Saudi Arabia’s Industrial Production Index up 0.9%: GASTAT

“Public-private partnerships drive investment in Saudi Arabia’s growing real estate market”

RIYADH: Public-private partnerships have become the basis for attracting significant investment into Saudi Arabia’s real estate market over the past five years, an expert told an industry forum.

Delegates at the 15th Saudi Real Estate Development Summit, European Edition learned that, as Saudi Arabia moves to strengthen the private sector and promote sustainable development partnerships, the role of PPPs in driving economic growth and innovation is more important than ever.

Saudi real estate projects were the main attraction at the event held in Palma de Mallorca, Spain, hosted by GBB Venture. The event was attended by over 100 companies and decision makers from major Saudi projects connected with global suppliers.

It also showcased the rapid development of the Kingdom’s real estate market, driven by ambitious urban development projects and significant infrastructure investments, with an emphasis on sustainability and innovation.

Speaking at the event, Elias Abou Samra, CEO of Rafal Real Estate, said: “We saw good traction in PPPs. In the case of public-private partnerships, you are guaranteed a recovery. So most of the investments that came into the country were based on that.”

During the panel discussion titled “A Conversation with the Main Contender,” Abou Samra presented the classification system of PPPs in Saudi Arabia – structured and unstructured.

“It’s a definition I came up with, but it helps me understand the landscape of possibilities,” he said.

Structured PPPs include projects under the National Privatization Center, which are highly organized and regulated. Unstructured PPPs, on the other hand, include megaprojects such as NEOM and Red Sea, characterized by joint ventures between public entities and private investors.

The NCP is one of the implementing programmes launched by the Economic and Development Council to achieve the goals of Vision 2030.

This program aims to support the development of the national economy, increase the role of the private sector and strengthen the role of the government in legislation and regulation, as well as attract local and foreign direct investment.

During the discussion, Abou Samra outlined the wealth of opportunities awaiting investors in the Saudi real estate market, highlighting the $1.5 trillion figure mentioned in a recent report by US-based global real estate services firm JLL, which detailed plans for future projects in the Kingdom.

“It will be good to segment this $1.5 trillion to understand the opportunity landscape in the market beyond this $1.5 trillion,” Abou Samra said.

“I think $80-90 billion has already been committed. That means a 15-fold increase in the number of projects to be implemented over the next seven, eight, maybe 10 years,” he added.

The CEO was candid about the challenges facing megaprojects, acknowledging that they take time and often run into problems. “It’s no secret that these projects can be stretched, but the significance of these numbers is that they underscore the scale of the opportunity. While the Saudi government may not invest the remaining balance of $1.5 trillion in the near future, there is a noticeable push from foreign direct investment.”

Regional investors have already shown significant interest, which Abou Samra saw as a positive sign that will drive further foreign direct investment from Western and Eastern markets.

“(They) understand the intricacies of investing in Saudi Arabia, which creates a domino effect that encourages more international investment,” he explained.

The Saudi real estate market is moving from traditional infrastructure projects to more sophisticated superstructures and operations. This transformation is set to accelerate, especially since most of the infrastructure work is already underway. Abou Samra emphasized that this progress is promising for industries such as construction, lifestyle, tourism and interior design.

Several initiatives are currently underway, including the creation of a headquarters group, with an increasing number of regional headquarters moving to Riyadh.

“At my last check, 225 companies have moved their regional headquarters to Riyadh. This shows the commitment of management to cross-functional development and value creation,” noted Abou Samra.

More than 120 international companies have received licenses to relocate their regional headquarters to Saudi Arabia in the first quarter of 2024, an increase of 477 percent compared to the previous year.

The Kingdom’s Ministry of Investment reported in its quarterly report that 127 permits were issued in the first three months of the year, which underlines the attractiveness and business friendliness of the country.

Speaking about the demand for stays in Saudi Arabia, the CEO emphasised that the demand remains strong and is driven primarily by local residents and, increasingly, expatriates who have settled in the Kingdom.

