Profit Potential in the Housing Sector 30

Market Analysis on the Housing

Sector in East Jerusalem

Demographics


the Quartet.

6

Population

According to the Palestinian Bureau of Statistics (PCBS), the total population of

Arabs in Jerusalem governorate was estimated at 404,165 persons in 2013, of

whom 251,043 (62%) were in Area J1 and 153,122 were in Area J2.

This contradicts the Jerusalem Institute for Israeli Studies (JIIS), which estimates

the Arab population in Jerusalem at 300,200 persons. This can be seen in the chart

below on the right. It is worth to mention that an accurate figure about the total

population is nearly impossible to find due to the dual lifestyle of Jerusalemites

(East J. & WB).

The table below shows the neighborhood compounding East Jerusalem taking

into account locality J1 and J2.

J1 J2

• Beit Hanina

• Sheikh Jarrah

• Shu’fat Refugees Camp

• Wadi Al – Joz

• Shu’fat

• Bab Al-Sahira

• Al’ Isawiya

• Assuwwana

• Jerusalem “Al - Quds”

• At –Tur

• Ash-Shayyah

• Jabal Al – Mukabbir

• Ras Al-Amud

• As–Sawahira Al–

Gharbiya

• Silwan

• Beit Safafa

• Ath–Thuri

• Sharafat

• Sur Bahir

• Kufr A’qab

• Um Tuba

• Rafat

• Mikhmas

• Qalandiya Camp

• Qalandiya

• Beit Duqqu

• Jana

• Al Judaeira

• Ar Ram & Dahiyat Al

Bareed

• Beit’Anan

• Al Jib

• Bir Nabala

• Beit Ijza

• Al Qubeiba

• Lahim

• Biddu

• An Nabi Samwil

• Hizma

• Beit Hanina Al Balad

• Kharayib Umm al

Qatanna

• Beit Surik

• Beit Iksa

• Anata

• Al Ka’abina

• A Za’ayyem

• Al ‘Eizariya

• Abu Dis

• Arab Al Jahalin

• As Sawahira ash

Sharqiya

• Ash Sheik Sa’d

• Jaba’

Population

“Palestinians in East Jerusalem represent 9.1% of all Palestinians living in the occupied Palestinian territories. 64%

of the city’s Palestinian population is under the age of 30. Jerusalem has an annual growth rate of 1.84% which is

well below the West Bank rate of 2.66% per annum”

The population in Jerusalem governorate constitutes 9.1% of the total population

of Palestine and 14.9% of the population in the West Bank. Whereas, the

percentage of persons aged below 15 years in 2013 was 35.2% of the total

population, while those aged 60 years and above made up 6.7% of the total

population in Jerusalem governorate.

The reported compound annual growth rate of Arabs residing in Jerusalem was

3% from 2000 until 2012, against the 1% of Jews. The population density was

1,182 (capita/Km2) by the end of 2013.


the Quartet.

CAGR: 3%

Figure 1

Table 1: Palestinian Neighborhood in J1 and J2

7

Population Movements

“Population Movements are mainly due to the availability of

more affordable houses either for rent or sale on one hand,

and the restriction to build within East Jerusalem on the other”


The population movements to outside of the municipal borders, represents one of

the major key demand drivers. These migration movements are presented since

the 80s, and are mainly due to the Israeli policies. In addition to this, there are two

other major factors boosting immigration to Ar Ram, Hizma and Abu Dis (which

represent principal final destinations of local movements):

• Lower Property Prices

• Restriction to build within East Jerusalem.

Nevertheless, since the second half of the 90s this flow reversed as result of the

enactment of the “Centre of Life Policy”, whereby Jerusalemites were required to

prove that they live within the borders of Jerusalem Municipality in order to

preserve their residency permits. This trend accelerated with the construction of

Separation Wall in 2003 as Jerusalemites feared the loss of their ID and

consequently, their access to the city.

This event not only impacted the actual population growth within municipal

borders but derived into a trend of unpermitted house construction. As

consequence, the Israeli Authorities developed and deployed harder restrictions,

tighter control mechanisms and stronger punitive measures.

The map on the right shows the internal migration from 2010-2012, represented

by persons by neighborhood. JIIS migration data shows a clear movement from

the central neighborhoods to the periphery, with neighborhoods beyond the wall

have the highest net migration. These movements are explained in depth on the

next slide.


the Quartet.

Source: IPCC 2013, Data From JIIS, Jerusalem Statistical Yearbooks 2012, 2013, Table V/15

Figure 2: Population Movement

8


“Population movement beyond the wall is encouraged by the accessibility to affordable houses within Municipal

boundaries while migration beyond the city boundaries is a consequence of the dual lifestyle”

Migration beyond the wall and city are the two major population movements

worth considering when discussing Real Estate and Housing.

On the West Bank side of the Separation Wall, little to no enforcement of

planning laws by the Municipality has enabled a proliferation of unpermitted

construction and with it attracted a large migration of families seeking an

affordable house within Municipal Boundaries.

The total population beyond the wall remains inaccurate to date. Based on

OCHA’s report (East Jerusalem Key Humanitarian Concerns, update Aug 2014),

Tens of thousands of Palestinian residents of East Jerusalem are physically

separated from the urban center by the Barrier. They must cross crowded

checkpoints to access health, education and other services to which they are

entitled as residents of Jerusalem.

More specifically, in the OCHA’s report (East Jerusalem Key Humanitarian

Concerns, update Dec 2012), it was estimated a total population of 55,000.

Moreover, based on data published by the JIIS, these population movements

represent 30% inter and intra city migration from 2010 to 2012.

As stated by NGOs working in policy research and urban planning, zoning and

development, the growth in these neighborhoods is not sustainable. Moreover,

there is a latent threat since there is a possibility that Israel Government will hand

over the control. In this scenario, residents will be at risk of losing residency

permits. This could trigger the return of thousands of households back inside the

city wall’s limits.

Households are moving to localities beyond the Jerusalem Governorate. This

migration is a direct result of the dual lifestyle that most Jerusalemites live. The

main destination is Ramallah and in the near future, Rawabi will probably also be

considered.

Since these movements are not official, they are not reported by the ICBS or the

PCBS. Hence, they cannot be accurately estimated. One of the main reasons why

it is hard to estimate the size of these migration flows is that Jerusalemites move

into Ramallah while registering at a family or household alibi in Jerusalem.

The Government of Israel, through the ministry of Interior, monitors households

and if it was discovered that a family lives outside the city limits, their residency

will be revoked.

Over the years, this kind of migration has increased due to poor living conditions

(high densities and lack of public services) inside the neighborhoods beyond the

wall. Nevertheless, poorer families that cannot respond to the increase of rents in

Ramallah are forced to move back to neighborhoods within city limits. If housing

rents and selling prices in Ramallah continue to rise/fall, these trends are expected

to be reinforced.

In conclusion, it can be said that if it were not for the risk of residency revocation,

the extent of migration would be greater.


the Quartet.

Population Movement beyond the Wall

Population Movement beyond the City Boundaries

Characteristics of the Current

Housing Units


the Quartet.

10

15,105 15,733 16,461

22,101 21,990 23,750

9,123 9,835 9,932

Housing Units 2011 Housing Units 2012 Housing Units 2013

Figure 3: Dwelling in East Jerusalem

Northern Neighbourhoods Central Neighbourhoods Southern Neighbourhoods

Housing Stock

“Dwelling in Arab neighborhoods increased by 4.2 percentage points above the growth observed in Jewish

neighborhoods in the period between 2012 and 2013”

Housing Stock

As stated in the “JIIS’s fact and trends: 2014”, in the end 2013, Jerusalem had a

total of 208,770 dwellings which represents a slight increase of 2.2% since 2012.

Out of them:

• 158,620 apartments (76%) are located in Jewish neighborhoods (1.2% increase

since 2012)

• 50,143 apartments (24%) are in Arab neighborhoods (5.4% increase since 2012

and with a compound Annual Growth rate of 4% between 2001-2013).


the Quartet.

Area J1 Dwelling units

2011 2012 2013

Northern Neighborhoods 15,105 15,733 16,461

Beit Hanina 6,193 6,762 7,192

Shu'afat 3,744 3,751 3,829

Kafr'Aqab, Atarot 3,882 3,885 4,044

New Anata 1,286 1,335 1,396

Central Neighborhoods 22,101 21,990 23,750

Old City (Jews Quarter

Not Incl.) 5,266 5,321 5,578

Issawiyya 1,790 1,800 1,840

At-Tur + As Sawana 4,075 3,676 4,231

Wadi al Joz + Sheikh

Jarrah 3,014 2,039 2,050

Abu Tur 1,929 1,929 1,946

Silwan 2,779 2,832 2,887

Ras al Amud + Wadi

Qadum 3,248 3,413 4,245

Bab A-Zahara,

Masudiya NA 980 973

Southern Neighborhoods 9,123 9,835 9,932

Jabal Mukabber + As

Sawahra 4,257 4,072 3,903

Sur Bahir + Umm

Tuba 2,463 3,294 3,390

Beit Safafa + Sharafat 2,403 2,469 2,639

Total 46,329 47, 558 50,143 Source: JIIS, Jerusalem Statistical Yearbooks 2012, 2013, 2014

CAGR: 3.7%

CAGR: 4.4%

CAGR: 4.3%

While the Arab population

represents 37% of Jerusalem

inhabitants, the proportion of

households is considerably lower

(24%. This is mainly due to the fact

that Arab households typically

include a greater number of persons

(JIIS, 2014).

The Northern and Southern

neighborhoods are experiencing a

faster growth caused by the

increasing demand of areas in the

outskirts of East Jerusalem which

have better public services,

infrastructure, and living conditions.

The neighborhoods that

experimented a greater growth

between 2012 -2013 are: At-Tur +

As Sawana (15%), and Ras al Amud

and Wadi Qadum (24%).

It is worth highlighting that the

neighborhood of Beit Hanina is the

largest with 7,000 housing units.

Table 2: Dwelling in J1 2011-2013

11

Housing Density

“In 2013, the average number of rooms per household was 3.7. 54.7% of households exceeded five members per

household while 25.1% consisted of 7 or more members”

Housing Density

According to JIISs’s “Jerusalem: trends and facts 2014”, there were 53,300 Arab

household in 2012 with an average size of 5.8 people. It is noteworthy that the

JIIS does not take into consideration that some of the growth is likely a result of

the increased usage of “alibi households”, and therefore indicative of outward

migration from the city.

Furthermore, 25% of Jewish households named one person, compared to only 4%

of Arab households. Households of six or more persons constituted 52% of the

total number of Arab households compared to 16% of the total number of Jewish

households. This can be seen in the table on the right.

Diving into the situational analysis of dwelling in East Jerusalem, the PCBS

reports that in 2013, the average number of rooms was 3.7. 54.7% of households

exceeded five members while 25.1% consisted of seven members or more.

On average, the housing density ranges from 1.5 to 1.9 persons per room

(depending on the source (PCBS or ICBS)) which represents a higher number

than all Palestinian cities in Israel and Palestine.


the Quartet.

Source: JIIS, Jerusalem: Trends and Facts, 2014

Figure 4

12

Apartment Size

“Neighborhoods with the largest average apartment

size are Beit Hanina, Shuafat and Beit Safafa”

Housing Size

Following the description of the housing market in East Jerusalem provided by

the JIIS (Fact and Trends, 2014), the average area of an apartment in Jerusalem

was 80 square meters (m2).

In neighborhoods with an Arab majority, the average is 76 m2. The smallest

average apartment size was found in the Muslim Quarter (45 m2), the Christian

Quarter (45 m2), the Armenian Quarter (61 m2) and Silwan (61 m2).

Within East Jerusalem, small apartments (60 m2 and below) are most common in

the old city (representing a percentage ranging from 71% - 100% of existing

units) followed by:

• Silwan ( in the range of 41% - 70% of existing units);

• Shuafat, Isawiyya, At-Tur, Sheik Jarrah, Wadi Al Joz, Abu Tor, Sawahira, Jabal

Mukabar, Sur Bahir, Uma Tuba, Beit Safafa and Sharafat (in the range of 21%

-40% of the existing units) and

• Beith Haninia, and Atarot (in the range of 0%-20% of existing units).

Regarding the estimation of large apartments (size 120 m2 and above) in

Jerusalem, as censored in 2012 and after deep studying of the status of housing in

East Jerusalem, it can be observed that large size apartments are most common in

Beit Hanina and Shuafat, Abu Tor, At-Tur and within Old City ranging from 6%

to 10% from the total existing housing units.

Less than 5% can be found in Atarot, Silwan , Sheik Jarrah, Sawahira, Jabal Al

Mukkaber, Sur Bahir, Bet Zafafa and Sharafat.


the Quartet.


Figure 5

13

Apartment Size


the Quartet.


“Neighborhoods with the largest average apartment size

are Beit Hanina (97 m2), Kafr 'Akb (91 m2), New Anata

(88 m2), and Beit Safafa (87 m2)”

91 97

83 88

71

80 80 75

45

61

45

61

76 77 82

85 87

20

40

60

80

100

120


Figure 6

Figure 7: Average Area of Dwelling in m2 per Neighborhood

Affordability


the Quartet.

15

Affordability

“The primary cause of high selling prices is the shortage of land available for construction. It typically ranges

from 30%-40% from the overall cost of dwelling”

Housing Cost and Selling Price

Over the last years and as result of housing shortage, apartment prices have

continuously been rising in Jerusalem.

In retrospect, the evolution of housing prices indicates that nominal prices (prices

not adjusted for changes in the Consumer Price Index (CPI)) decline from the

year 2000 to beginning of 2008. During this period, the change in the housing

price trend experienced a continuous ascent that lasted up till today.

Furthermore, it can also be observed from the evolution of prices in the past 14

years which cost of building (understood as cost of labor and materials) does not

dramatically affect the housing prices. In fact, the rise in land prices is the main

critical factor. And while this is a global phenomenon in Israel, in East Jerusalem

it plays the major role.

The results of the survey and a series of structured interviews conducted among

key real estate developers in East Jerusalem suggest that the average land cost in

US Dollar per square meter is US$ 742.5 in neighborhoods with higher demand.

It can range from

• US$ 300 – 500 per square meter in neighborhoods with low demand such as

those located along the city limits (Issawiya, A-Tur, and Ras al Amud among

others).

• US$ 500-1,000 in neighborhoods such as Beith Hanina, Shuafat, Sheik Jarrah,

Wadi Joz and Beith Safafa and Sharafat).

The cost of land is equally distributed among the available units. It typically

ranges from 30%-40% of the overall cost of dwelling. Therefore, any increase in

the value of land, it would drastically affect the selling price.

In conclusion, it can be said that the increase of cost of land is attributed to :

• Shortage of land for construction

• Private ownership of lands

• Returns of Jerusalemites, after the completion of the Separation Wall in 2006.

• Political Unrest


the Quartet.

Source: State of Nation Report, 2014 TAUB Center for Social Policy Studies in Israel

Figure 8

16

Affordability

“The second cause for high selling prices is represented in difficulties in obtaining building permits. It typically

ranges from 12% - 14% from the overall cost of dwelling”

For instance, assuming a land area of 1 dunum (1,000m2) with an average of 742 USD/m2 and a building ratio of

75%, Developers would have an available area of 750m2 and would be able to build up to 5 apartments of 150m2;

or, up to 7 apartments of 100m2; or up to 10 apartments of 76m2.

The cost of land per unit varies according to the size. Hence, for apartments of 150m2, the proportion of the cost

would be about 148,000 US Dollars; for dwelling of 100m2 would be approximately 108,000 US Dollars; and for

units of 76m2, about 75,000 US Dollars.

In addition to the above, the cost of municipality building permits is considered the second reason for high selling

prices. This fluctuates between 12% and 14% for each housing unit. The table on the left provides a detailed structure

of the building permits. It is estimated to amount to 336 USD/m2. And hence, for a 150m2 apartment, the building

permit would cost about 50,000 US Dollars; for a dwelling of 100m2 about 30,000 US Dollars and for small

apartments (76m2), it would cost about 25,000 US Dollars.

Together, the cost of land and building permits, represent up to 49%-59% of the total housing cost.

In comparison to the above, the cost of building is estimated to be about US Dollar 850 per square meter. It could

fetch up to 127,000 US Dollars for apartments of 150m2; 85,000 US Dollars for dwelling sized 100m2; and, 65,000

US Dollars for units of 76m2. It represents 30% - 45% of the total housing cost.

