Real estate developers have criticized the current situation regarding regulations and legislation related to the housing market, citing a lack of coordination and harmonization among them. They note that the current regulatory framework for the housing sector lacks coordination and enforcement, and that regulation fundamentally requires achieving the objectives of these systems through the application of best practices and methods, as compared to a number of countries—particularly those that rely on specific approaches in the areas of the courts and financing.
Hani Khashoggi, a real estate marketing specialist, said: ”The housing situation requires radical and serious solutions, because resolving it will address social, security, and economic problems,“ and they called for the private and public sectors to join forces and harness their capabilities to reach acceptable solutions,” noting that the coming period must see active participation by private real estate development companies in housing projects and the development of land and commercial buildings, with the aim of meeting the growing demand for real estate, to work seriously to avoid a production mindset driven by traditional practices and lacking sound organizational planning.
He noted that the emergence of new real estate developers and the eagerness to implement new real estate development projects have breathed new life into the Kingdom’s real estate sector. More of them are now realizing the negative impact of continuing with outdated practices, as they have begun to broaden their vision to better suit the needs of citizens and align with international standards of professionalism.
Khashoggi said that financing for housing development companies during the construction and sales period—which should not exceed four years—or the development of government-owned land by housing development companies, or the development of raw land sites owned by the Ministry of Housing in exchange for a portion of the land, without financial costs to the developer, which encourages private real estate companies to expand their development activities, help solve the housing problem, and provide adequate housing for citizens.
For his part, Ali Al-Omari, CEO of Saray Development and Investment Co., Ltd., emphasized the importance of financing in the Kingdom’s housing sector, considering it the cornerstone of the real estate sector as a whole, noting that financing is a savings vehicle rather than a consumer good like other commodities, noting in this regard the importance of cooperation between developers and relevant authorities through partnerships and coordination to launch financing programs that reduce installment periods and payments and create plans tailored to citizens’ incomes, He noted that one of the main reasons for the increased demand for home ownership is the “unjustified” rise in rents in a number of Saudi cities.
Al-Omari said that launching real estate projects takes a long time, but with many companies now focusing on developing housing projects and other companies offering various financing programs, this will help meet the growing demand in the housing sector in the coming period, Meanwhile, many owners of older homes have been renovating their properties to re-list them for rent after many tenants left because the owners had not previously renovated them, and because their locations within city centers are not preferred by many renters.
He warned against the expansion of individual financing, noting that reliance on individual financing in the majority of projects exacerbates rising prices. He also warned that the Kingdom could face a new housing crisis following the implementation of the new real estate regulations, citing the lack of real estate entities capable of meeting the growing demand for residential units, noting that development companies are not commensurate with the size of the Kingdom’s real estate market or its current market requirements, and emphasizing the need for consolidations and mergers among real estate development companies to advance the real estate industry, He said that the real estate market currently stands at a crossroads between avoiding a new housing crisis, or to facilitate mergers and acquisitions among development companies with a minimum capital of one billion riyals—involving a group of real estate development companies as a first phase—or to allow the entry of capable foreign development companies to bridge the gap and stabilize prices.
Reports indicate that Saudi and international companies and groups have begun to recognize the growth and incentives in the Saudi real estate market and have taken positive steps toward establishing mega real estate projects, The total value of real estate projects being implemented by the Saudi private sector is estimated at more than 400 billion riyals, including the four economic cities announced to date: (King Abdullah Economic City in Rabigh, developed by Emaar), (Prince Abdulaziz bin Musa’ed Economic City in Ha’il, developed by Rakeezah), (the Knowledge Economic City in Madinah, developed by Savola), (the Jazan Economic City in Jazan, developed by the Saudi Bin Laden Group and Malaysia’s MMC), in addition to the mega-projects announced by Emaar Middle East in partnership with Al-Awwal Real Estate Development, such as the Jeddah Hills project valued at 42 billion riyals, as well as the Riyadh View project developed by Dar Al-Arkan Real Estate Development at a cost of 6 billion riyals, which is in line with the plan launchedby Dar Al-Arkan Strategic.
The number of suburbs in the Kingdom currently stands at about 10,000 villages and hamlets that can be developed through large-scale projects by the public and private sectors, such as commercial complexes and the establishment of educational institutions like universities, technical institutes, and branches of government agencies, because without which these areas cannot develop.
A report by Banque Saudi Fransi indicated that the Kingdom needs to build 1.65 million new homes by 2015 to meet the growing demand for housing. It is also expected that private and government real estate development companies will need to build approximately 275,000 units annually through 2015. The Saudi real estate sector is considered one of the largest economic sectors, as it is expected to contribute approximately 55 billion Saudi riyals, or about 9.5 percent of non-oil GDP. Investment in the Saudi real estate sector is estimated at approximately 82 billion riyals over the next three years, while economic sources in Saudi Arabia expect funds invested in new real estate construction to reach about 484 billion riyals by 2020.
(Riyadh)
