(Reuters) - Iraq needs an investment of $100 billion under a plan to build a million new homes in the capital and meet a shortfall in residential property for its growing population, Baghdad's mayor said on Monday.
An eight-month delay in forming a government after a March election has deterred many foreign developers from entering Iraq to take advantage of efforts to rebuild its capital, Saber al-Issawi told Reuters in an interview.
"They were afraid of the critical political situation, so there was some inaction, anticipation and waiting until the government is formed," Issawi said.
Last week President Jalal Talabani formally asked Prime Minister Nuri al-Maliki to form a government, giving him 30 days to choose a cabinet from Shi'ite, Sunni and Kurdish factions.
Issawi said that around 80 percent of the total figure would come from investors and 20 percent from the government.
Baghdad has earmarked $1.5 billion for residential and infrastructure spending in 2011 but this figure has yet to be approved by the government and could be revised lower, he said.
Iraq faces an acute shortage of houses after years of war and sanctions and needs 2-3 million new homes. Of the country's estimated 30 million population, some 7 million live in Baghdad.
Baghdad will invest $10 billion over 10 years to build 150,000 homes in the capital's sprawling Sadr City slum, one of the main projects the government is focusing on. Sadr City is home to almost half of Baghdad's population.
Issawi said the government would hold a tender on December 9 to build 82,000 homes in the district from 11 short-listed foreign developers.
Issawi said the government is also looking to spend around $850 million on giving the city a facelift ahead of the Arab League Summit to be held in March 2011, the first major event Iraq is to host since the invasion.
"It is a chance to develop some of Baghdad's face," he said.
Some $350 million will be spent on renovating seven former luxury hotels in the city, $300 million on streets and $200 million on the main road into the city from Baghdad's international airport, Issawi said.
The road, known by many Iraqis as the "Route of Death," was frequently targeted by militias during the height of the country's sectarian violence in 2006-07.
The government hopes a sharp fall in violence in the past two years, and a new investment law allowing foreigners to own land for housing projects, will entice foreign investors.
Iraq's National Investment Commission said earlier in November it had signed a memorandum of understanding with a n group to build 500,000 homes all over Iraq.
Executives from Gulf Arab companies told the Reuters Middle East Investment Summit in October that while they see growing opportunities in Iraq, they retained a degree of cautiousness that slows plan execution.