In conclusion, since the cost of building index experimented a stable growth in the last 14 years and it appears there

is no correlation between this and the Housing Price Index, the trigger for the increase in the housing selling price is,

logically, the cost of land. Two studies ((Zussman, 2013) and Eckstein et al. (2012)) cited by the TAUB Center for

Social Policy Studies in Israel demonstrate that the primary cause of the housing price increase is the shortage of land

for construction, rather than the impact of any other inputs; and, that commercial real estate prices have not increased

alongside residential prices, as commercial real estate has not faced similar permit constraints to residential real

estate.


the Quartet.

Source: Al Quds holding

Table 3

# Building Permits Cost Breakdown USD/m2

1 Registration 9

2 Water Fees 18

3 Water Fees and services 3

4 Sewage 11

5 Land fees for water usages 3

6 Land fees for sewage usages 8

7 General services 5

8 Antiques 4

9 Excavation 8

10 Electricity 1

11 Waste and Garbage 5

12 Concrete testing 8

13 Taxes 211

14 Roads 43

Total 336

17

Affordability

As a result of the structured interviews (combined with survey techniques) among key players of East Jerusalem housing sector, it was possible to build an assumption box (displayed above) gathering the “Key Cost Indicators” incurred by property developers.

It is worth mentioning that this calculation refers to a Non-Collective Housing Development scenario (collective development indicates groups of households built on a single site together). The Union for Jerusalem Housing Assembly suggests that collective development benefit for better cost in terms of land (400 USD/m2), and building permits (233 USD/m2).

The model adopted also suggested that developers who have built without third

parties (contractors and/or construction companies), have significant savings and

therefore, have better profit margins.


the Quartet.

Assumption Box

Building permits for non

collective development

336

Construction according to International

and Municipal Standard (USD/m2 ) 350 ILS/USD 3.8 Land Area in m2 1,000 Av. USD/m2 Land 742

Infrastructure (architectural retaining

walls, electricity, gas) - USD/m2 100

Land Purchasing taxes in

Collective Project 2% Av. Apartment Size m2 (A) 150

Eng. Supervision over

(over amount required

for implementation)

2% Building Ratio 75% Land Cost

742,000

Developing a joint building layout

plan (Collective Development) -

USD/m2

13

Land Purchasing taxes in

Non-Collective Project 5% Av. Apartment Size m2 (B) 100

Building inspector


for implementation)

2% Building Area in

m2 750

Land Cost attribute to

building area in

USD/m2

989 Project Accident Insurance USD/m2 7

Legal Fees for transferring

ownership, signing

contracts, registration

2% Av. Apartment Size m2 (C) 76

Administrative and

Financial Mgt (over

amount required for

implementation)

5% Units to Build (A) 5 land Cost over Unit A

148,400 Contingency on Cost - USD/m2 33

House Finishing (USD/m2 ) 500 Profit Margin (%) 45

Accounting and Taxes


for implementation)

3% Units to Build (B) 8 land Cost over Unit B

98,933

Adjusted Land Zoning and Increasing

building ratio - USD/m2 20

Units to Build (C) 10 land Cost over Unit C

75,189

Total Amount Required for Implementation

Aprt. 150m2 Aprt. 100m2 Aprt. 76m2

USD USD USD

Individual / Property Developers (without third

parties) 357,696 238,464 181,233

Individuals / Property Developers (with thirds parties) 400,619 267,080 204,115

Savings in Administration Cost 42,924 28,616 21,748

Table 4

Table 5

18

Affordability

“The cost price of the upcoming supply of new multi-family residential, which has an average size of 110m2, is

expected to fetch up between 260,000 – 290,000 US Dollar per unit”

• The Price Cost of an apartment in m2 can range from 2,385 USD/m2 to 2,670

USD/m2.

• The Land Cost represents the major proportion of the cost, followed by the cost

of building (Construction according to international and Municipal standards

and House Finishing). The Cost of Building Permits rank the third.

• It is worth mentioning that this assumption and calculation have been made as

an indication of market price, and thus, it can vary from one project to another.


the Quartet.

Cost Breakdown for building and transferring

housing unit to buyers

Aprt. 150m2 Aprt. 100m2 Aprt. 76m2

USD USD USD

Citizen Contribution in Purchasing the Land 148,400 98,933 75,189

Purchasing Taxes in Non-Collective Projects 7,420 4,947 3,759

Legal Fees for transferring Ownership, signing contracts,

registration a relevant authorities 2,968 1,979 1,504

Permits including architectural designs and all relevant fees

(water, sewage, roads, improvements, etc) 50,408 33,605 25,540

Infrastructure including architectural retaining walls,

electricity company, gas pipes, etc 15,000 10,000 7,600

Construction according to international standards and safety

requirements imposed by the Municipality 52,500 35,000 26,600

House Finishing 75,000 50,000 38,000

Project Accident Insurance 1,000 667 507

Contingency on Cost 5,000 3,333 2,533

Total Amount required for Implementation 357,696 238,464 181,233

Administration Cost for Implementing Company (Third Party

constructor) 42,924 28,616 21,748

Eng. Supervision 7,154 4,769 3,625

Building inspector 7,154 4,769 3,625

Administrative and Financial Mgt 17,885 11,923 9,062

Accounting and Taxes 10,731 7,154 5,437

Total Cost of Each Housing Unit 400,619 267,080 204,115

Distribution

over the Total Cost

Developers with

Third Parties

Developers with

Non-Third Parties

Citizen Contribution in Purchasing the Land 37.0% 41.5% Purchasing Taxes in Non-Collective Projects 1.9% 2.1%

Legal Fees for transferring Ownership, signing contracts, registration a

relevant authorities 0.7% 0.8%

Permits including architectural designs and all relevant fees (water,

sewage, roads, improvements, etc) 12.6% 14.1%

Infrastructure including architectural retaining walls, electricity

company, gas pipes, etc 3.7% 4.2%


requirements imposed by the Municipality 13.1% 14.7%

House Finishing 18.7% 21.0% Project Accident Insurance 0.2% 0.3%

Contingency on Cost 1.2% 1.4%

Administration Cost for Implementing Company 10.7% -

Table 6 Table 7

19

In retrospect, the trend of housing prices has had a steady growth with a CAGR of

7.3% over the past ten years. Price developments with respect to housing between

2.5-3 rooms can be considered more encouraging for property developers, given

the differential of 0.7 and 1.5 percentage points, compared to the value of

dwellings between 1.5-2 and 3-4.5 rooms respectively

As mentioned above, the housing prices began to increase in 2008 but it was not

until 2010 when an outstanding leap of 17.1% was observed over the previous

year.

The chart below provides a useful image of the increase of the dwelling price in

Thousands of US Dollar per number of rooms.

.0

100.0

200.0

300.0

400.0

500.0

600.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Average Price of Privately Owned Dwelling in Jerusalem

2003-2013 (Thousands USD)

1.5-2 Rooms 2.5-3 Rooms 3.5-4 Rooms

Affordability

“Today, the average price of privately owned dwelling in the city of Jerusalem (West and East) is US Dollar

385,940”

In subsequent years, a lower price growth was observed, and while the value of

apartments with 1.5-2 rooms is expected to decrease, the price of those with 2.5-3

rooms will increase slowly. Today, the average price of privately owned dwelling

in Jerusalem (West and East) is US Dollar 385,940.


the Quartet.

Source: JIIS, Table X/11 - Average Prices of Privately Owned Dwellings in Jerusalem , Tel Aviv - Yafo and Haifa, by Number of

Rooms, 1988-2013

CAGR:7.3%

Source: JIIS, Table X/11 - Average Prices of Privately Owned Dwellings in Jerusalem , Tel Aviv - Yafo and Haifa, by Number of

Rooms, 1988-2013

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

1.5-2 Rooms

2.5-3 Rooms

3.5-4 Rooms

$300.75 $382.14

$474.94

1.5-2 Rooms 2.5-3 Rooms 3.5-4 Rooms

Average Prices of Privately Owned Dwellings in Jerusalem

(Thousand USD), 2013

Figure 9

Figure 10

Figure 11

Annual Percentage change of Privately Owned Dwelling in

Jerusalem 2004-2013

20

Affordability

“Observing the average cost of small apartments in East

Jerusalem in comparison to the average price they are

sold at, a profit margin of 45% is roughly estimated”

Another aspect that must be considered is the large price difference that exists

between neighborhoods on either side of the Wall of Apartheid.

• Beyond the wall (such as Kafr ‘Aqab and ‘Anata have affordable prices of

between US$50-120,000).

• Within the wall, prices can be summarized into three location-based ranges:

oCentral (such as Sheikh Jarrah and Wadi Joz where average prices range

between US$450-500 thousand)

oNorthern (such as Beit Hanina and Shu’fat and the price ranges between

US$300-450 thousand)

o Southern (such as Jabal Mukabber and Sur Bahir with a price range between

US$200- 300 thousand)

An observation made over the prices in the localities beyond the wall and within

Jerusalem limits was that the housing units can cost 90% cheaper. This is possible

due to the following: A lower land Cost; A high density construction; and,

Municipal license to build (permits) is not required.

The chart on the right shows the results of the analysis of data obtained from the

data collection process. Based on average apartment size per neighborhood, the

average selling price is around 260,000 US Dollar while the average cost is

180,000 US Dollar. This indicates a profit margin of 45%. These figures are

supported by IPCC estimates, 2013. It is worth mentioning that these percentages

can vary extremely from one neighborhood to the other.

In the next slide, the cost and selling price of new constructions of apartments

sized 100m2 and 76m2 is shown


the Quartet.

Source: Dimensions Consulting Analysis and IPCC

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

Average Prices of Privately Owned

Dwellings in USD

Figure 12

21

Affordability

“Builders are selling new dwellings of 100m2 at an average price of 350,000 US Dollar”


the Quartet.

Breakdown Cost for building and transferring housing unit of

100m2 to buyers

Non-Collective Development Figures

Cost Price in USD Selling Price in USD

Citizen Contribution in Purchasing the Land 98,933 143,453

Purchasing Taxes in Collective Projects 4,947 7,173


registration a relevant authorities 1,979 2,869


(water, sewage, roads, improvements, etc) 33,605 48,728


company, gas pipes, etc 10,000 14,500


requirements imposed by the Municipality 35,000 50,750

House Finishing 50,000 72,500

Project Accident Insurance 667 967

Contingency on Cost 3,333 4,833

Total Amount required for Implementation 238,464 345,773


constructor) 28,616 41,493

Eng. Supervision 4,769 6,915

Building inspector 4,769 6,915

Administrative and Financial Mgt 11,923 17,289

Accounting and Taxes 7,154 10,373

Total Cost of Each Housing Unit 267,080 387,265

Breakdown Cost for building and transferring housing unit of

76m2 to buyers

Non-Collective Development Figures

Cost Price in USD Selling Price in USD

Citizen Contribution in Purchasing the Land 75,189 109,025

Purchasing Taxes in Collective Projects 3,759 5,451


registration a relevant authorities 1,504 2,180


(water, sewage, roads, improvements, etc) 25,540 37,033


company, gas pipes, etc 7,600 11,020


requirements imposed by the Municipality 26,600 38,570

House Finishing 38,000 55,100

Project Accident Insurance 507 735

Contingency on Cost 2,533 3,673

Total Amount required for Implementation 181,233 262,787


constructor) 21,748 31,534

Eng. Supervision 3,625 5,256

Building inspector 3,625 5,256

Administrative and Financial Mgt 9,062 13,139

Accounting and Taxes 5,437 7,884

Total Cost of Each Housing Unit 202,980 294,322

Table 8 Table 9

22

47% 52%

44%

60% 64%

% ownership

Ownership

Nonetheless, based on ICBS data, the percentage of ownership in East Jerusalem

has remained stable along the years. Nowadays, this percentage has increased

severely where 83.9% of Palestinians own housing units against 16.1% who rent

housing units (PCBS, 2014).

It is worth mentioning that these exorbitant rates of housing prices could also be

considered a positive socioeconomic factor which enable households to

accumulate assets while also fostering their community involvement (TAUB,

Andrews and Sanchez (2011)).

.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

2007 2008 2009 2010 2011

Average Selling Price of Housing Units in Thousand USD

Affordability

“By international standards, this price is unaffordable in comparison to average salaries of Palestinians in East

Jerusalem”

Affordability

By international standards, affordability of housing is mainly defined by income

and living conditions.

Most agencies and experts agree that housing is financially affordable if it does

not absorb more than 30% of household income. Furthermore, international

benchmark states that the lower the income, the higher the proportion of income

spent on housing.

Therefore, in East Jerusalem, where the Jerusalemites’ average income is $1,722

(IPCC, 2013) and housing prices are above US Dollar 300,000, it is estimated that

the average percentage of income spent on housing could reach up to 59%.


the Quartet.

Figure 13

Figure 14

The Foundations for Affordable Housing

23

Affordability

“ICBS data suggests that the housing prices grew by 19.2% between 2007- 2011 while in the same period,

incomes grew by 12.3% only”

In conclusion, these prices are unaffordable in comparison to average salaries.

This result is expected as during the period between 2007 to 2012, the average

wage in East Jerusalem grew at a much lower rate than the average housing price.

In addition to the above, not only should affordable housing be inexpensive but

all housing, regardless of cost, should be:

• In good condition (no peeling paint and broken walls, electrical and plumbing

work, no broken glass windows, which open and close well; railings and stairs

solid; maintenance; and, clean hallways among others).

• Big enough for the people who live there.

• Free of hazardous materials.

• Safe.

• Suitable for residents, especially the elderly and people with disabilities.

• In appropriate areas (affordable housing, should not be automatically built in

less desirable areas of the city or community).

• Reasonably close to shopping centers, public transportation, recreation and

social services and health.

An important social impact worth highlighting in regards of Jerusalemites’

welfare is that families with no decent houses have poorer health outcomes;

children do less well in school and tend to drop out earlier; and unemployment

and under-employment rates are higher.

Furthermore, addressing the affordable housing gap will likely take on increasing

urgency as the number of affected households grows and the negative spillover

effects multiply.

A market-based approach that creates value while reducing housing costs was

developed by McKinsey & Company in 2014 with the aim of addressing the

global affordable housing challenges.

The proposed solution is one of the ascending goals, similar to Maslow’s

hierarchy of needs, with a four-tiered plan targeted towards households earning

80% or less of the median income for any given region. It sets its foundation on

the following:

• Securing land for affordable housing at the right location.

• Developing and building housing at lower cost

• Operating and maintaining properties more efficiently.

• Improving access to financing for home, purchases, development, and rental

assistance.


the Quartet.

24

Affordability

“The model relies on community

engagement, gathering funding, appropriate delivery of

housing models and creation of governmental

infrastructure to sustain housing”

Although this model in its entirety may not be applicable to East

Jerusalem due to economic and political constraints; the maturity of the

private sector; and, the absence of an effective credit system for

Palestinians, this model produces a set of strategic thinking and

innovative solutions and its components can be articulated based on the

operating context among property developers.

In regards to the two major obstacles for the housing sector in East

Jerusalem (shortage of land and access to finance), it can be read from the

McKinsey’s model, the following:

Unlocking land supply: Government land could be released for

development or sold to buy land for affordable housing. And private land

can be brought forward for development through incentives such as

density bonuses—increasing the permitted floor space on a plot of land

and therefore, its value. In return, the developer must provide land for

affordable units

Lowering financing costs for buyers and developers: Improvements in

underwriting would help banks safely make more housing loans to lower-

income borrowers; contractual savings programs can help such buyers

accumulate down payments and therefore finance purchases with smaller

and less risky loans. Such programs can also provide capital for low-

interest mortgages to savers, and governments could help cut the

financing costs of developers by making affordable housing projects that

are less risky—for instance, by providing a guarantee of finished unites to

buyer or tenants.


the Quartet.

Source: McKinsey & Company

Figure 15

Housing Supply and Demand


the Quartet.

26


“Many critics maintain that the Israeli government is promoting Jewish majority in the city. Nevertheless, East

Jerusalem has witnessed considerable urban development over the years”

Construction

As stated in the JIIS’s Fact and Trends: 2014 report, in 2013, construction in

Jerusalem city was initiated on 3,442 housing units (significantly higher than the

number in 2012 (2,470) and 2011 (2,360)), while 2,430 residential units were

completed (38% more than the previous year).

The chart below shows a comparison between new dwellings sold (in which

compound annual growth reached up to 17.2%) and new dwellings for sale at the

end of the period ( in which compound annual growth was 41.6%).

In 2013, 2,713 dwellings were sold in Jerusalem which is 74% greater than the

number in 2012. The percentage of sold units is only slightly superior (only 4%

difference) in relation to the overall new dwelling available in Jerusalem. The

overall supply of new dwellings in Jerusalem grew from 7,311 in 2012 to 9,885

residential units.

Furthermore, while the number of homes increased in Jerusalem as a whole, in East

Jerusalem, the trend is reversed. The housing supply has continued to fall far below

the level required to meet either demand or need. Studies presented by the IPCC

suggest that between 2001-2010, there was a shortfall of over 3,800 units.

