Leaders KSA: Private sector key to housing crisis

Saudi Arabia will have to depend on its private sector to meet local demand for housing

Left to right: Moatasim Zeidan, Eng. Habis, Abdurahman Medallah, and Sultan Batterjee.
Left to right: Moatasim Zeidan, Eng. Habis, Abdurahman Medallah, and Sultan Batterjee.

When Saudi Arabia appointed a former private real estate developer as its housing minister in July 2015, the experts concurred it marked a turning point for the Kingdom’s real estate market.

HE Majed al-Hogail, former managing director of Rafal Real Estate Development, was chosen for the post by King Salman.

Remarking on the move while at the Leaders in Construction Summit KSA 2015, Sultan Batterjee, founder of Lifestyle Developers, said: “He [al-Hogail] is a young man, has the private sector mentality, and arrives backed by achievements in Riyadh.”

Batterjee added that change can be effected through a “proper collaboration between the private sector and the ministry of housing”.

Abdurahman Khaled Medallah, design and engineering director at AKM & Partners Consulting, highlighted the lack of housing supply in Saudi Arabia: “Supply is shrinking and demand is increasing. Jeddah is getting only 10% of the 120,000 units needed from the ministry of housing.”

Moatasim Zeidan, advisor to Mohammed Al Dosary, CEO of Orient Real Estate, said: “Regardless, there should be proper urban planning and masterplans for cities where affordability does not come at the expense of quality and sustainability,” said Zeidan.

Eng. Mohammed Habis, director of strategy and business development at Ewaan Global, said: “The issue over the past year was obtaining approvals for master-plans, a process that might take six months to years.”

Batterjee put things in perspective, noting that privatised real estate development in Saudi Arabia is only eight years old.

“The industry has been here for a long time mostly through buying and selling land, but vertical development has not,” Batterjee said.

“We are very new at this and are learning as we go, aiming to meet demand for 70% of the country’s population aged between 18 and 32.”

Habis said Saudi’s recently-approved tax on undeveloped land will increase supply of housing units in the market.

An annual tax of 2.5% of the value of the land will be applied once the law is approved.

Batterjee, however, pointed out that the Kingdom should not compromise on quality as it looks to satisfy the quantitative housing demands of its citizens and residents.

“Competition will get you quality, so the more supply, and the more the competition, the better the quality,” he concluded.

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