In a rapidly growing & young population as KSA, the government recognizes the importance of Housing sector to its citizens and took completely different approach to realize its commitments: by adopting new technologies like 3D printing, using more prefabricated buildings, leveraging robots for construction, providing many incentives for private sector players like funding and risk sharing.
Fatcs & Figures
Real Estate Value Proposition
Growing and attractive housing market for residential developers
Over the next couple of years, KSA is expected to witness a sharp increase in the demand for new housing units. Saudi Arabia currently holds the greatest potential for the construction sector within the GCC:
- 5 million cumulative housing units needed by 2030
- With more than 5,000 capital projects worth well over $1.6 trillion in the pre-execution stage
- About 1.2 B sqm of built-up area are expected to be developed by 2030
Driven by strong market fundamentals:
- Rapid growth of a large and young national population
- Presence of middle-income class of nationals able to afford housing units
- Economic growth and manufacturing GDP
Demand for new housing units is distributed throughout KSA across 4 category groups (villas, apartments, duplexes and townhouses)
Residential developers can benefit from high profit margins resulting from competitive cost advantage compared to other countries
New era in the housing construction
The housing construction industry in KSA is shifting from traditional to technology-based delivery methods, also known as Modern Methods of Construction (MMCs). These MMCs include but are not limited to:
2D/2.5D Building Systems:
- Insulated Precast Systems
- Autoclaved Aerated Concrete
- Light Gauge Steel
- Insulated Concrete Form
- Form work system and Tunnel formwork
3D Building Systems:
- Modular Concrete
- Modular Light Gauge Steel
The shift towards these new methods of construction is driven by the government’s appetite to address current construction market challenges which include gaps related to the construction price, duration and quality – all hindering the realization of the housing sector potential in the Kingdom. As such, the government’s efforts are now focused around:
- Decreasing the housing units’ construction cost
- Expediting the delivery and construction of housing units
- Increasing the housing units’ construction quality
In line with KSA’s ambitious Vision 2030, ~400k units(including residential, commercial and industrial) are expected to be built using modern methods of construction by 2025 in the Kingdom. This will drive an increased demand for modern methods of construction. The current MMC supply capacity is estimated at ~40k units per year and so, additional competitive supply is required in the market in order to meet the yearly demand of the next five years.
The Building Technology Stimulus Initiative (BTSI), which is part of the Real Estate Development Deputyship under the Ministry of Housing, is fully committed towards industrializing the MMC sector in the Kingdom. The initiative aims at increasing the adoption of MMCs in the Kingdom to expedite the housing delivery and address, in the process, the market challenges.
In order to realize its strategic vision and objectives, the initiative is currently operating under three strategic pillars, which are all supported by the required financial and non-financial offerings:
- Strengthening MMC production and boosting its competitiveness: BTSI aims at increasing the competitiveness of the MMC capacity present in KSA. This is done through:
- Supporting current factories present in KSA in resolving the challenges faced and making them more attractive to the market. Offerings include financial ones such as working capital financing, expansion financing, modernization financing as well as non-financial ones which include but are not limited to value engineering advisory services, upskilling services, etc.
- Attracting new factories to the Kingdom and help localize best-in-class cutting-edge technologies. Offerings include financial ones such as set-up financing (covering 75% of the required capital investment as well as up to 6 months of working capital requirements with up to 20% advanced payments at a preferential rate) as well as non-financial offerings such as investor attraction, business support such as licensing, incorporation, access to lands, etc.
- Driving housing delivery through adoption of MMC: BTSI also aims at driving the adoption of MMCs in the Kingdom to expedite the housing delivery. This is done through:
- Match-making efforts between developers (private and public) and relevant MMC factories to support in creating partnerships between the two parties
- Match-making efforts between contractors and MMC factories to create solid partnerships which is able to deliver turn-key products at competitive prices
- Providing incentives and offerings (financial, regulatory, etc.) to push the adoption of MMC in the market
- Creating an enabling environment to strengthen MMC in KSA: The initiative also aims at creating an attractive ecosystem that supports the thrive of MMCs. This is done though:
- Marketing efforts to increase the acceptance of MMCs in the overall market across the different players of the ecosystem (developers, citizens, contractors, etc.)
- Upskilling efforts to enhance the workforce capabilities and further increase the workforce localization in the sector
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