Speaking at the Cityscape Connect Alkhobar Business Breakfast on Sunday, Bassam M. Boodai, MD and CEO, Jenan Real Estate Co., and Abdul Aziz K. Al-Shaibani, CEO, Al-Oula Real Estate Development Co., said the government can initiate a series of steps to energize the private sector.
“It can provide land at subsidized rates, it can make it easy for new players to enter the market, there has to be a high level of trust and flexibility between the government and the private sector,” said Boodai. “Without sufficient no partnership can work.”
The two speakers felt that the Housing Ministry should play the role of a facilitator and do more of a regulatory work rather than being the direct provider of housing. “It is not possible for the ministry to single-handedly construct 500,000 residential units that the government has promised to built over the next five years,” said Boodai. “It is a huge number.”
They agreed that the government’s injection of SR250 billion in affordable housing indicates that the time is right to capitalize on investment and development opportunities in the residential and affordable housing sectors.
Boodai said it was not just the cost of land that is making it difficult. “A number of factors are responsible for the high cost of villas and apartments. For instance, there is a shortage of labor because of Saudization,” he said. “There are these mega projects that are going on and there are huge government projects … So there is a shortage of labor and that is driving up the cost of construction.”
Commenting on the market’s lack of sufficient affordable housing, Al-Shaibani said: “The government’s strategy is dependent on private developers’ willingness and capability to provide affordable housing. On the other hand, significant challenges still remain in the local markets, to make affordable housing feasible due to the huge demand gap that is outstripping supply, in addition to legislative obstacles.”
According to him, strong population growth and continued economic development and diversification are set to ensure robust demand for all types of real estate over the coming years.
“According to the Central Department of Statistics and Information, Saudi Arabia's population is growing at a rate of 3.2 percent and with about 60 percent of Saudi population under the age of 30 the private and public sector needs to take serious action to cater for the ever increasing demand,” said Boodai.
“The government has already taken decisive action to tackle the problem by injecting SR250 billion into affordable housing and now it is up to the private sector to accommodate the demand. A collaboration between the private sector and the government will be the most effective approach to meet the increasing demand in a record time."
Huge demand for new residential properties led to the establishment of the Ministry of Housing in 2011. Rapid population growth and an increasing number of expatriate workers relocating to the Kingdom are said to be the primary growth drivers.
Soraka Al-Khatib, co-head of Jeddah Office, Jones Lang LaSalle, moderated the session.