The supply of housing units in East Jerusalem takes on a political and cultural

nuance due to the Israeli Settlements Policy. Between 2010-2013, the number of

building permits in Palestinian Neighborhoods reached 1,449 while for the

settlements neighborhoods, it reached up to 2,669 permits in the same period

(Foundation for Middle East Peace, Bimonthly Report Mar-Apr 2014). This

indicates that the annual average of permits issued for Palestinian neighborhoods is

“362” .

Many critics maintain that the Israeli government is promoting Jewish majority in

the city. In fact, the Israeli “Master Plan” mission statement states that “it is an

inclusive Plan aiming to develop the city of Jerusalem as a capital of Israel and an

Israeli Metropolitan Center, preserving the image of the city, and the standard of

living of all its residents”. Nevertheless, despite land and development rights

controversy, East Jerusalem has witnessed considerable urban development over the

years. To date, and since 1995, urban planning of Jerusalem envisions 95,000

residential units by 2020. However, there is another updated version of Jerusalem

Master Plan 2000 that is drafted but not yet approved.


the Quartet.

Source: JISS: Trend and Facts 2014

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2005 2006 2007 2008 2009 2010 2011 2012 2013

New dwellings for sale at the end of the period in Jerusalem

New dwellings sold during the period in Jerusalem

CAGR: 17.2%

CAGR: 41.6%

Figure 15

27



the Quartet.

Source: Foundation for Middle East Peace, Bimonthly Report Mar-Apr 2014, Map: © Jan de Jong Source: Chat from Foundation for Middle East Peace, Bimonthly Report Mar-Apr 2014.

2001-2004 – 440

building permits

were issued in East

Jerusalem

(Palestinian)

2005-2009 – 222 building

permits were issued in East

Jerusalem (Palestinian)

Figure 16

Figure 17

28


“An additional 2,590 dunums of new housing areas are expected to be added to East Jerusalem in response to

the Palestinian population growth”

In the master plan 2000, it was estimated that the population in East Jerusalem

would grow by an additional 92,000 persons to reach 380,000 inhabitants as a

result of the natural population growth and Jerusalemites migration back to the

neighborhoods within the Separation Wall. And consequently, an additional of

2,590 dunums of new housing areas are expected to be added to East Jerusalem.

In addition to supply being limited, not all the built housing units are legal ((at

least 302 structures have been demolished and more than 665 people were

forcibly displaced in East Jerusalem between the years 2011 – 2014 (OCHA

2014). In retrospect, the number of units permitted for construction from 2001 to

2010 were only 3,823 representing just 30% of new construction.

The Jerusalem 2000 Outline Plan estimated the presence of 15,000 unpermitted

units at the time of its writing in the early 2000s. IPCC estimates that unpermitted

housing must now total somewhere between 20,000 - 25,000 units, or 42-52% of

housing stock in East Jerusalem.

The situation of unpermitted housing has been aggravated since the construction

of the Separation Wall as the Israeli Authorities have stopped all enforcement of

building laws in areas beyond the wall. This has greatly increased the supply of

housing in these areas. Municipality data shows that between 2006-10 Kafr ‘Aqab

alone accounted for 20% of residential construction in East Jerusalem.

Housing Supply and Demand Market Analysis

A precise estimate on housing need and supply requires a set of specific

demographics and housing data for East Jerusalem that is not available. And

therefore, based on the approach and assumption followed, the figures could vary.

The residential units to be developed to respond to the need of the Jerusalemites’

households is calculated by comparing trends of housing unit occupied and

households, as follows:

Housing Units

While in 2013 there were 5.4% more residential units than the previous year in

East Jerusalem, considering the uncertainty of residential growth, the annual

average growth rate of Jerusalem as a whole city which is 2.2% will be applied

and 2013 figures will be assumed for 2014.

Households

The total population of East Jerusalem (J1), as estimated by the PCBS 2014,

reached 251,043 and grow at an average annual rate of 3%. Additionally, the

average household is expected to be 4.5 (PCBS 3.7%; JIIS 5.3%)


the Quartet.

2012 2013

Housing Units in J1 47,558 50,143

Av. Annual Growth in City of Jerusalem (West and East) (%) 2.2

2014 2015 2016 2017 2018 2019 2020

Estimated Housing Unit 50,143 51,246 52,374 53,526 54,703 55,907 57,137

2014 2015 2016 2017 2018 2019 2020

Population 251,043 266,332 274,321 282,551 291,028 299,758 308,751

Households 55,787 57,461 59,185 60,960 62,789 64,673 66,613

Table 10

Table 11

29


“The shortfall of dwelling will amount to approximately 70,000 residential units in 2020”

Vacancy Rate

The vacancy rate is a value calculated as the percentage of all available units in

a rental or on sale property that are vacant or unoccupied. IPCC suggest a

vacancy ratio of 4%.

The model suggests that from 2014 to 2020, the shortfall of dwelling will amount

to 69,532 residential units; the annual average supply would shrink to 1,166

units while the annual average of housing needs would amount up to 10,276 units.


the Quartet.

2014 2015 2016 2017 2018 2019 2020

Required Housing Units 58,019 59,759 61,552 63,399 65,301 67,260 69,278

2014 2015 2016 2017 2018 2019 2020

Estimated Housing Units in J1 50,143 51,246 52,374 53,526 54,703 55,907 57,137

Population J1 251,043 266,332 274,321 282,551 291,028 299,758 308,751

Av. Household Size 4.5

Households 55,787 57,461 59,185 60,960 62,789 64,673 66,613

Vacancy Rate 4%

Units Required 58,019 59,759 61,552 63,399 65,301 67,260 69,278

Shortfall of Housing Units 7,876 8,513 9,179 9,873 10,597 11,353 12,141

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2014 2015 2016 2017 2018 2019 2020

Total Supply of Housing Units Shortfall of Housing Units

Figure 18

Table 12

Table 13

Profit Potential in the Housing

Sector


the Quartet.

31

Profit Potential

“Higher prices and therefore, better profit margins can be founded in the neighborhoods of Bet Haninia,

Shuadat, Sheikh Jarrah and Bet Safafa”


the Quartet.

As a reminder, the graph on the left

provides an indication of housing

selling prices relative to its cost.

Selling prices of new dwellings are

orbited in the central area of the city.

They could reach up to USD 340,000

for apartments of 80m2. These prices

are an indication of the lifestyle that is

in these neighborhoods. Most

international institutions, consulates and

ministries are located in Sheikh Jarrah.

On the other hand, the demand for

neighborhoods in northern East

Jerusalem (Shuafat and Beit Hanina)

has grown exponentially, and prices

could reach up to USD 350,000 for

apartments of 94m2.

In the south of East Jerusalem, the

housing prices decline drastically,

except in Bet Safafa on which demand

tends to increase gradually.

The demand is driven by the social

stratum of residents, access to

infrastructure and better public services.

Table 14

Neighborhood Av. m2

Kafr 'Aqb, Atarot 91

Bet Hanina 97

Shu'afat 83

New Anata 88

Isawiyya 71

At-Tur, Mount of Olives 80

Wadi Al-Joz, Sheikh Jarrah 80

Bab A-Zahara, Mas'udiya 75

Old City - Moslem Quarter 45

Old City - Armenian Quarter 61

Old City - Christian Quarter 45

Silwan 61

Abu Tor 76

Ras Al-'Amud 77

Jabal Mukabar 82

Sur Baher + Um Tubba 85

Bet Safafa 87

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000 Av. Housing Cost Av. Housing Selling Price

Figure 19

32

Profit Potential

“The estimate profit margin is an average of 45% accounting from US Dollar 80,000. In neighborhoods with

high demand, it could reach 75%”

As expected, the most attractive neighborhoods

for property developers’ investment are Beit

Hanina, Shuafat, Bet Safafa and above all, Wadi

Al Joz-Shiekh Jarrah. The av. Profit in these

locations could exceed 60% per unit.

Generally speaking, the profit margin is high in

the East Jerusalem Real Estate market. The main

reasons that explain the high percentage is due to:

• High cost and shortage of land available for

constructions.

• Limited number of neighborhoods with basic

infrastructure which boosts a high concentrated

demand.

• A greater demand above the current supply

resulted from the natural population growth,

immigration movements from places beyond

the wall and the impossibility to build more

housing units.

• Large number of legal, administrative and

engineering obstacles faced by property

developers.

• The outstanding period of constructions that can

reach up to seven years.


the Quartet.

$-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000 Profit in USD Table 15

Neighborhood Profit

Kafr 'Aqb, Atarot 25%

Bet Hanina 50%

Shu'afat 68%

New Anata 10%

Isawiyya 10%

At-Tur, Mount of Olives 40%

Wadi Al-Joz, Sheikh Jarrah 75%

Bab A-Zahara, Mas'udiya 50%

Old City - Moslem Quarter 10%

Old City - Armenian Quarter 25%

Old City - Christian Quarter 25%

Silwan 40%

Abu Tor 40%

Ras Al-'Amud 40%

Jabal Mukabar 40%

Sur Baher + Um Tubba 40%

Bet Safafa 60%

Figure 19

33

Profit Potential

“ The estimated profit from the construction and sale of new dwelling in East Jerusalem would oscillate in

average from 60,000 US Dollar to 140 Million US Dollar”

The estimated accumulative supply of housing, in the period 2015-2020, is

estimated to reach up to 70,000 units, for a given percentage of growth. The

absence of data makes it impossible to determine the future actual supply in terms

of m2 and location. Therefore, it has been assumed that the average of apartment

size would remain the same per neighborhood

In addition, different profit percentages have been applied to draw different

scenarios that could be related to locations with higher and lower demand.

In accumulative terms, the profit can oscillate between 380 Million US Dollar and

890 Million US Dollar.


the Quartet.

2014 2015 2016 2017 2018 2019 2020

Estimated Housing Units 50,143 51,246 52,374 53,526 54,703 55,907 57,137

Estimated Supply 1,103 1,127 1,152 1,178 1,203 1,230

By 2020, it is estimated that there will be about 60,000 housing units in the Arab

neighborhoods of East Jerusalem. The model suggests that in the upcoming six years, about

7,000 new dwellings will be delivered . The profit margin of these new units will be related to

the location, size and complexity of the projects.

• In the following neighborhoods, housing projects will benefit of a profit margin up to 30%,

in the best scenario: Atarot; New Anata; Isawiyaa; and the Old City.

• In neighborhoods such as At-Tur, Bab-Azahra, Silwan, Abu Tour, Ras Al-Amud, Jabal Al-

Mukaber, and Sur Baher and Um Tuba will experiment a profit margin that can oscillate

from 30%-45%.

• The more attractive neighborhoods: Wadi Joz and Sheik Jarrah; Shuafat; Bet Hanina; and,

Bet Safafa, the profit margin can be higher than the average and up to 70%.

Table 16 and Figure 20

$-

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$140,000,000

$160,000,000

$180,000,000

2015 2016 2017 2018 2019 2020

Profit Potential in USD

Profit Bellow the Av. (30%) Av. Profit (45%) Profit Above the Av. (70%)

Obstacle to Housing Development


the Quartet.

35

Obstacles to housing development

“The Israeli municipality approves on average about 300-400 permits a year, forcing Palestinians to build illegally.

Only 13% of the total East Jerusalem area is available for Palestinian construction and the vast majority of East

Jerusalem’s land is unregistered”

Planning

The first challenge faced by Palestinians residing in Jerusalem is obtaining a

housing permit from Jerusalem Municipality which is considered to be a lengthy,

costly and uncertain procedure. As stated by the Jerusalem Centre for Legal Aid

and Human Rights: there is an annual shortage of 1,500 housing units in

Palestinian neighborhoods to accommodate natural growth. Whereas, the shortage

of housing units to alleviate overcrowding in East Jerusalem is estimated in the

tens of thousands.

It is suggested by NGOs such as the IPCC, that an insufficient number of building

permits is issued annually which forces Palestinians to build illegally. It can take

up to three years to finish the process of applying for a building permit, and

permission is often not granted. And hence, given the financial and bureaucratic

obstacles, many Palestinians choose to build illegally, incurring the threat of

having their houses demolished by Israeli authorities.

Zoning

Of the 70.5 km of land in East Jerusalem, 35% (24.5 km2) has been expropriated

for Israeli settlements. According to the Israeli human rights organization

B’Tselem, most of this expropriated land was privately-owned Arab property.

Another 35% (24.7 km2) has plans that have been approved by the Jerusalem

District Committee for Planning and Building. The remaining 30 percent (21.3

km2) has not been included in any plan approved since 1967 (planning is taking

place in some areas, but not yet approved). Of the 24.7 km2 that are planned,

approximately 15.5 km2 (22% of all land) are designated as ‘green’ or ‘open’

areas where no construction is allowed, or for public purposes such as roads and

other infrastructure.

This leaves only 13% of the total East Jerusalem area (9.2 km2) available for

Palestinian construction, and much of it is built-up already.

Infrastructure

Inadequacies and deficiencies in the existing public infrastructure create further

difficulties to obtaining permits. Requirements such as minimum car parking

space and building lines are typically difficult to meet in East Jerusalem’s dense

neighborhoods.

It is worth mentioning that some areas in east Jerusalem, opposite to West

Jerusalem, lack the basic infrastructure requirements.

A 2010 survey by the Jerusalem Municipality, estimated that East Jerusalem

needs NIS1.9 billion (US$531 million) to upgrade infrastructure to adequate

levels (M. Margalit, Discrimination in the Heart of the Holy City, 2006).

Based on the Municipalitie’s studies (Infrastructure Survey in East Jerusalem,

2010), Palestinian neighborhoods have received a maximum of 12% of the

Municipality’s budget.


the Quartet.

35%

22% 13%

30%

Zoning in East Jerusalem (Palestinian)

Expropriated for Israeli Settlements

Zoned for Green Areas and Public

Infraestructure

Zoned for Palestinian Consturction

Unplanned Areas

Source: Union for Jerusalem Housing Assembly, 2015 / OCHA Fact Sheet 2011, East Jerusalem Key Humanitarian Concerns

Figure 21

36


“In order to accommodate public infrastructure,

landowners are forced to donate 40% of their land

for public purposes”

In conclusion, the disparities between East and West Jerusalem are caused by both under investment and inadequate planning. In addition, the condition of East Jerusalem’s infrastructure will likely to degrade further as the proportion of unpermitted housing increases.

Land Parcel

Palestinian land in East Jerusalem is almost entirely privately owned. In order to accommodate public infrastructure, a process termed re-parcellation is required in order to share the burden evenly across different owners. Typically, this requires landowners to donate 40% of their land for public purposes. The Municipality has only initiated the process in two neighborhoods, Beit Hanina and Shu’afat, and despite starting in 2000 many plans have yet to be approved.

The small size of East Jerusalem’s parcels, typically less than one dunum, are now a cause of further planning difficulties. In order to reduce the number of plans to be processed, the District Committee introduced a minimum size of 10 dunums for detailed plans. This has made households reliant on the willingness and financial capability of other households to develop joint planning proposals.

Land Registration

While nearly all of West Jerusalem and Israeli Settlement areas have registered parcels, the vast majority (92%) of East Jerusalem’s land has no form of land registration. Those that do, typically have only partial registration. Only a few central Palestinian neighborhoods such as Sheikh Jarrah and Wadi Joz contain land that is fully registered.

Since the freezing of the Jordanian land registration process in 1967, it has been impossible for Palestinians to fully register the land. This affects both the approval of detailed plans and the issuance of building permits


the Quartet.

Source: IPCC

Figure 22

37


“Palestinians are hesitant to obtain mortgages from Israeli banks as a result of their fear of losing collateral

property to Israeli entities in case of default”

Access to Finance

Palestinian households and businesses in East Jerusalem face several impediments

related to access to finance and credit whether for consumption, investment or

housing purposes. The effects of lack of access to credit and mortgages have been

compounded by the particularly high prices in East Jerusalem, compared to the

rest of OPT. (e.g. to purchase an average property, with the maximum loan

currently available (US$150,000), a buyer will be expected to make a down

payment of almost 50% (IPCC, 2013)).

While workers from East Jerusalem have higher average nominal income than

those in the remaining OPT, they still face higher prices, and have to deal with

expensive houses and building permit fees, which make it harder to own homes

(UNCTAD, 2013).

Despite the need for financing, there are no working branches of Palestinian

banks in J1. On the other hand, operating branches of Israeli banks are limited and

do not cover the basic needs of East Jerusalem Palestinians. The problem

however, is not merely the lack of Palestinian bank branches in East Jerusalem.

Palestinians are hesitant to open and rely on accounts in Israeli banks for

financing whether for housing mortgages or business purposes.

