With an increasing young population and steady demand for residential and commercial units, the Saudi government has taken several steps, including bringing forth a new law that is set to transform the real estate sector.
The government of Saudi Arabia has been supporting the development of the real estate sector by improving technology application in the entire value chain. It has been seen as attempting to bring about transparency by releasing real estate indicators online. The government also inaugurated the Developers Services Center (Etmam) for developing an attractive investment environment. Moreover, it is providing innovative financial solutions to real estate consumers.
Saudi Arabia’s Real Estate Market is divided into:
- Residential Real Estate (Condominiums, Apartments, Villas, and Landed Houses) in key cities like Riyadh, Jeddah, Dammam, as well as across Saudi Arabia,
- Commercial Real Estate (Offices, Retail, Hospitality) and
- Other Types of Commercial Real Estate.
The Ministry of Housing aims to build 300,000 housing units in partnership with the private sector players over the next 5 years. The market of real estate in Saudi Arabia is expected to register a CAGR of more than 9.74% during 2022 – 2027 period.
The Saudi government has set different goals to be completed by 2030. This has given new impetus to the real estate sector as the government now plans to involve the private sector, including foreign players in this journey. The goals are:
- To complete 70% of Saudi’s home ownership target by 2030.
- 50 percent of new real estate units built using new technology.
- 1.5 million housing units to be built by 2030.
- 1.2 billion m² built-up area expected to be developed by 2030.
Relevance of Vision 2030 to Real Estate Business in KSA
Since the launch of Vision 2030 in 2016, the Saudi government has allocated a fund of $1.1 trillion in real estate and infrastructure developments supporting the different projects including 15 GIGA projects and Riyadh’s 8 Mega Projects. These projects include building of more than 555,000 residential units, 275,000 hotel rooms, 4.3 million square meters of retail units, and 6.1 million square meters of new office space for commercial purposes. Additionally, the Kingdom has put in funds for real estate and infrastructure projects with a minimum of 8 new cities planned primarily along the coast of the Red Sea. Thus, the relevance of Vision 2030 to real estate business is the key element for foreign investment.
Saudi New Law on Property Ownership and Foreign Investment
The upcoming law of Saudi Arabia on Real Estate Ownership and Investment for non-Saudis will be a game changer for the property market in the Middle East. The proposed ownership and foreign investment in real estate is aimed at improving the effectiveness and increasing the efficiency of the legal procedures related to the property ownership and real estate business by foreigners. The objective of the law is to make them enjoy natural and legal power in economic zones or cities in the Kingdom targeted for development.
The new law on ownership and foreign investment in real estate by non-Saudi boosts the competitiveness in the market of construction and infrastructure development in the Kingdom. The new law specifies that by any means other than inheritance, a non-Saudi may not own or acquire real estate located within the boundaries of Mecca and Medina cities.
It is predicted that Saudi new law will set off the region’s next freehold boom because of Vision 2030 giga and mega projects. This new law can also be a game-changer for the property market in the Middle East and will encourage more global investors in the region to join the freehold boom.
According to Abdullah Alhammad (CEO of the Real Estate General Authority i.e. REGA), the new Saudi law, eagerly awaited by the global investor community, will allow non-Saudi nationals to own property in all regions of the Kingdom (Khaleej Times_ 29/3/2023).
The forthcoming New Saudi Law for foreign nationals to own real estate is in its final stages and expected to be passed soon. This new law is extensive and more inclusive in comparison to current law. The CEO of REGA said that the government aims to inject units at affordable prices by providing government lands and forming partnerships with the private sector, particularly in Riyadh.
The real estate sector of Saudi Arabia accounts for nearly 5.1% of the kingdom’s GDP and 12.8% of the non-oil GDP market. – Alhammad said.
Presently, ownership of land and property in the Kingdom is restricted to Saudis national or – subject to certain rules for GCC citizens and entities. Presently, companies may own land and buildings for the purpose of their own use such as for employee accommodation, office space and factory space.
Saudi Arabia has become the largest construction market in the Middle East region, having $31 billion out of a total $87 billion worth of awarded projects during the first 10 months of 2022, according to KPMG Professional Services.
The Saudi real estate business leads in the Middle East not only in market size, but also becoming one of the leading countries in terms of real estate innovation at a global scale. Saudi Arabia’s GIGA and MEGA projects will contribute to the digital transformation of the Kingdom’s cities with heritage and culture at their core.
These real estate development projects will be instrumental in positioning Saudi Arabia ahead in entertainment, tourism, and real estate destinations to rival with places such as Dubai.
Because the Kingdom has a lot of potential for the next ten years in the real estate and infrastructure property market, as per Alex Galtsev (CEO of Dubai based property technology company – Realiste). Galtsev also predicted that if a visionary invests in Riyadh and is supposed to buy 10 and 20 apartments and leave it for five years, he can come back and it will have grown to 100 and 200 percent as the Saudi property market is to boom in the next 5 to 10 years.
There is a need of foreign investment in Saudi real estate because of various reasons:
- The real estate market in Saudi Arabia is highly competitive, with increasing demand for new properties because of growth in commercial activities and increased competition.
- Vision 2030 projects need huge investments to complete all projects on time by meeting international standards in all construction fields, from design to latest technology based facilities.
- For creating a competitive atmosphere among real estate industries to build innovative modern housing projects planned by Vission 2030.
- Foreign investment will bring international reputed real estate players to develop any type of real estate project whether residential or commercial by adopting international standards and practices.
Q. Is Saudi Arabia good for real estate?
Ans. Saudi Arabia has the largest population within the Gulf Cooperation Council (GCC) region. There is a good opportunity for real estate investors to meet the highest demand for new housing units in the Kingdom.
Q. What is the outlook for Saudi Arabia’s real estate market?
Ans. The Saudi real estate market is a booming sector for foreign investors. The real estate market growth in Saudi Arabia is expected to register a CAGR of more than 9.74% during the period of 2022 – 2027.