UAE's Giga Group has signed a $1 billion initial contract with local officials in Iraq's southern Basra province to build 12,000 houses in a country which suffers from an acute housing shortage, authorities said.

The Dubai-based company will build the homes over 1,600 acres of land on the outskirts of Basra, 420 km southeast of Baghdad, Sabah al-Bazouni, head of Basra Provincial Council said during the signing ceremony.

'It is an initial agreement. The land has been allocated to the company so they could start quickly,' Bazouni said.   

The contract has been divided into four smaller contracts each worth around $250 million in order to avoid bureaucratic procedures of seeking the approval from the central government in Baghdad, Bazouni said.      

Iraq faces an acute shortage of houses after years of wars and sanctions. It needs between 2-3 million new homes for its growing population, officials said.

While oil companies are helping develop the country's petroleum industry, other sectors like energy production, electricity and construction are lagging behind and require more foreign investment to help Iraq rebuild. - Reuters