One of the reasons for this is the language barrier. Bank operations and

documents are all in Hebrew which most Palestinians in Jerusalem do not

command, especially with regards to technical terms used in banking documents.

However, the critical barrier is the fear of losing collateral property to Israeli

entities in case of default. Inability to pay loan principal or interest in time could

jeopardize the client’s property such as houses, land and businesses.

This forces Palestinian residents of East Jerusalem to resort to Palestinian banks

operating in J2 areas or in nearby cities such as Ramallah, Jericho and Bethlehem.

However, Palestinian banks have restrictions of their own – they rarely accept real

estate guarantees from Palestinian East Jerusalemites.

Even though deposits made by East Jerusalem residents in Palestinian banks

amount to about $200 million, as a result of certain jurisdictional considerations,

certain banks operating in OPT do not provide housing loans unless the clients are

from Palestinian Authority-controlled areas of East Jerusalem (J2).

Approved applicants are typically government employees with a steady income,

but they are charged with relatively high interest rates in the range of 8.5 percent.

It is worth mentioning that donor intervention with the objective of expanding

access to mortgage loans to provide improved housing opportunities to

Palestinian East Jerusalemites was also observed. However, these actions have

remained minimal and disparate, with little visible impact.

In addition to the external support, The Islamic Development Bank has channeled

support to public health facilities and other social welfare projects in East

Jerusalem in partnership with United Nations agencies, while some Arab aids

helped in renovation of Palestinian properties in the Old City. But compared to

the challenges of Palestinian social survival and economic development in East

Jerusalem, efforts have been piecemeal and marginal.


the Quartet.

Stakeholder Analysis


the Quartet.

39

Real Estate

Agents and

Brokers

Property Developers

Citizens

Banks

Palestinian

Authority

Israeli

Authorities

Local

NGOs

International

NGOs

Private Sector Governmental and Non-Governmental Organization

Stakeholders

“Stakeholders for housing development are found at two levels: Private and governmental and non-governmental

organizations. Private stakeholders are formed by banks, individuals, real estate agents, brokers, and property developers

while the second group of stakeholders are constituted by the Israeli and Palestinian Authorities and I/NGOs”

Once the main characteristics of the housing sector in East Jerusalem are defined,

it is necessary to determine the relevant players in the market and the degree of

their involvement.

It has been considered international best practices with the purpose to identify and

define the stakeholders wisely.

Therefore, it is necessary to distinguish between two levels: Private and

Governmental and Non-Governmental Organization as each play an important

role in the creation of an enabling and favorable environment where the housing

sector can grow efficiently:

• Private:

oCitizens (Individuals)

o Property Developers

oReal Estate Agents and Brokers

oBanks

• Governmental and Non-Governmental Organization:

o International and Local Organization

o Israeli and Palestinian Authorities

Based on international best practices, a stakeholder mapping framework has been

adopted, as it is shown in the figure on the right. This diagram is made up of those

stakeholders whom are considered to be real opportunity enablers for change.


the Quartet.

Figure 22

Stakeholders in the Private Sector


the Quartet.

41


“The real estate housing sector is not mature enough and property developers faced many challenges in regards

to land ownership, zoning, building permits and customers' purchase power”


the Quartet.

Private Sector

In general, the real estate housing sector is not mature

enough, and since most of informal businesses are

constituted by family businesses that do not

necessarily develop their projects with the standards,

procedures and legal requirements that formal

businesses comply with, such as registration of the

land among others, formal and informal businesses

collide frequently in the development of projects.

Therefore, real estate developers, in the formal

economy, are forced to seek more complex projects

that informal business cannot develop, such as

initiatives in a larger plot of land and more apartment

units of higher quality among others.

The main obstacle faced by property developers is the

ownership of the land and the customers' access to

finance.

Agents and brokers are not properly formalized in

the business sector and the group is mainly

constituted of the individuals which consider this

work as an alternative source of income. Therefore,

it is nearly impossible to define their marketing

techniques. They basically rely on their network

and word of mouth.

Although, there is a good fabric of credit system

among Israeli banks, East Jerusalemites are

hesitant to obtain mortgages from these banks as a

result of fear of losing collateral property to Israeli

entities in case of default.

Nevertheless, Israeli Banks require the registration

of the land to be updated to the benefit of the

borrower. This is the main reason behind the loan

denial.

In response to the needs of Jerusalemites,

Palestinian banks are articulating a fund provided

by Jada's Islamic Development bank for

encouraging new dwelling purchases. The ceiling

of these loans is 300 Thousand of US Dollar and it

covers up to 85% of the price.

Only 13% of East Jerusalem's land is assigned for

construction. Most of it is already built,

unregistered and privately owned. Citizens could

play the role of borrowers, landlords and builders.

Most of citizens' housing projects are mainly used

for renting purposes. In addition, there is no

available data determining with a high level of

accuracy the percentage of land owned by

individuals nor the relation between housing

development project initiated by individuals and

property developers.

Banks

Property

Developers

Citizens

Real Estate

Agents and

Brokers

Figure 23

42


“67% of the interviewed property developers are micro-companies against 16% that are SMEs and 17% that are

considered Large”

Housing Developers

To date, there is no fair profile view of housing developers in East Jerusalem.

The set of structured interviews conducted combined with survey techniques have

allowed to roughly highlight the definitive characteristics of these key players.

Mainly, company size; functions; operating sites; factors for strategic growth;

their existing housing projects; and the external factors that might limit the

market

Company Size

For the purpose of the study, the definition of company size given by the

Palestinian Authority has been adopted as follow: Less than 10 employees are

considered Micro Enterprises; Between 10 and 20 employees are considered

Small and Medium Enterprises (SME); More than 20 employees are considered

large companies. As it can be seen in the chart below, the exercise indicates that

67% of the interviewed property developers are micro-companies against 16%

that are SMEs and 17% that are considered Large. This result is expected since

most of the companies are family oriented.

Strategic Growth Drivers

In Israel, the Business Tendency Survey conducted by the Israeli Central Bureau

of Statistics in 2013 stated that the main barriers for housing development are the

lack of available land and permit delays.

Under the circumstances of the housing market in East Jerusalem, real estate

companies can thrive amid complexity and deliver high returns, through

strengthening their capabilities beyond traditional competences through business

expansion, innovation model, finance restructuring and functional and leadership

skills.


the Quartet.

67%

16%

17%

Number of Employees

>0<10

>10<20

>20*Wet work include foundations, plastering and flooring.

Source: TAUB Center for Social Policy Studies in Israel. The State Report 2014. ICBS, Business Tendency Survey Oct. 2013 Source: Dimensions Consulting Analysis

Figure 24

Figure 25

43


“Property Developers are moving towards a strategic partnership to develop more complex and profitable

projects in order to differentiate investment strategies”

Additionally, 58% of the respondents have stated that industry specific skilled

labor (wet and non-wet work) is hard to find and hence, Major expenses are

expected to be invested in their talent development. It is worth mentioning that

32% of them is referred to workers with poor skills in regards to wet-work,

meaning: foundations; plastering; and flooring.

Regarding financial sources, 17% of the surveyed stated that they have faced

complications in accessing bank loans.

In East Jerusalem, developers face similar constrains. Shortage of land that is

available for constructions and delay of the building permit issuance are the major

obstacles in the development of the housing market. Banking services are not

considered a challenge nor is the skilled labor

Under these circumstances, real estate companies can thrive and deliver high

returns by strengthening their capabilities beyond traditional competences through

business expansion, an innovation model, finance restructuring and functional and

leadership skills.

In order to contextualize these competences, the analysis set the foundations on

five strategic pillars and inquired into the challenges and priorities among the

interviewees. These pillars are:

• Expansion.

• Innovation.

• Finance.

• Functional and Leadership Skills.

The major findings are the following:

Growth:

Access to properties not yet managed properly and brand expansion are the top

priorities when considering growth.

Innovation:

Transformation of the business model along the value chain was considered the

top priority as a mechanism to overcome market challenges, followed by

differentiating investment strategies.

Finance:

Refinancing exiting debt in order to reduce risk was the single top priority. The

Project can be extended beyond five years, and hence, reducing their

profitability.

Functional and leadership Skills:

Interviewees agreed that the most important action to strive for better project

management is investing in creative employees with industry knowledge and

experience.

In the next slide, it is provided the table for the strategic growth drivers and their

respective results.


the Quartet.

44

Strategic Growth Drivers

Pillars Drivers Rate

Expansion

Merger and Acquisition 1.5

Industry wide investment 1.5

Accessing properties not yet managed professionally 2.75

Brand 3.4

Innovation

Transforming the business model along the value chain 3.5 Differentiating products and services 2.8 Differentiation investment strategies 3.25 Differentiating sourcing strategies 2.2 Got to market speed 3.5 Lean cost basis 3.25

Finance

Fixing existing portfolio 3.25 Refinancing 4.25 Capital sources 3.6

Functional

Skills

Industry knowledge and experience 4

Assets management 3.75

Leadership

Skills

Strategic thinking 3.25

Innovative and creative thinking 4.5

People and team leadership 4

Change leadership 3.5

Stakeholder management 4


“Refinancing their existing debt to reduce risk and investing

in innovative and creative employees are the two greatest

factors for a better management of housing projects”


the Quartet.

Measurement criteria used to assess priorities among

Real Estate Developers

Not

Important

Very

Important Important

Below 2.5 Above 3 2.5 to 3

The criteria utilized to determine the degree

or level of priority, is based on the responses

given by the higher management., as follow:

1=Not Important at All

2= Not Important

3= Important

4= Very Important

5= Extremely Important

It can be observed that expansion drivers rated the lowest were “Merger and

Acquisition” and “Industry wide investment”. Developers would rather focus on their

success stories to build the greatest reputation and make new projects more attractive to

the public. Although, it is not a common practice and is not yet implemented,

developers might consider access to property not properly managed to be interesting.

As it is expected, mostly all developers interviewed agreed that “Source Strategies” are

not important due to the vast numbers of players in the supply of building materials and

labor.

The current trend is that developers are moving into strategic partnership to develop

more complex and profitable projects as intent of “differentiating investment

strategies” and major backward and forward integration along the value chain to have a

better control of the process, reduce cost and reduce the time to market.

Additionally, developers believe that accounting control and cost measurement

processes must be driven towards the provision of more suitable information about

control, decision making and understanding of customer value.

Among finance drivers, developers might recur to refinancing in order to take

advantage of better interest rates; and reduce or alter risks.

At international level, talent development and management are considered key factors

that drive revenue growth. The property developers interviewed confirmed this. All of

them stated that functional and leadership skills are very important when hiring and in

some cases, could weigh more than their educational background.

Table 17

45


“Several scenarios can be drawn when considering the responsiveness to legal and engineering requirements.

Property Developers suggest that the average of a housing development project should range between three to

five years”

Not being fully aware of the legal and engineering requirements for the construction of housing units in East Jerusalem can be dramatically disastrous and would damage in

one way or another each stage of the value chain. The zoning is intrinsically related to the lack of urban planning, and hence, highlights the shortage of construction area and

that land ownership may not be properly delimited among landlords.

As an example, It was stated by one of the interviewees that the proper limitation of their land took about three to four years before they could apply for building permits.

The procedures of issuing building permits can last about two to three years.

Developers are fraught aware of the particularities of the sector: materials and construction goods; reliable suppliers and workers; and standards of operations and

production. And hence, the construction period can vary from one to two years, only.

In conclusion, while it is expected that the average development framework ranges between three to five years, stakeholders can mobilize in unison to develop a public

advocacy plan towards factors of urban planning, zoning, and licensing to optimize procedures.


the Quartet.

Scenario 1 Scenario 2 Scenario 3

Urban Plan Available Available Non Available

Zoning Available Available Non Available

Building Permit Available Non Available Non Available

Period for Project

Completion 2 Years 3 to 5 Years More than 5 Years

Table 18

46


“374 and 236 apartments are expected to be delivered in Sharafat and Beit Hanina, representing the 37% and

23% of the interviewed current supply, respectively”

Housing Development Projects

At first glance, it can be observed that property developers are directing their

efforts to meet the increasing demand for Beit Hanina, Shuafat, and Beit Safafa

and Sharafat neighborhoods. The chart below shows the neighborhoods where

developers operate. 40% operate in the Northern East Jerusalem and another 40%

in Southern East Jerusalem.

It is worth highlighting that while Wadi Al-Joz- / Sheikh Jarrah are the

neighborhoods with greater demand, the shortage of land and its high cost hinder

the capabilities of companies to develop housing projects. Consequently, it is

understandable that none of the interviewed developers operate in these locations.

Nevertheless, from a perspective of the current supply of housing units (It is

worth mentioning that most of these projects are self-financed), it was roughly

estimated that there will be approximately 1,000 units deployed. The chart below

shows their distribution per neighborhoods. It is worth highlighting that 374

apartments are expected to be delivered in Sharafat, representing the 37% of the

current supply; and other 236 dwellings are expected to be delivered in Beit

Hanina, representing 23% of the current supply. Even though the Shuafat

neighborhood has more demand than Beit Hanina and Sharafat, the current supply

is much more limited, representing only 4% of the total. This could be explained

by shortage of land and the type of land ownership, mostly private and not

properly registered.

Regarding the quality of delivery, 75% of the interviewees have affirmed that the

quality of their housing supply is above average against 25% who stated that the

quality of material, finishing and amenities of their project are fair.


the Quartet.

20%

20%

6% 7%

7% 7%

13%

13% 7%

Neighborhoods where Property Developers are Active

Beit Hanina

Shu’fat

Jerusalem “Al - Quds”

Ras Al-Amud

As–Sawahira Al–Gharbiya

Beit Safafa

Sharafat

Sur Bahir

Ash-Shayyah

Source: Dimensions Consulting Analysis Source: Dimensions Consulting Analysis

23%

4%

2% 12%

2%

37%

13% 7%

Housing Project

Beit Hanina

Shu’fat

Ras Al-Amud

As–Sawahira Al–Gharbiya

Beit Safafa

Sharafat

Sur Bahir

Jabal Al – Mukabbir

Neighborhood Units

Beit Hanina 236

Shu’fat 41

Ras Al-Amud 16

As–Sawahira 124

Beit Safafa 22

Sharafat 374

Sur Bahir 125

Jabal Al –

Mukabbir 72

Figure 26

Figure 27

47


“441 new dwellings are expected to be delivered by the interviewed developers in the upcoming three years as

follows: 70 units by the end of 2015, 189 and 182 units in 2016 and 2017 respectively”

In regards to the apartment size, it was indicated that it can range from 96m2 to

126m2 (Apr. av. 110m2) for which prices can vary from US Dollar 2,000– 3,500

per m2 based on location and quality. 67% of the interviewees believe that price

will increase.

While 300 dwellings are completed, there are about 700 housing units to be

delivered. 400 apartments are still in the pre-development phase while 300 are on

the queued. These 700 units are to be deployed in the coming years as follow:

It is worth mentioning that 83% of the interviewed developers have affirmed that

building permits are already available against 17% who do not but are in the

process of obtaining them.

Additionally, 33% do not own the land and have recurred to partnership with

landlords, splitting benefit. The most common ratio is 60% (developers) - 40%

(landlords). Nevertheless, one of the interviewed developers have stated that

benefit can be split equally. Another type of agreement can be reached for social

housing development with social institutions. Developers can lease huge spots of

lands for over 100 of years or more.

In regards to the sales trends, 60% of the interviewees have experimented a steady

volume of sales of one to 10 houses per month, and other 40% above 11 houses

per month.


the Quartet.

Luxury

Apartments High Quality Apartments

Average Quality

Apartment

Min. Max Min. Max Min. Max

m2 120 150 100 128 70 100

10%

27%

26%

19%

18% 2015 2016

2017 2018

2019

Year for Deployment

60% 20%

20%

Average Sales per Month

[0,10) houses

[10,20) houses

[40,50) Houses

Figure 28 Figure 29

Table 19

48


“Real Estate and Housing Developers estimate an accumulative gross revenue of 180 Million US Dollars by the

end of 2019”

It was stated by one of the key interviewees that in East Jerusalem, for every 100

potential customer, only five can afford their prices. And four out of these five

have paid through bank loans.

Assuming average monthly sales of 10 houses until 2019, it is estimated that 60%

of their upcoming housing supply (600 units) will be sold. Translating this into

gross revenue, it is expected to approximately reach up to 180 Million US

Dollars.

Today, 150 housing units are sold (15.5% of the supply) are sold and 850

apartments (84.5%) are still for sales.

Key Players

A mapping of competition market is complex to draw due to the variety of the

players and the secrecy of the sector. Below is provided a sample list of key

property players (companies and individuals):


the Quartet.

