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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.

Facts & Figures

50%
Percentage of new units built using new technology
1.2 B sqm
of Built-up area are expected to be developed by 2030
70%
Home ownership target by 2030
1.5 Million unit
to be built by 2030

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:

  1. Strengthening MMC production and boosting its competitiveness: BTSI aims at increasing the competitiveness of the MMC capacity present in KSA. This is done through:
    1. 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.
    2. 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.

 

  1. 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:
    1. Match-making efforts between developers (private and public) and relevant MMC factories to support in creating partnerships between the two parties
    2. Match-making efforts between contractors and MMC factories to create solid partnerships which is able to deliver turn-key products at competitive prices
    3. 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:
    1. Marketing efforts to increase the acceptance of MMCs in the overall market across the different players of the ecosystem (developers, citizens, contractors, etc.)
    2. Upskilling efforts to enhance the workforce capabilities and further increase the workforce localization in the sector

Devolving a Sustainable Quality of Life for Communities and Suburbs

One of the mandates of the Kingdom’s 2030 vision is to improve individuals’ lifestyles by developing an ecosystem to support and create new options that boost citizens and residents’ participation in cultural, environmental, and sports activities.  This is in addition to other suitable activities that contribute to enhancing the quality of life of individuals and families, creating jobs, diversifying economic activity, and raising the status of Saudi Arabian cities so that they rank among the best cities in the world.

By 2030, 1.5 million units is expected to be built which is equal to 580 million square meters of residential development. This will require the development of 24k different residential supporting facilities and services. This expect to create a market for developing and operating such facilities with a size of 33 billion Saudi Riyals.

The Quality of Life Initiative, which is owned by the Real Estate Deputyship under the Ministry of Housing, is fully committed to enable the participation of private sector to develop a sustainable quality of life for communities and suburbs in the kingdom, and has all the tools required to achieve this objective by offering the following:

  • Highlighting investment opportunities (Parks, Schools, Preliminary Healthcare, Security, Commercial, etc.)
  • Matchmaking (support to access demand/projects under the Government housing programs)
  • Business support (licensing, incorporation, access to lands, buildings, local supply chain, etc.)
  • Financial support
  • Consultation

Government commitment to develop the industry

The KSA Government commitment is expressed through investments in large real estate developments, incentives to attract private developers and a well-developed ecosystem in place.

For developers, incentives are provided for construction on ministry and private lands including:

  • Financial support (subject to the conditions determined by the ministry on each project): interest-free loans, infrastructure financing support, conditional purchase back guarantees, VAT coverage and higher floor to area ratios
  • Non-financial support is provided in different forms: set-up facilitations (e.g., fast track licensing), operational support (e.g., marketing and sales) and business development / expansion support (e.g., linking technology providers to demand / developers)

For beneficiaries, the Real Estate Development Fund (REDF) and the Saudi Real Estate Refinance Company (SRC) were created to develop the nascent mortgage market in KSA with the aim of increasing home ownership to 60% by 2020 and 70% by 2030

  • REDF covers defaulting borrowers, covers defaulting developers and pays a portion of down payment in the aim of incentivizing borrowers to accept more mortgages and developers to lend more
  • SRC provides solutions to originators, ensures a balanced and sustainable market thrive and channels liquidity in the market

KSA established a clear governance for the housing sector by allocating clear entities across the housing value chain: sector owner / promoter, developers, funders and license issuers

Invest Saudi supports Companies seeking to invest in KSA Real Estate sector

  • Highlight opportunities for potential investment
  • Provides information on KSA & the Real Estate Market
  • Coordinate with government bodies to provide incentives for investments
  • Connect investors with potential partners (matchmaking services)
  • Support with business plan
  • Support in licensing and set up

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