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Q&A: SRECO chairman talks Riyadh's Al Widyan project, Saudi Vision 2030

Abdulrahman Almofadhi discusses Al Akaria Saudi Real Estate Company's planned 700ha Al Widyan project, announced earlier this month, as well as Saudi Vision 2030

Abdulrahman Almofadhi became chairman of the Al Akaria Saudi Real Estate Co in 2014
Abdulrahman Almofadhi became chairman of the Al Akaria Saudi Real Estate Co in 2014

Earlier this month, Al Akaria Saudi Real Estate Company (SRECO), one of the biggest names in the Saudi Arabian real estate market, posted a $20m (SR74.9m) net profit for the first six months of 2018 – a modest 5.17% increase on the same period last year.

SRECO chairman, Abdulrahman Al-Mofadhi, talks to Construction Week about the group's ambitious 700ha mixed-use development in Riyadh’s northern corridor, the latest project to be revealed by the firm, as well as his thoughts on where it sits in the kingdom’s Saudi Vision 2030.

Regarding Al Widyan’s self-regulatory office status, will SRECO seek this status for all of its developments in Saudi moving forward?

We believe Al Widyan will be viewed as an ideal model for other lifestyle communities across Saudi Arabia. Its self-regulating approval status is a key part of that.

This will be invaluable on projects that require phased development over a period of five to 10 years, and for projects that require private sector participation.

Given the new direction SRECO is taking, this will be the case for a number of our future projects.

Where do you anticipate the majority of Al Widyan’s investment to stem from, given moves away from public funding?

Al Widyan is the first private development to obtain self-regulating approval status in Saudi Arabia. This unique approval process for such a large-scale, private project creates an investment friendly environment, de-risking the project for investors, reducing complexity in the development phase, fast-tracking permit services, and offering significantly shorter go-to-market timelines.

This landmark achievement has attracted considerable attention from investors and commercial partners. We have already signed several major stakeholders from the region and beyond, and continue to see strong demand from other potential local and international investors and partners.

The project’s unique status makes it extremely attractive to investors who are interested in the improved regulatory and transparent licencing processes.  

Given the optimistic outlook for the Saudi Arabian economy and Riyadh’s geographically central location – bridging the economic centres of the East and the West – we continue to see growing levels of interest from investors in the Far East, particularly those from China and Hong Kong.

How will Saudi Vision 2030 impact the country’s real estate sector?

Vision 2030 is truly transformative. It recognises the importance of real estate in diversifying the economy and by vision to reality making change real in the citizen’s everyday life. I think it will be a catalytic change for the real estate sector in Saudi Arabia and it is encouraging to see developers, within the kingdom, adapting their strategies to align themselves with the Saudi Vision 2030.

Real estate development is a fundamental part of the Saudi Vision 2030. This lays out plans to drastically improve the quality of life for the citizens of Saudi Arabia and its residents by launching a variety of new real estate projects including residential, commercial, and entertainment projects that focus on the wellbeing of residents, whilst providing the highest level of sustainable, innovative systems, and services.

From SCRECO’s point of view, this will help drive change in Saudi Arabia’s real estate sector, attracting capital from local, regional, and international investors with expertise and talent from around the world. We see a raft of ambitious new projects in the pipeline, which I believe will showcase Saudi Arabia’s capabilities to the world, demonstrating the kingdom’s unique history and culture alongside its modern ambitions for progress, inclusion, and sustainability.

How is SRECO geared to take advantage of any shifts set to take place?

SRECO has aligned its approach to large-scale community-focused urban developments with Vision 2030’s pillars of sustainability and innovation. The company has embarked on a new business strategy to deliver large-scale projects, including Saudi Arabia’s first mixed-use urban development that will create a new model for a community-focused urban development.

What are the major challenges for developers in Saudi looking ahead?

The Saudi market presents some unique challenges. Recently, developers have suffered from price volatility creating additional complexity in the planning phase. This has been compounded by changing consumer preferences, with many people choosing apartments over traditional villas. In addition, developers have to contend with unregulated self-construction of private family homes, where systems are lacking and finishes are poor quality, which account for a sizable chunk of the residential housing market.  

Our scale has helped us tackle some of these challenges, but the true cause of our success lies in our diligent resource management, proactive employee engagement and delivery of excellence to our customers. We have made it our mission to modernise the real estate development sector by partnering with the right international partners, leveraging in western skills to maximise co-sharing of innovation, ideas, skillsets, and making the implementation and transition to ‘Saudiarisation’ greatly effective. Thereby, investing in developing local Saudi talent and aligning ourselves with Vision 2030.

Will changes in oil prices alter SRECO’s business over the next 12 months? If so, how and why?

Saudi Arabia’s economy has been dependent on the export of oil for many decades. Hence the reduction in oil prices has had a huge impact on its economy. The real estate market has witnessed a slowdown, due to the erosion of purchasing power in the kingdom and the introduction of VAT. Rather than the depletion of natural resources to generate wealth, Saudi Arabia’s vision and the economic reform agenda, ensures the diversification of the economy from oil exports and creates new economic growth.

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