• Sami Awadallah Construction Company

• Al Quds Holding

• Ali Brothers Co.Ltd

• Trading ad Investment Company (TAICO)

• Dour for Engineering and Planning

• Al Quds Mustafa Abu Hamad

• Rajab Abu Asab and Sons Company

• Jamal Jaber

• Ismail Ushahe

• Basem Misk

• Beit Al Maqdess Surverying Services

• Samer Mustafa

49


The Motivation Drivers of Key Players


the Quartet.

• Financial Goals: The housing sector offers a high profit margin that continuously attracts new individuals. property developers currently

existing in the market preserve secrecy of information due to the vast majority of players in the informal business and limitations in the sector.

Due to the high cost of land, building permits and increasing demand, market prices are fully controlled by developers allowing exaggerate

profit margins above 45%. Increasingly, developers turn to collective development and cooperation to reduce building cost but maintaining

similar selling prices.

• Corporate Culture, Structure, and Leadership Backgrounds: The existing players in the formal economy are run as a family business.

They are family owned (private companies), family run, and even hold the family name. The management of the company is inherited from one

generation to the other. This all results in a closed culture with very vague, undocumented bylaws and informal business profiles.

• External Constraints: The real estate companies in East Jerusalem are affected by a number of external factors. Israeli Municipality

impediments for issuing building permits is the most common restriction faced by all of the companies, in addition to lack of proper planning

and zoning, limited infrastructure and difficulties in accessing lands due to its private ownership character.

• Business Philosophy: Almost all of the companies share the same ideals which are highlighted in two principles: the continuation of the family

legacy and the support of the East Jerusalem economy environment. The companies take pride in their name and success story.

Business Business

Strategy

Assumption Capabilities

Business

Drivers

Business

50


The Current Strategy of Key Players


the Quartet.

• How the business creates value: Non-Price competition is the most effective method of marketing in the housing sector in East

Jerusalem. All developers share, more or less, the same price range for given quality standards and neighborhoods. Property developers

try to create value for customers through targeting niche markets that are formed by young families with relatively high incomes with

white collars jobs; and focusing on creative design of building, newness of amenities (balcony, parking, storage, parks, etc.), and

expanding their brands.

• Where the businesses are choosing to invest: Property developers try to create more investment value through differentiation of

investment strategies, targeting major residential and commercial real estate asset classes. This includes high quality multifamily

compounds and shopping centers. a new trend is observed where existing developers join to develop and co-finance real estate

landmarks.

• Relationships and networks the businesses have developed: The network of connections is very important in the housing sector.

Property developers strive to build strong relationships with players along the value chain. Emphasis is put on building strong

communication channels with the Jerusalem Municipality; partnership with foreign and local aid development agencies (INGOs and

NGOs), banks, MoPWH, PECDAR, lawyers and suppliers of construction materials and labor. A strong affiliation with these

organizations helps in landing more projects as well as an easy and organized implementation.

Business Business

Strategy


Business

Drivers

Business

51



the Quartet.

• Strengths: Existing companies hold some control over the supply chain since there is a vast number of suppliers of building materials and labor

in both formal and informal economy from Jerusalem and the West Bank. This helps in reducing the costs, time, and improves quality control.

Another strength for companies is their occupancy rate which each believes others cannot affect due to the shortfall of available licensed houses

and high demand.

• Weaknesses: The lack of highly qualified and specialized individuals in the housing sector create a problem in the management of projects

when dealing with constraints such as zoning, building permits and legal related issues. Another weakness is the impossibility to reach economy

of scales due to the limited number of stories that property developers in East Jerusalem are abided by.

• Organizational Values: Since the companies are family owned and managed, they are affected by the family’s reputation and vice-versa,

which creates more pressure on management to uphold high standards. Such standards include ethical behavior, producing high quality

products, professionalism and accountability and excelling in customer service.

• Perceived Industry Forces: Companies believe that the housing industry in East Jerusalem is affected by the Israeli Authority (more

specifically, the Jerusalem Municipality) since they are failing to provide the necessary infrastructure and other public services. Also,

regulations to license unpermitted houses on one hand, and the increase of settlements on the other which is gradually attracting more

Palestinian buyers and limiting Palestinian neighborhood expansion. Finally, one the major obstacles highlighted by developers is the limited

support and financial sources made available for buyers.

• Beliefs about Competitors’ Goals: In one way or another, Developers share similar goals in terms of profitability, project advancement and

modernization and strengthening their position in the market.

Business Business

Strategy


Business

Drivers

Business

The Assumptions of Key Players

52



the Quartet.

• Marketing skills: Even though there is a lack of professional brokers and real estate agents, Property developers do not put a

great effort in promotion and media coverage; most of these companies even lack a marketing department. Existing businesses

depend on the word of mouth and their network of connections for their marketing schemes.

• Ability to service channels: Since most of all of the existing companies move backward and forward in the value chain, it can be

said that most of the engineering and architectural firms and the Construction Company control the supply chain core services,

meaning logistics, information flow and capital flow control, procurement of raw materials and sales to the end consumers. On

other hand, investment companies rely on these firms to carry out the procurement of raw material and intermediate goods and the

construction itself. While information and capital flows as well as the transaction are controlled by them.

• Financial strength: Most of the companies, if not all, have affirmed that they benefit from a relatively stable financial health.

However, developers can be largely affected by the limited purchase power of their customers in terms of pay back and internal

rate of return.

• Leadership qualities of CEO: Most of the businesses started with the family owning a piece of land on which ,at certain time,

they decided to build on. The qualities that were commonly observed among general managers and industry experts are the

following: integrity; revenue-driven; and, determination.

Business Business

Strategy


Business

Drivers

Business

The Capabilities of Key Players

53


“The Islamic Development Bank launched a long term financing program of 30 Million US Dollars. The loan

can range from 30 – 300 thousand of US Dollars and covers up to 85% of the price”

Banks

Palestinian Banks

The Islamic Development Bank launched a long term financing program of 30

Million US Dollars, with the objective of facilitating Palestinian Jerusalemites’

access to finance for housing. This fund is articulated through three major

Palestinian banks:

• The National Bank (TNB).

• The Cairo-Amman Bank.

• Bank of Palestine.

The criteria for Palestinian residence in East Jerusalem to be eligible to apply for

this grant is the following:

• The loan is only granted to the first home purchase and for J1.

• The Palestinian East Jerusalemites should have Jerusalem ID card but do not

hold Israeli Nationality.

• The house unit has been built according to legal requirements (licensed

building) and standards.

• Jerusalemites are advised to transfer their salaries to a correspondent Palestinian

bank ( the minimum accepted monthly salary is US Dollar 1,100).

• Income proof for guarantees with non transferred salaries.

• A personal guarantee from a first degree relative.

An individual complying with the above criteria is eligible to ask for a loan. The

loan can range from 30 – 300 thousands of US Dollars, and covers up to 85% of

the price, payable in 30 years.

The interest rate applied is the commonly known Islamic “Murabaha” of 3.5%

corresponding to management fees. Additionally, one time payment for

administration fees of 1% of the total value of the loan. The installment should

not exceed 50% of borrowers’ monthly salary

Unfortunately, most Palestinian Jerusalemites are not able to fulfill the mentioned

conditions.

Israeli Banks

Bank Hapoalim, and Leumi among others provide loans called “Mushkanta” up to

75% of the selling price, payable on 25 years at 3% interest rate.

This loan can be provided for house purchase or construction. Among the

requirements, the most critical one is the availability of land registration and

proper ownership, which most of the lands in East Jerusalem lack.

Citizens – Customers

Buying a house is a long-term decision for at least two aspects: it is financially

binding and it is the kind of product “consumed” in the long run. Compared to

buying convenience products, consumers perceive these kinds of ‘large ticket’

purchases as riskier, sometimes even ‘traumatic’. For a complicated product such

as a house, the information coming solely from a buyer’s memory is generally

inadequate (Gibler and Nelson 2003).

The foundation of the buying decision is set on the following variables: product;

external and internal factors; and, services granted.


the Quartet.

54


“87% of the surveyed East Jerusalemites stated that the down payment should be less than 50 Thousand of US

Dollars and 79% indicated that a convenient installment should range among 700-1,000 US Dollars”

With the occasion of their new housing development projects, a survey was

conducted by Al Quds Holding in relation to the buying decision factors among key

neighborhoods in East Jerusalem (mainly Beit Hanina, Shuafat, Essawya, Sour

Baher, Silwan, At Toor, Jabal Al Mukaber, Kofer Akab, Old City, and Ras Al

Amud).

The following main conclusions were drawn from the survey:

• 88.9% of the surveyed are in need of a first residential unit, against 4.8% that

will use additional units as a second residence.

• 69% of the surveyed confirmed that the convenient apartment size should range

between 100-140m2. 37% of them stated that it should oscillate between 100-

120m2.

• 87% of the surveyed stated that the down payment should be less than 50

thousand of US Dollars.

• The monthly installments should not exceed 1,000 US Dollars. 79% indicated

that a convenient installment should range among 700-1,000 US Dollars.

• For a vast majority of the surveyed, property developers are trusted in terms of

the process of production and delivery.

• Marketing oriented practices should target not only the purchaser but their

families as well since 62% of the respondents affirmed that it is a family

decision.

• As financial sources, Banking and lending services must be developed properly

since only 27.8% have the potential to buy a residential unit by cash. In addition,

Islamic mortgages have 67% preference over regular ones.


the Quartet.

Price

Buying Decision

Factors

Product

External Factors

Services

Internal Factors

Location and

development phase

Neighbors /

Compounds

Culture and Family

Demographics

Property Developer

Behavior and

Reference Group

Customization

Size

Variety of

Apartments

Isolation / Privacy

Risk

Motivation

Buying Decision Factors’ Scheme

Source: Al Quds Holding

Figure 30

55


“54.5% of the surveyed indicated that they have the potential to buy a house in installments with a down

payment from a Palestinian Bank, against 45.5% who would deal with Israeli Banks”

• The survey indicated that East Jerusalemites partially deal with both Israeli and

Palestinian banks partially. 54.5% of the surveyed indicated that they have the

potential to buy a house in installments with a down payment from a Palestinian

Bank, against 45.5% who would deal with Israeli Banks.

• The apartment sizes of the residential compounds should vary to meet the buyer

needs. 70% agree on having different apartment sizes in the compound and

13.4% disagree.

• Examining customer preferences about residential units’ amenities, the survey

indicated that 27% preferred the parking lot. 22.4% preferred the balcony, the

private entrance with 19 % and 15.8% preferred the outdoor space and the

storage.

• The surveyed preferences about housing projects location showed from most

important to less, the following: Away from pollution; Close to services center

and transportation; Quiet; Easy to recognize; Not anywhere near other

apartments; and constructed on a high level.

• Second construction phases are not considered a point breaker of the buying

decision.

• As a conclusion drawn from the 77% of the surveyed responses, East

Jerusalemites are not savvy customers. They just want basics.

• Housing projects should be family oriented and preserve a certain social status.

Real Estate Agents and Brokers

As it was mentioned previously, agents and brokers are not properly formalized

in the business sector and the group is mainly constituted by the individuals which

consider this work as an alternative source of income.

Real Estate agents commonly deal with properties in rent. The fees they earn,

regardless of whether it is a long or short term rental, correspond to one month

rent. And the brokers’ fees for real estate/house purchase oscillate between 2%-

5% of the sale.


the Quartet.

Stakeholders in the Governmental

and Non-Governmental Sector


the Quartet.

57

Stakeholders in the Governmental and Non-Governmental Sector

“The Israeli applied urban planning policy neglects the needs of people in four related aspects: land use, existing

gap between population growth and availability of land for expansion, green areas, and restriction to building

permits”


the Quartet.

Governmental and Non Governmental Organization

Their responsibility is to respond to the needs of the

population of Jerusalem.

The master plan 1995 (a tool for the planning system

to allocate resources to either allow or confine

development) determines the urban planning of

Jerusalem (West and East) and obliges property

developers to comply with its norms.

Although, it allows third parties to extend the

development of the master plan for a given

neighborhood in East Jerusalem. This make room to

non-profit organization to work on Urban Planning,

Zoning and Development.

The municipality of Jerusalem is responsible for

issuing building permits that include license to build

and access to public infrastructure.

They are formed of international and regional

institutions with representation in East Jerusalem.

Among their work, they seek the welfare of

Jerusalem and Palestinian Jerusalemites, such as the

QQR, UN entities, the Portland Trust, INGOs such

as the Lutheran World Federation and Consulates,

among others.

The Palestinian Authority envisions the

reinforcement of the resilience of Jerusalem

population and preservation of its Palestinian and

Arab character in order to maintain it as the capital

of the state of Palestine. Consequently, the

objective of the Palestinian Authority is to increase

the number of housing units available to

Palestinians by building new units, restoring the

existing units and legally advocating to increase

the area allocated for housing.

The proposed interventions range from the

provision of soft loans and individual lending

schemes and capacity building among others.

There are many organizations working towards the

welfare of Jerusalemites.

At a social sphere, these organizations (Arab and

Israelis) preserve the economic and political rights

of Palestinian Jerusalemites. At a specific sphere,

there is a limited number of organizations that

work towards the improvement of the factors and

environmental conditions that affect the boost of

housing development. These are namely IPCC, the

“Israeli Committee Against House Demolitions”

(ICAHD), Union for Jerusalem Housing

Assembly, and Palestinian Housing Council. The

last two organizations have interesting services, in

relation to housing development support and

finance option for borrowers.

Palestinian

Authority

Israeli

Authorities

Local

Org.

International

Org.

Figure 31

58


“Currently, the Master Plan 1995 is been executing,

waiting for the legitimacy of the master plan 2000”

Israeli Authorities

As it was previously thoroughly discussed, the Municipality of Jerusalem is

responsible for the development of the urban fabric of Jerusalem City.


the Quartet.

The Jerusalem Master Plan

2000 is to be considered as

the first comprehensive plan

for the “whole” city of

Jerusalem and the first

document, detailing the

Israeli’s spatial vision for

both west and East

Jerusalem. Bet

Hanina

Shuafat

Isawya

Sheikh

Jarrah

Old City

Sur Baher Bet Safafa

Figure 32

59


“The expected increase of new residential units in East Jerusalem by expansion and densification strategies will

approximately amount to 70,000 dwellings. Only 32,000 units correspond to Palestinian East Jerusalemites' needs"

As complied in the “Jerusalem Master Plan: Planning into the Conflict, by

Francesco Chiodelli”, the Master Plan 2000 (the Plan) attempts to resolve all

Jerusalem’s urban problems in a neutral way, without any discrimination, and

regardless of political issues connected with city governance.

It states that the purpose of the plan is to ensure “an urban quality of life for all

the residents and “to preserve the special character of the city as a world city,

sacred to the three major monotheistic religions of the world and at the same time

to create a lively and vibrant city providing its citizens with a high level and

quality of life.

In addition, the Plan declares the need to fix the problems of the Arab areas: for

instance it declares the necessity to solve the problem of inadequate infrastructure

and to meet the Arab population’s enormous demand for residential building.

There are two main strategies suggested to guarantee new buildings:

• Densification:

Increasing the actual limits on height or volume.

• Expansion:

Expansion of existing neighborhoods and the construction of new residential

neighborhoods on the outskirts.

As it can be observed from the table above, the increase of residential units in the

Arab neighborhoods will correspond in its majority (55.7%) to densification

strategies.

This could be understood from two aspects: firstly, from a technical perspective,

the fabric of Arab neighborhoods is sparser and has a lower density in comparison

with Jewish neighborhoods and thus, densification is more feasible. Secondly,

from a political perspective, the densification strategy, unlike expansion, does not

entail territorial occupation or consumption. And hence, preserving Jewish

territorial occupation.

In addition to the above, and in line with the Plan’s main objective of developing

the city of Jerusalem as a capital of Israel and an Israeli Metropolitan Center,

much of the Jewish residential increase is expected to be within East Jerusalem.

37,000 new residential units (9,400 units surround Beit Hanina and Shuafat

neighborhoods) will be built in East Jerusalem, while in Arab neighborhoods it

amounts to 32,630 new residential units, only.

It is worth mentioning that most of these new Jewish residential neighborhoods

will constitute public housing and will be dedicated, exclusively, to Jewish

population.


the Quartet.

Expansion

(Residential Units)

Densification

(Residential Units)

Jewish Population 31,778 19,131

Arab Population 14,462 18,168

Source: The Jerusalem Master Plan: Planning into the Conflict, Francesco Chiodelli

Table 20

60



the Quartet.

Source: The Jerusalem Master Plan: Planning into the Conflict, Francesco Chiodelli.