“I started the project earlier this year, and almost 15 percent of the buyers are expats who are residents. Some of them have been living in Saudi Arabia for 10 or more years, so they call it home. But until recently, they had not bought a home,” said Rafał’s boss.

He explained that demand is coming primarily from Arabs and Southeast Asians, with the potential for more Western emigrants to come as social projects such as Dirriyah take shape.

Saudi Arabia introduced a premium residence visa option in 2019, which aims to allow eligible foreigners to reside in the Kingdom and enjoy benefits such as exemption from foreign residence fees for their dependents, visa-free international travel, and the right to own property and run a business without the need for a sponsor.

Abou Samra also discussed Saudi Arabia’s growing mortgage industry, which is making up for the lost years of low interest. Saudi Real Estate Refinance Co., founded by the housing minister, aims to securitize and syndicate mortgage portfolios, creating liquidity in the market.

According to the CEO, this initiative can be compared to the creation of Freddie Mac and Fannie Mae in the US.

Alternative strategies, such as land deals with extended payment terms, are being used to disconnect from debt markets amid expected turbulence. “We just won a project worth a few billion rials, but we could start with 150 million rials of equity, and that’s without debt,” Abou Samra said.

He concluded with a call to action for suppliers and retailers, emphasizing the importance of localization in the supply chain. “Localization is key. I know we’re speaking to a crowd that’s mostly suppliers and retailers from all over the world, but my advice is: find ways to localize your products,” he urged.

Abou Samra’s insights highlighted the dynamism and evolution of the Saudi Arabian real estate market, which offers a plethora of opportunities to investors and stakeholders.

Saudi Arabia’s real estate sector is poised for significant growth, forecast to reach $69.51 billion in 2024 and expected to grow to $101.62 billion by 2029. This expansion is closely aligned with the Kingdom’s Vision 2030, with a major focus on housing, tourism and commercial development.

Armada Casa COO Wassim Hamdanieh. Delivered

Speaking to Arab News on the sidelines of the event, Wassim Hamdanieh, COO of Armada Casa, a supplier of high-end construction materials, said his company plans to forge key partnerships to expand its offering of top-quality construction materials.

“As Vision 2030 drives rapid growth, we are focused on meticulous, detail-oriented projects that align with the country’s goals for urban development and sustainability. This gives us the opportunity to shape the future of Saudi Arabia’s real estate landscape with unparalleled quality and innovation,” he said.

During another panel discussion titled “Positioning Saudi Arabia Beyond Competitive Borders,” Navdeep Hanjra, vice president of planning and development at the Royal Commission for AlUla, highlighted the region’s enormous potential.

“AlUla covers an area of ​​22,000 km2, almost the size of Belgium, and boasts stunning landscapes and significant nature reserves. Its masterplans reflect its uniqueness and diversity,” she said.

Hanjra detailed the five master plans, with an emphasis on the “Journey Through Time” that takes visitors from the ancient Nabataean era to Hegra, the first UNESCO World Heritage Site in Saudi Arabia.

The Path to Prosperity master plan aims to increase the current population from 44,000 to 222,000, transforming AlUla into a sustainable city where tourism is balanced with community development.

Navdeep Hanjra, Vice President, Planning and Development, Royal Commission for AlUla. Screenshot

The Vice President stressed that 70 percent of AlUla’s area is made up of nature reserves, which allows for the preservation and renewal of historical landscapes.

In response to a question about whether AlUla would remain a restricted tourist destination or open up more widely, Hanjra explained that the development of the region is governed by a detailed framework plan developed five years ago.

The plan includes clear boundaries for urban development, target groups for tourists and 12 guiding principles focusing on cultural and natural heritage, sustainable development and socio-economic factors.

These principles aim to support and preserve the existing community while promoting sustainability and re-naturalisation of the landscape for future generations.

Leave a Comment