The old town is the equivalent of Manhattan, moved to the Middle Ages (or earlier). I don't know the new part of the city, but it probably is concrete and tents/shanty towns, like all large cities in poorer countries.
I don't find it strange that they will not be able to pay for the infrastructure and the additional costs of desalination and of pumping the water to the city (over 2 km up)
http://data.un.org/CountryProfile.aspx?crName=Yemen gives a gross income per capita for Yemen of around $1300. http://en.m.wikipedia.org/wiki/Economy_of_Yemen has a more optimistic $2200. Sana'a may be richer, but I guess the poor will be significantly below that.
I don't find it strange that they will not be able to pay for the infrastructure and the additional costs of desalination and of pumping the water to the city (over 2 km up)
Also, looking at http://files.transparency.org/content/download/700/3007/file..., Yemen is perceived to be extremely corrupt. That means that its population may not trust their government with that amount of money, even if they could afford to pay it.