Beit

Hanina

Shuafat

2500

Housing

Units

400

Housing

Units

650

Housing

Units

800

Housing

Units

800

Housing

Units 2,100

Housing

Units

Figure 33 Figure 34

61

• The completion of the wall will completely alter Jerusalem’s urban

conformation. Very large swathes of West Bank territory, where a large number

of the most important Israeli settlements in the West Bank around Jerusalem are

located, will be physically annexed to Israel (and to Jerusalem). Moreover, the

wall will exclude several Arab neighborhoods from Jerusalem. This is the case

of Samiramis, Kafr Aqab, Shu‘fat refugee camp, Ras Khamis, Dahiyat As-

Salam, and Al Walaja. These neighborhoods are inhabited by almost 55,000

Arab Jerusalemites.


“Illegal housing construction is directly connected to the extreme difficulty for an Arab inhabitant to obtain a

building permit and the Separation Wall, once completed, will exclude several Arab neighborhoods from

Jerusalem and will add others”

In regards to the opportunities for Arab housing increase by expansion or

densification, Chiodelli concluded that it is likely to be unattainable if we take

into account that:

• The majority of the 15,000 unauthorized Arab residential units are comprised of

stories added to existing housing without a building permit and consequently,

the space that the plan devotes to densification is already occupied.

The possible results of this situation are twofold: first, an ex post process of

regularization on the basis of the plan’s proposals and second, the interruption

of many processes of densification proposed by the plan, with blame for this

attributed to unauthorized building.

There are many causes of unauthorized building, but the main one is certainly

connected with urban policies and bureaucratic mechanisms implemented by

the Israeli municipality. In particular, illegal housing construction is directly

connected to the extreme difficulty, for an Arab inhabitant, of obtaining a

building permit.

In addition, it is not possible to obtain building permits in areas characterized by

an infrastructure shortage: this is a characteristic of many Arab neighborhoods.

Moreover, it is not possible to obtain any building permit within areas where no

detailed plan has been approved: many Arab districts are not provided with

these kinds of plans and (as the master plan itself highlights). In addition to that,

there are also several problems connected with the land registration system or

the very high cost of building permits.


the Quartet.

Source: The wall. The Jerusalem Master Plan: Planning into the Conflict, Francesco Chiodelli.

Figure 35

62


“The Municipality insists on transferring 40% of private land in East Jerusalem to public services such as roads, parks

and schools while their Master Plans for Arab neighborhoods are not being developed with local residents and detailed

plans which would guarantee building rights”

The IPCC provides an overview of Jerusalem Municipality's Restrictive

Measures, that it is summarized by the following:

Public Space: The Municipality insists on transferring 40% of private land to

public services such as roads, parks and schools. This concurs with accepted

international standards on requirements for public facilities within

neighbourhoods.

However, the Municipality does not recognise the large areas already allocated for

public open space in the Jerusalem 2000 Plan in Palestinian neighbourhoods. This

leads to the common situation whereby a landowner who has already lost more

than 40% of their land as public open space is then asked to contribute 40% of

their already diminished plot.

Moreover, the majority of Palestinian neighbourhoods are already built-up,

allocating 40% of land for public services is often only possible by demolishing

the existing structures.

The allocation of public land is done at the level of small areas of less than 100

dunnum meaning it will create fragmented small parcels of land difficult for

implementing projects specially those serving the entire neighbourhood and the

City level.

Further to this, the interpretation of ‘public facilities’ is highly restrictive. IPCC

experience suggests that in Palestinian areas the Municipality only accepts public

institutions and roads, while in West Jerusalem and Settlements a much wider

range of activities are allowed including cultural, sport, civil institutions, religious

institutions and commercial activities.

In most cases the Municipality still insists on full transfer of ownership of land

allocated for public use. In practice, such transfer has no advantage to the

provision of public services and blocks Palestinian private and civil society

organizations from developing community institutions.

Registering the private land allocated for public use as municipal property,

inevitably, such stipulations are met with suspicion from the community and

weaken support for the plans.

Counter Planning: After decades of refusing to plan in Palestinian areas, the

Municipality has initiated General Master plans in three Neighbourhoods

(BeitHanina, surBaher and Jabal Al Mukabeer) already being planned by IPCC.

Unlike IPCC’s plans, these are not being developed with local residents and

detailed plans which would grantee building rights.

Discriminatory City Level Planning: Planning at the city level makes little

consideration for Palestinian neighbourhoods. Regional road networks, Tourism,

employment areas, logistics hubs and commercial centres are all located for the

benefit of Jewish areas, either in West Jerusalem or in the Settlements.

The positioning of regional and primary roads are often detrimental to Palestinian

neighbourhoods, both failing to provide adequate connections between

neighbourhoods and in many cases dividing or cutting through existing built

areas.

Land Owners: Ownership of land used to block planning initiative by the

community in the different areas, by needing 51% signatures at least for detailed

plans, at the stage of opening plan file number and the discussions with the

authorities.


the Quartet.

63

MoPHW recognizes that the affordable housing program must be in partnership

with the Palestinian Authority, private sector contractors/property developers, and

donor and agencies for the provision of subsidies for housing and infrastructure.


“Affordable housing program must be in partnership with the Palestinian Authority, private sector

contractors/property developers, and donor and agencies for the provision of subsidies for housing and

infrastructure”

Palestinian Authorities

The Palestinian Authority in the National Development Plan 2014-2016

reconfirmed their pledge regarding the sustainable development of East Jerusalem

in the basis of the Strategic Multi Sector Development Plan for East Jerusalem

(SMDP) that is being articulated since 2011.

In this regards, the major Palestinian institution working on the housing sector is

the Ministry of Public Work and Housing (MoPWH) and the Palestinian

Economic Council for Development and Reconstruction (PECDAR).

Ministry of Public Work and Housing

In September 2013, the MoPWH drafted a National Housing Policy (NHP) which

objectives and strategies are adapted from the “Housing Sector Strategic Plan” of

the Ministry of Public Works and Housing, as contained in the “Palestinian

National Plan 2011-2013”, and the “Strategic Plan for Developing the Housing

Sector in Palestine” (2010).

Additionally, the NHP’s objectives and strategies are based on results of the draft

Housing Sector Profile produced by UN-HABITAT in July 2013 and a series of

focus group discussions with the MoPWH and other housing sector stakeholders

in 2012 and 2013.

The MoPWH envision a well-functioning and equitable housing sector to help

Palestinian to access to sufficient, affordable and good quality housing in West

Bank, Gaza and Jerusalem. The figure on the left illustrate the MoPHW’s

framework.


the Quartet.

Source: Draft National Housing Policy , MoPWH /Un-Habitat

Figure 36

64


“The articulation of financial sources and programs of subsidies and international funds is considered to be the

cornerstone to establish a sustainable economic housing development”

The housing construction and upgrading in East Jerusalem takes a major role and

it is tackled from a special prism and more sensitive rationale.

The NHP is acquainted with the challenges and needs that Palestinian East

Jerusalemites face in their neighborhood, as a result of the impediments to

obtaining permits, and improve their housing conditions among others.

The NHP proposed that in order to achieve better living condition of the

Palestinian Jerusalemites, government institutions, non-governmental

organizations and international donors should collaborate to prioritize the

following:

• Support Palestinian residents in their efforts to obtain building permits.

• Support Palestinian residents in their efforts to obtain home loans at more

favorable rates.

• Make available subsidies to Palestinian households to legalize their homes or to

access new housing.

• Make available funding to help Palestinian families defend their housing rights

in court.

• Make available funding for infrastructure for housing cooperatives.

• Make available funding for new housing projects for Palestinians in East

Jerusalem, to address the shortfall in housing faced by current residents and to

cater for expansion of housing needs of new Palestinian households in the

future. Several different modes of housing supply should be investigated.

In addition to above, the NHP also envisions a scenario of post-independence. Under this situation, it is suggest that the Palatine Authority and local government should prioritize the following:

• Upgrade and legalize Palestinian neighborhoods.

• Draw up regional plans for East Jerusalem and its hinterland.

• Draw up urban plans for East Jerusalem.

• Declare “special project areas” in zones of historical and natural significance (linked to urban plans), with a view to protecting the natural and cultural heritage and landscapes of these areas.

The Palestinian Economic Council for Development and Reconstruction

In PECDAR’s Strategic Development Plan (SDP) 2013 for the city of Jerusalem, it is stated that the State of Palestine through PECDAR aims at reinforcing the resilience of Jerusalem population and preserving its Palestinian and Arab character in order to maintain it as the Capital of the State of Palestine.

PECDAR recognized that in order to achieve their stated vision, it will be required the following:

• Official Palestinian bodies have a responsibility to continuously search for development interventions, keeping abreast with the daily happening in the city and supporting any initiative for its development.

• A clear reference framework for Jerusalem should be established, which can be approached by citizens seeking to solve their daily living issues.

• The implemented projects should always reflect the needs of, and be in consultation with the City’s residents, neighborhoods, institutions and bodies.


the Quartet.

65


“Palestinian Economic Council for Development and Construction has 12 projects ready to be implemented in

East Jerusalem, worth 98 Million US Dollars”

PECDAR’s objective, in regards the housing sector in East Jerusalem, is to

increase the number of housing units available to Palestinian by building new

units, restoring the existing ones and working at the legal level to increase the

area allocated for housing from different categories of planning areas.

PECDAR proposed intervention are the following:

• Provide the required funding to build houses through the provision of soft loans

to officially resisted housing cooperatives in Jerusalem in order to build their

housing projects or to finish the incomplete projects

• Provide the required funding to restore and rehabilitate old residential buildings

especially in the Old City, in order to mitigate the suffering of their inhabitants

and support their resilience, as well as to preserve the historical ca archeological

value of these building that witness to the Arab and Islamic identity of

Jerusalem.

• Create a mechanism to assist the Palestinians in meeting part of the excessive

costs associated with obtaining new building permits for their houses and help

them in developing constructions schemes and layouts wherever possible.

• Support and enhance the capacity of civil society organizations in the field of

housing. Therefore, the development strategy includes technical assistance and

capacity building programs for these organizations in order to help them exam

and enhance their activities.

• Provide the required funding through individuals lending schemes to

Palestinians who obtain a building permit for new housing units or for extension

in existing units.

As shown in the SDP 2013 for the City of Jerusalem, PECDAR has over 19

proposed housing projects, worth 129 Million US Dollars:

• 12 out of the 19 projects are ready to be implemented. Total value in 98 Million

US Dollars.

• 4 out of 19 projects are partially ready to be implemented. Total value in 13

Million US Dollars.

• 3 out of 19 projects that are in the pre-development phase, worth 18 Million US

Dollars.

It is worth mentioning that only 7 out of the 19 projects are proposed to deliver

new dwellings in East Jerusalem. The intervention plan counts over 272 new

units. 84 out of them are ready to be implemented (there are building permits),

worth 4 Million US Dollars; 148 are partially ready to be implemented; and, 40

need preparation.

Additionally, the SDP 2013 for the city of Jerusalem counts over 4 funding related

projects; 4 project related to maintenance and restoration; and other 4 projects

related to urban planning and infrastructure.

In the following slide it is shown a breakdown of these project per its readiness:

• Projects ready to be implemented.

• Projects Partially ready.

• Projects that need preparation.


the Quartet.

66



the Quartet.

Projects Partially Ready to be implemented Description Value in Million USD

• Housing project for Jerusalem engineers’ society The project consist of 54 housing units with all public utilities 2.5

• Housing project for Orient House employees Construction of 35 apartments 2

• Housing Projects for the Jerusalem Social Society Cooperative housing project composed of 20 units to benefit 20 Jerusalemite families who have managed to

obtain a building permit 2

• Beit Haninia Housing Project Cooperative housing project composed of 21 units to benefit 21 Jerusalemite families who have managed to

obtain a building permit 7

Projects that need preparation Description Value in Million USD

• Housing project for families of martyrs and ex-prisoners The project consist of 40 housing units 2.4

• Ras Al-Amud housing project Purchase of 4 dunums for a housing project in order to mitigate the housing crisis and preserve the Arab

identity of Jerusalem 7.5

• Housing project for Jerusalem physicians Purchase of 10 dunums and development of layouts for construction of 70 housing units 8

Projects Ready to be implemented Description Value in Million USD

• Housing Project for Sur Baher Teachers The project consists of 6 building, containing 72 housing units. 3.5

• Individual Lending Project Provision of individuals loans for building and maintenance 10

• Housing Project for Jerusalem Cooperative of Astronomers The project consists of 12 housing units. 0.5

• Relief of Khalayleh neighborhood project Maintenance and restoration work in Khalayleh neighborhood 0.3

• Project to establish a financial firm to guarantee loans offered to Jerusalemites A financial firm to ensure payment o loans 50

• Project to support contribution payment of fines for building violations. Contribution by paying part of fines for building violations. 3

• Project for the urban planning and structural zoning unit Establishment of a unit for urban planning and community development 3.5

• Infrastructure project for Sharafat housing project (Latin Monastery) Helping around 60 families to construct the Sharafat housing project. 1

• Project “Restore Your Home by Yourself” Maintenance of old building and houses 5

• Home rehabilitation for the poor in Jerusalem Assisting Palestinian residing outside the Old City in construction and providing the poor with shelter 10

• Project to compensate for demolished houses Compensation to owners of homes demolished by Israeli Authorities. 2

• Restoration project in the Old City and the surrounding area Restoration of 53 alleys and building in the Old City 9

Table 21

67


“The Palestinian Housing Council, International Peace and Cooperation Center and Union for Jerusalem

Housing Assembly are the main three players among local non-governmental organizations”

Local Non-Governmental Organizations

There are plenty of non-governmental organizations working on East Jerusalem in

several topics. Those that directly work on the housing issues are the following

organizations:

• Palestinian Housing Council (PHC).

• International Peace and Cooperation Center (IPCC).

• Union for Jerusalem Housing Assembly (UJHA).

• Al-Awda for Social and Economic Development Non-Profit Company.

The Palestinian Housing Council

The PHC was established in Jerusalem in 1991 as a non-profit institution

dedicated to help alleviating the problem of housing, and contributing the

development of the housing sector, by offering loans and providing housing

project to low income families.

In addition to overcoming the housing problems, the council raised more than 168

million US Dollars to contribute in solving habitations problems in Palestine.

More than 7 thousand Palestinian families have benefited by the PHC programs; 2

thousand of them in Jerusalem.

Furthermore, the PHC have contributed in formulation of a national Palestinian

housing strategy.

PHC was awarded UN-habitat Scroll of Honor Award 2007 for exceptional

endeavors in helping provide homes, employment prospects and bringing new

hope to countless Palestinian families. Also, PHC won Dubai International Award

for Best Practices 2008.

PHC’s objectives are:

• To explore practical ways that will enable it to resolve the housing problem in

Palestine.

• To identify appropriate mechanisms to meet the basic housing needs of the

Palestinian community.

• To minimize the housing crisis among low and middle income families by

providing them with long term soft loans and low cost housing units.

• To contribute to the lessening of poverty among Palestinian families through

improving their housing environment.

• To participate along with national and international organizations in the

formulation of a national Palestinian housing strategy.

• To develop sustainable housing programs and policies along with line agencies

in Palestine.

• To improve the construction industry by utilizing the most modern technical

methods and quality standards, and introducing new building techniques and

modern planning.

• To support housing and construction efforts in Jerusalem at all levels, including

the restoration of residences.

• To activate the building materials trading and job creation.

• To preserve the architectural heritage in Palestine.


the Quartet.

68


“Palestine Housing Council is articulating tow credit system, one to support low income families to renovate

their homes and a second one to encourage affordable houses in East Jerusalem”

PHC’s programs are listed below:

• Indirect Credit Program: It aims to build low cost housing units, fit with

Palestinian households’ size and income. The housing units are to be sold based

on long term loans program for families with low and middle income status.

Loans begin at a minimum of 28,000 US Dollars and a maximum of 45,000 US

Dollars.

• Grant Program: It aims to contribute to the reduction of poverty through small

grants. This program provides grants in the maximum amount of 5,000 US

Dollars to families living below the poverty line in order to renovate their

homes.

• Old city Jerusalem Renovation Program: The program begun with primary

funding from the Islamic Development Bank (IDB) to renovate and restore

major Arab historic and residential sites in the Old City of Jerusalem.

The Program aims to preserve the cultural heritage and architecture in the city,

promote the local restoration practices as well as to improve the social and

economic conditions for inhabitants.

Additionally to these, there are other four programs whose detailed are not yet

disclosed. These are:

• Direct Credit Program.

• Housing program in Jerusalem

• Saving Fund for Housing program

• Site and Service program

General requirement:

• The beneficiary and his family must be a permanent resident of the Palestinian districts including Jerusalem.

• He, or his wife or any of the juvenile children should not be owners of residence.

• He should be financially incapable of building his own house, that is, his income should be low or limited.

