In the Gulf, developers are learning from what did not work and moving on to what is feasible for all.

A Reuters report released Wednesday said property developers in the Gulf are trying something new in the market -- focusing on actual housing demands with great consideration to economic reaches of the potential occupants.

After having been burned by extravagant real estate projects, which only brought financial woes when economy soured three years ago, the Middle East real estate players are ready for a paradigm shift.

"Post-Arab Spring, countries like Saudi and Bahrain have realised that affordable housing is an issue," said Deepak Jain, head of strategic consulting for the Middle East and North Africa at real estate services firm Jones Lang LaSalle.

"The focus now is on building as per occupier demand, a concept that is relatively new in the region."

This means developers are shifting their focus from villas and tall towers to mid-income housing.

"In the UAE, most interest has been driven by speculator demand. The speculator market represented more than half the real estate market. They all have left now," said Jain.

Developers are getting encouragement from governments, which see housing projects as necessary steps in mitigating socio-political unrest in their countries.

Saudi Arabia has promised to spend about $130 billion, or around 30 percent of its annual economic output, on social projects such as building new houses and creating jobs over an unspecified period. Earlier this year, King Abdullah pledged 250 billion Saudi riyals ($67 billion) to be spent on 500,000 new homes.

Bahrain is pushing to fill a longstanding shortage of about 50,000 affordable homes, hoping this will also mitigate some of the discontent behind the socio-political unrest in February and March.

"Developers in Bahrain now know that the shortage is in affordable, medium-size housing. We are all targeting this market now," said Durrat Al Bahrain Chief Executive Jassim Al Jowder.

In April, Abu Dhabi awarded a 21 billion dirham ($5.7 billion) contract to state-linked firms to build housing for the local population. Describing its demand to developers, government said it wants to provide "adequate and modern housing for citizens" to help achieve social stability.

Many property developers in the region are partly owned by the government or, in the case of the United Arab Emirates, were bailed out by the state after the market soured and they ran into debt two or three years ago. Aldar Properties, the biggest developer in Abu Dhabi, was given a $5.2 billion bailout by the state-owned Mubadala fund.

An average two-bedroom apartment now costs over 1 million dirhams ($272,0000) in a middle-class neighborhood of Dubai, after prices plunged over 50 per cent. An apartment of similar size would cost well over $400,000 in London.

Aldar Properties, builder of Abu Dhabi's Formula One race track and related development on Yas Island