UPDATE 1-Abu Dhabi, Aldar Properties launch $2.6 bln dev't

* Govt says more housing projects possible

* Housing would be provided free to UAE nationals

(Wraps stories, adds details and comment)

ABU DHABI, Apr 19 (Reuters) - Aldar Properties ALDR.AD, the largest real estate developer in Abu Dhabi, is launching a 9.4 billion UAE dirhams ($2.6 billion) mid-income housing project and the government signalled more could follow.

The Al Falah project will be fully funded by the Abu Dhabi government and would be delivered in stages starting from 2011 to 2014, Aldar said on Sunday.

"This project signals the emphasis we will place this year and in 2010 in building more mid-income housing projects because there is a requirement for it from UAE nationals," Aldar Chairman Ahmed al-Sayegh told reporters.

A section will be made available for expatriates, he added.

Abu Dhabi is facing a housing shortage that has driven up rents and stoked inflation as an oil price boom attracted expatriates faster than new homes could be built, but inflationary pressures have subsided since the global economic crisis spread and hit oil prices.

It is Aldar's first fully government funded housing project and will comprise 5,000 homes for mid-income UAE families who will be given the residences free of cost, as well as schools, mosques, office space, a retail mall and hospital.

The government of oil rich Abu Dhabi plans more such projects, said Falah al-Ahbabi, general manager of the Urban Planning Council in Abu Dhabi.

Some 90 percent of projects will be built through the private sector over the next five years, he said. (Reporting by Stanley Carvalho; Editing by Sam Cage, Sharon Lindores) ($1=3.673 Uae Dirham)