• He should be capable of paying back the loan or the value of the housing unit.

• He or his wife or any of his juvenile children should not have made use of another previous loan from another party.

• Special conditions of benefit to obtain a housing loan from PHC to use in the city of Jerusalem.

• The structure intended to be built or finished should be licensed from the Jerusalem City Council and the license should be valid. The license validity should not only be restricted to the period of obtaining the finishing loan.

• The applicant must be the owner of the land on which the intended or existing structure is located for which he intends to obtain a loan.

• Should not have obtained a loan for the same structure from another party.

• The apartment should not exceed an area of more than 120m2.

• The applicant must furnish all the guarantees which PHC requires from him and he should be capable of paying back the loan.

• The applicant must be of limited income.


the Quartet.

69


“IPCC is developing spatial outlines plans attempting to reconcile the existing situation with the demands of

Israeli planning regulations and allocate for additional development necessary to meet population growth”

International Peace and Cooperation Center

Established in 1998 in Jerusalem, IPCC is a Palestinian non-profit policy and

applied research center specializing in urban planning and community

development.

IPCC's programs are based on five main pillars:

• Policy Research.

• Urban Planning, Zoning and Development.

• Civil Society and Community Engagement:

o Youth.

o Local Government.

o Urban Rights.

o Dialogue and Peace building.

• Media.

• Training and Capacity Building.

IPCC have two main programs under the Urban Planning and Community

Engagement work stream:

• Urban Intervention to Reduce Tension in East Jerusalem

• Re-Planning Palestine: West Bank Area C.

Since 2007 IPCC has been working with Palestinian communities in East

Jerusalem to support their demand for urban rights; to shelter, secure tenure and

access to urban facilities and services.

This end, IPCC has developed spatial outline plans for communities in 12

neighbourhoods (at the level of outline planning and detailed planning- detailed

plans different from general outline plans guaranteed building rights and can be

immediately implemented-).

The plans have attempted to reconcile the existing situation with the demands of

Israeli planning regulations and allocate for additional development necessary to

meet population growth.

In other words, the plans will legalise existing housing under the threat of

demolition and provide expansion potentials for new housing, public facilities,

and commercial and employment areas. Such development is key to reverse the

decline of the city’s economy and living standards of its residents.

IPCC has worked closely with community representatives to raise awareness of

planning issues build endorsement of the planning work at the grassroots level.

On a technical level IPCC has established a productive relationship with the

Municipality and the District Committee for Planning and Building. Nonetheless,

serious impediments continue to delay the authorisation of the planning work.


the Quartet.

70


“IPCC has over 12 outlines plans and 10 detailed plan for a total of 7,907 housing units and respond to the need

of more than 40,000 Palestinian living in East Jerusalem”

Below is a list of IPCC’s on-going planning projects in East Jerusalem. The ten detailed plans most urgently require political support as these will go furthest in securing

building rights and protection of homes against house demolition.


the Quartet.

Outline Plans

Neighbourhood Population Dunum Housing Units

1 Ashkareyeh North 333 165 64

2 Ash Shayyah 7,504 300 1,443

4 Qalandia 765 226 153

5 Ein a Loze 2,340 387 450

6 Deir al Amud and Al Mintar 489 260 94

7 Addasseh (inc.Aqabbeh) 593 667 114

8 AthThuri 12,048 580 2,317

10 Asahel (at tur) 4,360 615 838

11 Wadi Qaddum (Hara Fouqa and Tahta) 3,432 660 660

12 HaiSweih 2,850 186 548

Total 34,714 4,046 6,681

Detailed Plans

Neighbourhood Statutory File Number Population Area (dunum) Housing Units Est. Unlicensed Units

(90%) Total Units Proposed

1 Ashkareyeh North 101-0211078 130 24 25 23 120

2 Ashkareyeh South 101-0260208 0 95 0 0 450

4 Ash Shayyah 520 120 100 90 300

5 Qalandia 765 226 153 138 250

6 Ein a Lozeh 14338 2,340 387 450 405 1,000

7 Deir al Amud and Al Mintar 13016 489 260 94 85 750

8 Aqabbeh 101-0177816 593 667 114 103 750

9 Asahel 468 120 90 81 200

10 Wadi Qaddum 101-0260224 1,040 135 200 180 600

Total 6,345 2,034 1,226 1,103 4,420

Table 22

71


“The Union for Jerusalem Housing Assembly is expecting to deliver over 530 new and affordable dwellings all

across East Jerusalem”

Union for Jerusalem Housing Assembly

The UJHA is a non-profit organization registered with the Palestinian Ministry of

Interior and Israeli Ministry of Interior, working in East Jerusalem with the

mission to provide affordable housing for Palestinians Jerusalemites.

Moreover, the UJHA is establishing a legal and engineering unit within its

structure to provide legal assistance and protection to land owners in their land

development efforts.

The UJHA overall goal is to find practical means and solution that help solve the

housing crisis in East Jerusalem through:

• Assessing residents in obtaining permits and reduce its costs and administrative

procedures

• Enabling owners and investors to construct housing cooperative across east

Jerusalem as affordable and cost effective models of housing for the city’s

residents.

• Contributing to land planning and development initiatives, and advocate for

their implementation for residential, commercial and public service purposes.

• Facilitating access to credit and loans for constructing housing projects,

purchasing housing units or lands.

• Implementing housing projects through cooperative models across East

Jerusalem.

• Advocating for collective efforts directed towards solving the housing crisis in

the city and streamlining efforts through policy making in this regard.


the Quartet.

Project Name # Units Progress Funding Source

Sharafat 12 90% El Awda for Housing

Mukabber I 16 50% El Awda for Housing

Mukkaber II 7 35% El Awda for Housing

Mukabber III 15 40% El Awda for Housing

Beit Hanina 15 50% El Awda for Housing

El Farouk 21 50% El Farouk Association for Jerusalemites Teachers

Sur Baher 86 45% Housing Association of Sur Baher Teachers

Bay El Makdes 37 45% Bayt El Makdes Housing Association

Jeruaslem Eng.

Project

26 40% Al Quds El Shareef Housing Associations

Shuafat 135 40% Shuafat Housing Association.

Total 530

As part of its efforts to promote affordable housing, the Union for Jerusalem

Housing Assembly is working with banks and micro-finance institutions to

facilitate access to long-term financing strategies with low-interest for Palestinian

citizens in East Jerusalem. The Union has held several meetings with the Islamic

Development Bank and banks operating in Palestine to devise an operational

mechanism for providing long-term loans, with reasonable preconditions that

minimize the risks for financing institutions yet feasible for ordinary citizens to

fulfill.

Below is the list of project the Union of Jerusalem Housing Assembly has been

involved with cooperatives, since its establishment.

Table 23

72


“The UJHA’s Legal and Engineering Unit will assist over 500 families annually, with the objective of effectively

reducing the cost associated with building”

The UJHA adapts three categories in working with cooperatives:

1. Cooperatives that has the funds and ability to get financial for housing.:

In many instances, disputes arise in these cooperatives related to cost of

building. The UJHA will oversee the work of the cooperative, ensuring that

real cost is properly documented. Additionally, UJHA will assist them in

reaching out to donors or low interest lands to buy housing units.

2. Cooperatives that have the financial capacities:

These cooperatives enter into agreement with Al-Awda Financing Company to

hand over the housing units fulfilling all safety and decent standards. The

UJHA will assist them in seeking grants to subsidize the cost of purchase.

3. Cooperatives with middle income:

The cost of a housing unit, in collective development, is estimated to be

280,000 US Dollars. Members of these cooperatives can only afford around

130,000 US Dollars in four years, while having the financial capacity to pay

1,500 US Dollars per month. This means that they are usually still short of

around 149,000 US Dollars

The UJHA states that unfortunately Palestinian banks do not offer loans even

if these cooperatives members are able to provide the houses as collateral,

under the pretest that Jerusalem is under Israeli Administration and thus there

would be no guarantee from them by law.

Additionally, the UJHA is working on a two year project that supports the

establishment and operations of a legal and engineering unit that will provide the

following services:

Helpline for Advisory Services

Available twice a week for the public to get advisory services on a number of

legal or engineering issues. These services will be provided with an average of

two hours per case.

Legal Advice and Assistance

The services will be provided to over 150 cases on matters such as land

registration, tax and fee exemption, reducing property taxes, settling land

disputes. In addition, 50 cases will be followed through litigation and petitions.

Engineering Counseling and Assistance

Services will be provided to around 150 cases that will include areas such as

procedures for obtaining permits, increasing building ratio, land zoning and re-

parcelization as well as providing advice on architectural and civil architectural

designs.

Moreover, the engineering unit will provide substantial direct assistance to

some of the cases reported, which will include conducting land surveys and

accessing land files from the municipality.

Studies and Publications

Bi-annual newsletter will be produced and will include news updates and

relevant important for land owners and developers.


the Quartet.

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“The Mount of Olives Housing Project will be leased to individuals, couples and families at subsidized rates, providing

a much-needed affordable housing option within Jerusalem enabling many Palestinian Jerusalemites to maintain their

Jerusalem residency and rights”

The newsletter will include updates on the housing sector and housing projects,

new services procedures pertaining to land development and housing as well as

messages that advocate for more affordable housing in East Jerusalem.

Moreover, a services procedures guidebook will be produced that entails all

services guidelines, procedures tips and references for land development and

housing.

In addition to the above, the UJHA is also developing a new project with the

purpose of developing the first East Jerusalem “Land Database”, highlighting

their legal status, owners and restrictions and opportunities for planning and

development in these areas and, a second one.

Al-Awda for Social and Economic Development Non-profit Company

The mission of Al-Awda financing company is to assist Palestinian citizens in

East Jerusalem in accessing long term loans up to 180 months at low interest that

do not exceed 1.8%, with accepting the housing unit as a collateral.

Al-Awda Financing Company is distinguished by its ability to accommodate the

needs and contest of East Jerusalemites, while serving to the special status and

requirement needed for cooperative housing associations.

International Non-Governmental Organizations

Most of these organizations work towards the welfare of the Palestinian and

tackle issues more related to the protection of human rights such as demolition

and displacements and urban planning. Nevertheless none of them has developed

mechanisms to boost the real estate and housing sector in East Jerusalem.

An exception is that The Lutheran World Federation (LWF), the Evangelical

Lutheran Church in Jordan and the Holy Land (ELCJHL), and the Kaiserin

Auguste Victoria Foundation (KAVF) are addressing the need for housing through

the construction of 84 apartments on the LWF property.

An interesting opportunity for Real estate developers is that through the match

grants of the Palestinian Market Development Program (PMDP) and the

Jerusalem Grant Facility (JGF), this could fund market studies to determine the

exact number of businesses in the formal and informal sector and customer

profiling per district, new staff hiring, training labor, marketing, purchasing

supplies and equipment.


the Quartet.

Legal Units Engineering Unit

Permits

Building ratio

Land Zoning

Civil and Architectural

Design

Registration Procedures

Fee Exemption

Property Taxes

Land Disputes

Legal Pleadings and

Petitions

Source: Union of Jerusalem Housing Assembly, Structure of the Legal and Engineering Unit.

Table 24

Value Chain Scheme of the Housing Sector in East

Jerusalem


the Quartet.

75

Value Chain Scheme of the Housing Sector in East Jerusalem

“There is forward and backward integration in the housing market sector. Project developers are becoming

investors, and investors are developing housing projects”

Not only Real Estate Developers, strictly, but other players such as land surveying services

companies, architectural firms, construction companies and investment companies move backward

and forward, along the value chain.

The ownership stage is constituted by inception and design functions. Through the conduction of

structured interviews, it was noticed that not only property developers are responsible for

developing the housing sector in East Jerusalem. There is a large number of individuals/landlords,

investment companies, architectural firms, construction companies that own housing projects.

On the design functions, the field work exercise revealed that architectural firms are not the only

player in the design of building structures, construction companies have in-house employees doing

the work of surveyors and architects. 77% of the interviewed players have stated that they outsource

the design of their housing projects.

Financial capacity and sources are secured for the majority of

the interviewees. 83% of them stated that the housing projects

are self-financed. This could be either co-financed between

developers/builders, or executing the process of sales in the

inception phase, allowing self-financing.

In the construction stage, only investment companies recur to a

tendering process among construction companies, while real

estate developers, builders (individuals), architectural firms

have their own workers.

Furthermore, 67% of the respondents confirmed that they take

the responsibility of the maintenance of building and do not

outsource to management firms.

As a result of the lack of professionalism among real estate

agents and brokers, it was predictable that a vast majority of

transactions (sales and post sales services) are carried out by the

property developers themselves.


the Quartet.

• Residential Use

• Commercial Use

• Industrial Use Ownership Finance Construction Transaction Usage

• Builders

• Property

Developers

• Investors

• Self Finance

• Investor

• Banks

• Contractors

• Suppliers

• Eng. and Construction Firms

• Real Estate Agents

• Brokers

PRIMARY FUNCTION ON THE REAL ESTATE AND HOUSING SECTOR

76

Value Chain Scheme of the Real Estate Companies

“There are plenty numbers of suppliers of building materials and constructions workers from West Bank,

supplying property developers in East Jerusalem”

Due to the constraints and challenges in the housing sector in East Jerusalem, once a real estate opportunity is identified, the marketing and sales process take place so that

the “work” is sold before beginning and tension is avoided in the matching of supply and demand and financial unrest.

Within the contracting process, it can be distinguished the following phases: Selection of contests to bid; Bidding Process; and, Award. As previously mentioned, only

investment companies follow this process. One of the major challenges they faced is that Palestinian construction companies are not formalized and also the lack of

professional data when bidding for projects tendered. And hence, they positioned themselves to a lower level in comparison to Israeli firms who bid as well.

In the construction stage, the key functions identified are the following: Initial approach: provision of resources for startup; Management and obtaining permits and

licenses; Management and general contracting facilities; Organization of areas and means for collection; Definition of specific facilities; Organization provision and receipt

of materials; and, Technical planning and economic planning.

Sale and after sale stage includes not only delivery of housing units but also delivery of guarantees of these housing units.

Once a project is built and almost sold, real estate companies move forward to identify new real estate projects.


the Quartet.

VALUE CHAIN IN REAL ESTATE COMPANIES

CLIENTS

Research and

Development

(New Real Estate

Opportunities)

Sale and Post Sale

Services

Business

Management

and

Contracting

Construction Real Estate

Opportunities

Case Studies

Beit Almaqdes Engineers Housing Cooperative

Association – Collective Development Initiative


the Quartet.

79

Beit Almaqdes Engineers Housing Cooperative Association

“54 Engineers / Architects and their direct families will be provided with adequate living conditions in new

housing units in the Beit Hanina area within the East Jerusalem boundaries”

Project Background

At the end of 2006, the Palestinian Engineers Association in East Jerusalem

initiated the First Housing project for Engineers in East Jerusalem due to the

continuous concerns from the Presidents’ Office and the Association of the

housing sector situation in East Jerusalem and specifically housing for Engineers.

The association aimed to assist a number of Jerusalemite Engineers living in

Jerusalem to improve their living conditions and to assist them in their economic

situations specifically due to the high rents of apartments in Jerusalem and its

surroundings.

Thus, all Engineers residing in Jerusalem had to fill in application forms

indicating the reasons they need to have a private housing unit; the application

assisted the Association to take decisions regarding the number and names of

Engineers that will be part of the First Housing project.

Only 54 Engineers and Architects were chosen for the project although the

number of engineers eligible was much more than that. However, the 54 engineer

were chosen according to different criteria and priorities were given to some due

to :

• Lack of private housing owned by the engineer applicant.

• Household characteristics such as age, number of children, income.

In order to start with the plan and the implementation of the project; the

Palestinian Engineers Association has developed a number of committees to

follow up on the project phases and steps required. The Association has developed

4 committees which consisted of different engineers:

• Land Committee: who is responsible for searching for suitable land and do all

the necessary actions to purchase the land.

• Design Committee: to follow up on all issues related to the design of the

housing units, their functions and that all technical procedures are taken into

consideration.

• Permit Committee: to follow up on all issues related to the units permits with

Jerusalem municipality.

• Fund raising committee: to seek funding opportunities from internal donors

(PA office, NGO’s, UN Agencies) and other external donors (Arab donors, EU,

etc)

Furthermore, as per the PA regulations in regards to the work and establishment of

community based organizations, the Association has established and registered

what is called “Beit Almaqdes Engineers Housing Cooperative Association” in

the PA in order to be able to implement its activities and follow up legally as per

regulations.

Project Description

The project is located on four contiguous plots of land in Beit Hanina

neighborhood. The plots are certified and are part of the approved structural plan

of the Jerusalem Municipality. The plots are registered as per numbers “No. 7466

and 7466 A,” which are located within the basin of Aqaba No. 30607 in Beit

Hanina. The plots are near the Nusseibeh family housing project also located in

Beit Hanina.

The area of the four plots of land equals to 7,395 square meters after the

deduction of nearly 4,000 square meters of the original area for public benefit as

per the Jerusalem municipality urban plan law, this decision has added the burden

of the costs of land on the engineer involved in the housing project.


the Quartet.

80

Beit Almaqdes Engineers Housing Cooperative Association

“A new residential neighborhood is developed with Public areas (parks, parking areas and green areas) as well

as public facilities and improved the socio-economic situation of the related engineers as they will not have to

pay rent”

The project plan is to include four separate building units, these buildings will

consist of a total of 54 housing units.

The project has gone through a lot of phases, the below points summarize these

phases with their status:

• Phase 1 (completed): Selecting eligible engineers according to specific criteria

• Phase 2 (completed): “Buying the land” and all related actions are completed,

all 54 Engineers have completed their financial obligations on the land

purchase.

• Phase 3 (completed): the establishment of “Beit Almaqdes Engineers Housing

Cooperative Association” as per the PA regulations to enable the Association to

advocate the project to the donor community and seek potential funding. The

Association has been established for more than three years.

• Phase 4 (completed): “Design of the project” with all related drawings is

finished. The design was done through a licensed Israeli / Palestinian Design

Engineering Office. The Engineers participating in the project have paid also

the cost of the design to the office. The architectural design of the buildings is

based on the concept of Green architectural buildings.

• Phase 5 (46 housing units completed) / 8 housing units pending): “the

issuing of construction permits as per the Jerusalem municipality regulations”,

phase is currently ongoing.

Three permits have been issued for three buildings by the municipality with a

total cost of 1.5 Million US Dollars.

The Engineers participating in the project are obliged to start the construction

works of the buildings within a maximum period of 1 year; if not, the issued

permits would be canceled and the process will have to be repeated again. The

Association is also in the last phase of process of issuing the last permit.

Project Cost Breakdown


the Quartet.

Item Area (m2) Unit cost (US$ /

m2)

Total cost in

Million USD

Land cost (for 4 plots) 7,395 - 2.268

Permit / license cost for 4 buildings - - 1.9

Construction of 4 buildings

Structure work 13,000 300 3.9

Finishing works of 4 buildings

Not including Parking and storage 9,000 500 4.5

Finishing works

of Parking and storage stairs 4,000 250 1

Green areas and parks, public areas / walls, and

retaining walls - - 0.8

Pavements / construction of streets with the

construction of basic infrastructure - - 0.548

Elevators - - 0.25

Generator 630 KVA Qty (2) 75,000 0.15

Cost of lawyer and design office - - 0.2

Total Project Cost 15.516

Table 25

AL Quds Holding - Al Taleh Housing Project


the Quartet.

82


“Al Taleh Project intends to develop a distinctive housing complex; provide green spaces; create a residential

community; reflect the character of Jerusalem life; support the real estate sector in East Jerusalem; support and

meet the needs of Palestinian young families”

Project Brief

Al Taleh is the first housing project for Jerusalem Holding Company. It is located

in Ras al-Amud area and it is less than 7 minutes away from the old city.

The AL-Taleh Project is constituted by 34 housing units distributed among 4

buildings. Within the first phase, 16 apartments are to be deployed and in the

second phase 18 dwellings are to be delivered.

The land which is about 3 dunum has the proper legal requirement, building

permits and Tabo (land registration) so households can enjoy ownership.

The Project intends to develop a distinctive housing complex; provide green

spaces; create a residential community; reflect the character of Jerusalem life;

support the real estate sector in East Jerusalem; support and meet the needs of

Palestinian young families.

The Project will be implemented in two phases:

Phase 1: Within this phase, the entire space given to land exploitation is currently

equivalent to 50% of the land available and comprises over 16 housing units to be

delivered after the fourth quarter of 2014. This phase, due to license issuance,

took three years.

Phase 2: Within this phase, the entire space given to land exploitation is 160%

and comprises over 18 apartments.

Al Quds Holding Company offers the following:

• Registration of the apartment in the Land Registry in the name of the

beneficiary, this will maintain the beneficiary's right as the land owner and will

enable the beneficiary to turn to many financial institutions that offer mortgage

loans according to their types.

• Assist the beneficiary in obtaining mortgage loans by providing all necessary

documents.

• Delivery of ready apartments bought by the beneficiary including best finishing

specifications and according to the beneficiary's desire.

• Processing of all public utilities including parking spaces, patios, a staircase and

an elevator.

• Legal construction and delivery of the apartment as well as the apartment's

license with permission Works.


the Quartet.

83


“Al-Taleh Project is an attractive initiative that highlights the profit potential of developing multi-family

buildings. Once apartment are built and sold, gross profit would exceed the 12 million US Dollars”

Project Details

The table above provides detailed characteristics of the dwellings within phase 1

ready to be sold. Almost all apartments benefit from the following amenities:

terraces, gardens, parking lots and storage areas. Only 3 apartments out of 16

have no terrace and 7 out of 16 units have no gardens.

The average size of amenities per dwelling is as follow: terrace 4.9m2; garden

56m2; parking lots 15m2; and store 6.2m2

The average of floor space in the Al Taleh project is about 103m2. The average

price per square meter is about 3,500 US Dollars.

Only from phase 1, Al Quds Holding is expecting a gross revenue of about 5.7

Million US Dollars.

With an average price of 362,261 US Dollars, it can be predicted that in Phase 2,

gross revenues amount to 6.5 Million US Dollars.


the Quartet.

# Floor Space Terrace Garden Staircase Parking Lot Storage Area Final Price

m2 m2 m2 m2 m2 m2 USD 1 96.4 - 128 25 15 6.6 367,303

2 108.5 - 117 25 15 6.6 397,735

3 104 2.8 - 25 15 8.1 337,504

4 96.3 12.6 40.1 25 15 5.35 346,051

5 101 - 135 25 15 6.3 383,720

6 107 11.2 53 25 15 5.3 380,904

7 107 11.4 43 25 15 6.3 377,032

8 95 14.6 152 25 15 6.3 394,588

9 101 2.6 - 25 15 5.7 327,892

10 110 - 170 25 15 6.3 425,355

11 107 7.8 64 25 15 6.5 381,172

12 107 2.6 - 25 15 5.7 345,382

13 107 2.6 - 25 15 5.7 345,382

14 90 2.6 - 25 15 6 295,900

15 105 4.2 - 25 15 6.3 341,986

16 108 2.6 - 25 15 5.6 348,273

Table 26

Conclusion and Recommendation

85

General Recommendation to revive the Housing Market

“Social Investment should be promoted through local and international organizations with the objective of

increasing the positive social impacts derived from affordable dwellings. Not undermining the importance of the

community involvement when actions are articulated”

As previously discussed, East Jerusalem lacks an

available land and an adequate infrastructure, which

makes the need to formalize urban planning to

rehabilitate existing units and enable new housing

development.

In order for this to happen, there is a need for the

redistribution of ownership from private to public

that will bring more public spaces, facilities and

infrastructure, while improving transport networks

and generating commercial and employment

opportunities.

Therefore, the participation of communities to work

in unison with NGOs and Israeli Authorities with a

common vision and objective is required.

Collective development, where groups of

households build on a single site together, offers

solutions for both affordable housing and provision

of public land. It is assumed that collective

development overcomes sovereignty issues of

public land by enabling the community to maintain

ownership.

Such development has been implemented with high

success. E.g. Beit Almaqdes Engineers Housing

Project, and Physicians Housing project among

others.


the Quartet.

Long-Term

Strategies on Real

Estate and Housing

Community Planning Collective Development

Reviving the housing sector in East Jerusalem is a complicated task, considering the wide range of obstructions to the development of the sector at different stages of the

Value Chain: Development and Delivery. In the development stage community planning and collective development seem to be the most suitable responses

86


“Public institutions and International organizations should work on creating a mechanism of funding; soft

loans and individual lending schemes to promote land registration, house purchase and building, respectively”

Social investment is a financial mechanism articulated

used to create social impact with the main purpose of

securing loans at low interest.

The entities that provide such funds are mainly: non-

profit organizations, housing bank, charity and social

banks among others. In East Jerusalem, there are few

organizations that provide this financial support to some

extent

Social investment, beyond securing loans at low interest,

could fund a large-scale housing project along with its

related public infrastructure, which promotes affordable

housing, as such projects commonly benefit from

economy of scales.

Urban Planning, Zoning and Development

• Create wider consensus with Israeli practitioners in

regards to urban planning and policies.

• Increase lobbying at political level to support needs of

Palestinian Jerusalemites and planning efforts.

• Increase international focus on planning project and the

authorization process with the Municipality and the

Ministry of Interior with particular concern to:

o Restriction applied to the transfer of private lands to

public facilities.

o Restriction on land zoned as green or open spaces which

could provide schools, libraries and other city level

public facilities

o Obstacles imposed by the Municipality regarding

submission of community plans.

Delivery Stage

• Facilitate the formation of financial models that are better

suited to East Jerusalemites financial capacity such as a

long term loans with low interest, and grants for low

income households.


the Quartet.

Long-Term

Strategies on Real Estate

and Housing

Social Investment International Support

In the delivery stage, social investment and international support seem to be the most suitable responses.

87



the Quartet.

Urban Planning Zoning Licensing Construction Hand Over

Israeli

Authority

• Unlock available public land on the

West and East of Jerusalem for new

Palestinian Neighborhoods.

• Develop the urban planning of

Palestinian neighborhoods with the

cooperation of the community and

I/NGOs.

• Unlock in whole or part of the East Jerusalem

land expropriated for new Palestinian

Neighborhoods.

• Complete the zoning of areas yet not tackled.

• Increase the percentage of land available for

construction to 20%, by rezoning green areas.

• Collaborate with the communities and NGOs

to proper categorize the land usages.

• Reduce taxes to make permits more

affordable.

• Minimize bureaucratic procedures in order

to agile the process of obtaining a response.

• Clarify the criteria established to grant or

deny building permits.

• Develop an unchallenging payment system.

• Upgrade the public infrastructure,

prioritizing neighborhoods with higher

demand.

• Launch a regulatory process to legitimate

unpermitted Dwelling.

• Promote public and social housing

project for Palestinian in existing or

new Palestinian Neighborhoods

Community

and People

• Formalize neighborhoods’ CBOs

• Work closely with I/NGOs and

Israeli Authorities to determine

expansion strategies

• Develop joint planning.

• Update and legitimate the

ownership of land.

• Advocate for the proper zoning and rezoning

of the land in East Jerusalem and restore of

the expropriated land.

• Identify the basic infrastructure upgrades

and advocate.

• Organize in groups to collectively

develop housing projects.

• Promote housing project on land own

by multiple individuals.

NGOs (Local

and

International)

• Articulate public advocacy efforts

to unlock public land for new

Palestinian neighborhood, not

necessarily in the East Jerusalem.

• Develop detailed plan of existing

Palestinian Neighborhood in

collaboration with the Municipality.

• Propose and develop plans for new

areas and new neighborhoods

within Jerusalem limits.

• Collaborate with the communities to proper

categorize the land usages

• Advocate for the restoration of the

expropriated land.

• Identify gaps in infrastructure and advocate

for their adequacy.

• Rehabilitate infrastructures of communities

with high density.

• Provide financial support to builders

and individuals through making

available soft loans for constructions,

reconstructions, rehabilitation of

dwellings.

• Provide the financial support and/or

fund to large scale low income

residences ($170,000 per unit)

• Provide financial support to home buyers

through long term soft loans and grants.

Palestinian

Authority

• Support the efforts of NGOs and

Community leaders, financially and

politically.

• Support financially the efforts to

officially register the lands.

• Support the efforts of NGOs and Community

leaders, financially and politically

• Provide financial support to rehabilitate

infrastructure in communities in a critical

situation.

• Provide legal advisory services to East

Jerusalemites.

• Provide financial support to builders

and individuals.

• Purchase land and unlock it for

affordable housing projects

• Provide financial support to home buyers in the

poverty lines through long term soft loans and

grants. This with the collaboration of the

banking sector and donor community.

Developers and

Contractors

• Provide alternatives options for purchasing such

as leasing, easy installments.

• Normalized profit margins to meet citizens’

purchase power.

• Optimize cost of material and administrative

and managerial fees.

Banks

• Ease administrative procedures

• Equal interest rate loans to Israeli banks interest

rates that is much lower than the Palestinian.

Annexes


the Quartet.

89

List of Interviews

1. Beit Almaqdes for Construction &

Investment

2. PRICO

3. Haya Real Estate

4. Al-Quds holding

5. Amar Group – Real Estate

6. TAICO

7. Union of Jerusalem Housing Assembly

8. Palestinian Economic Council for

Development & Reconstruction

(PECDAR)

9. Rajab Abu Asab and Sons Company

10. Sami Awadallah Construction

Company

11. Ali Brothers Co.Ltd

13. Dour for Engineering and Planning

14. Rajab Abu Asab and Sons Company

15. The National Bank

16. Islamic Development Bank

17. The Cairo Amman Bank

18. Mustafa Abu Hamad

19. Moa’yad Amouri

20. Ibrahim Abukhdair

21. Fouad Dakak

22. Samer Mustafa

23. Samer Shqirat

References


the Quartet.

Document Title Author Year

A Blue Print for Addressing the Global Affordable Housing Challenge McKinsey Global Institute Oct. 2014

Coalition for Jerusalem, The Master Plan of Jerusalem 2000, Analytical Study, Part One Souad Nasr-Makhoul Jun .2006

Construction and Housing Conditions in Israel 1985-2010 Israeli Central Bureau of Statistics Dec. 2011

Draft National Housing Policy v.3 Ministry of Public Work and Housing Sept. 2013

Demography , Geopolitics, and the Future of Israel’s Capital. Jerusalem’s Proposed

Master Plan

Jerusalem Center for Public Affairs 2010

East Jerusalem Housing Review International Peace and Cooperation Center 2013

East Jerusalem Key Humanitarian Concerns, update Aug 2014 OCHA Aug 2014

Jerusalem Facts and Trends Jerusalem Institute for Israeli Studies (JIIS) 2011-12-13-14

Jerusalem Statistical Year Book Palestinian Central Bureau of Statistics (PCBS) 2014

Local Outline Plan Jerusalem 2000, Report N.4, The Proposed Plan and the Main

Planning Policies

Jerusalem Municipality Aug. 2004

Private Sector and Economic Development in East Jerusalem , Final Report ACE International Consultants Dec. 2012

Report on Israel Settlement in the Occupied Territories. Bimonthly Publication, Vol. 24,

Number 2

Foundation for Middle East Peace Mar-Apr. 2014

Strategic Plan for Developing the Housing Sector in Palestine Ministry of Public Work and Housing 2010

State of the Nation Report. Society, Economy, and Policy in Israel TAUB Center for Social Policy Studies in Israel 2014

The Jerusalem Master Plan : Planning into Conflict Francesco Chiodelli 2012

The Lutheran World Federation Annual Report The Lutheran World Federation 2013

The Palestinian Economy in East Jerusalem: Enduring annexation, isolation, and

disintegration

United Nation Conference on Trade and Development 2013

Violation of Civil and Political Rights in the Realm of Planning and Building in Israel and

the Occupied Territories

Bimkom – Planners for Planning Rights Sept. 2014

90 Real Estate and Housing Sector Opportunity Analysis - Al-Quds Economic Forum and the Office of

the Quartet.

Disclaimer

The information contained in this document is for genera guidance on matters of interest only. It is provided on the basis that OQ, nor advisors or staff

thereof, are engaged in rendering any professional advice and/or services of any kind. As such, it should not be used as a substitute for consultation with

professional accounting, tax, legal or any other advisers, nor should it be relied on in any way.

While OQ has made every attempt to ensure that the information contained in this presentation has been obtained from reliable sources, OQ is not

responsible for any errors or omissions, accuracy, impressions or otherwise, or for any results which are consequential directly or indirectly from the use of

this information. All information in this presentation is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results obtained

from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance and fitness for a

particular purpose.

In no event will OQ, its advisers, agents or employees thereof be liable for any decision made, action taken or omission of an action in reliance on the

information in this presentation and/or any discussions that followed it or for any consequential, special or other damages.

This publication “Housing Sector in East Jerusalem, a Market Opportunity Analysis” has been funded by the Italian Development Cooperation Agency within

the Project Palestinian Small and Medium Enterprises (SME) Development Programme AID 6525

The views expressed in this publication are those of the authors and do not necessarily reflects the views or policies of the Italian Development Cooperation

Agency.

The Italian Development Cooperation Agency is not responsible for any inaccurate or libelous information, or for the erroneous use of information.

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