‘Private-public partnerships boost investment in Saudi Arabia’s booming real estate market’
RIYADH: Public-private partnerships have become a cornerstone for attracting substantial investment into Saudi Arabia’s real estate market over the past five years, an expert told an industry forum.
As Saudi Arabia seeks to strengthen the private sector and promote sustainable partnerships for development, the role of public-private partnerships in driving economic growth and innovation is more important than ever, delegates at the 15th Real Estate Development Summit Saudi Arabia – European Edition were told.
Saudi real estate projects headlined the event held in Palma de Mallorca, Spain and hosted by GBB Venture. The gathering featured over 100 companies and brought together decision makers from major Saudi projects with global suppliers.
Also on display was the Kingdom’s rapid real estate development, driven by ambitious urban developments and substantial infrastructure investments, with an emphasis on sustainability and innovation.
Elias Abou Samra, CEO of Rafal Real Estate, said at the event: “We have seen good traction on PPPs. With public-private partnerships, you have guaranteed offtake. So most of the investments that came into the country were based on this.”
In a panel discussion titled “In Conversation with a Supreme Challenger,” Abu Samra introduced a classification system for PPPs in Saudi Arabia – structured and unstructured.
“It’s a definition I came up with myself, but it helps me understand the landscape of possibilities,” he said.
Structured PPPs include projects under the National Center for Privatization, which are highly organized and regulated. In contrast, unstructured PPPs include mega projects such as NEOM and Red Sea, which are characterized by joint ventures between public entities and private investors.
The NCP is one of the executive programmes launched by the Council for Economic and Development Affairs to achieve the objectives of Vision 2030.
The programme aims to support the development of the national economy, strengthen the role of the private sector and enhance the government’s focus on its legislative and regulatory role, and attract local and foreign direct investment.
During the conversation, Abou Samra revealed a wealth of opportunities awaiting investors in the Saudi real estate market, highlighting the $1.5 trillion figure cited in a recent report by US real estate services firm JLL, which outlined the pipeline for future projects in the kingdom.
“It will be good to segment this $1.5 trillion to understand the landscape of opportunities in the market from the $1.5 trillion,” said Abou Samra.
“I believe $80 to $90 billion has already been allocated. That means 15 times more projects need to be implemented in 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 present problems. “It is no secret that these projects can be stretched, but the relevance of these figures is to highlight the scale of the opportunity. While the Saudi government may not invest the remaining $1.5 trillion in the short term, there is a remarkable pull from foreign direct investment.”
Regional investors have already shown significant interest, a development that Abou Samra saw as a healthy sign that will lead to more foreign direct investment from both western and eastern markets.
“(They) understand the complexities of investing in Saudi Arabia, which creates a domino effect that leads to more substantial international investments,” he explained.
The Saudi Arabian real estate market is moving from traditional infrastructure projects to more advanced superstructures and operations. This transformation is expected to accelerate, especially since most infrastructure works are already underway. Abou Samra stressed that this progress is promising for sectors such as construction, lifestyle, tourism and interior design.
There are currently several initiatives underway, including the Headquarters Group, with more and more regional headquarters moving to Riyadh.
“According to my last check, 225 companies have relocated their regional headquarters to Riyadh. This shows the leadership’s commitment to interdisciplinary development and value creation,” Abou Samra noted.
More than 120 international companies received permits to relocate their regional headquarters to Saudi Arabia in the first quarter of 2024, a 477 percent increase from a year earlier.
In its quarterly report, the Kingdom’s Ministry of Investment reported that 127 permits were issued in the first three months of the year, underlining the country’s attractive and favourable business climate.
Speaking about the demand for residency permits in Saudi Arabia, the CEO stressed that it remains high, driven mainly by local residents and increasingly by expats who have made the Kingdom their home.
“I launched the project at the beginning of 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 years or more, so they call it home. But until recently, they didn’t really buy a house,” said Rafal’s head.
This demand comes mainly from Arabs and Southeast Asians, but there may also be demand from Western expats as community-based projects like Dirriyah take shape, he explained.
Saudi Arabia introduced the premium visa residency option in 2019, which aims to allow eligible foreigners to live in the kingdom and receive benefits such as exemption from paying expat and family allowances, visa-free international travel, and the right to own property and run a business without the need for a sponsor.
Abou Samra also discussed the growing mortgage industry in Saudi Arabia, which is making up for the lost years of low take-up. The Saudi Real Estate Refinance Co., established by the Minister of Housing, aims to trade and syndicate mortgage portfolios, thereby creating liquidity in the market.
According to the CEO, this initiative is being 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 break free from debt markets amid expected turbulence. “We just won a project worth a few billion riyals, but we can start with 150 million riyals of equity, and this is without debt,” Abou Samra shared.
He concluded with a call to action for vendors and suppliers, emphasizing the importance of localization in the supply chain. “Localization is key. I know we’re speaking to an audience that’s primarily vendors and suppliers from all over the world, but my advice would be: find ways to localize your products,” he urged.
Abou Samra’s insights highlight the dynamism and development of the Saudi real estate market, which offers a wealth of opportunities for investors and stakeholders.
Saudi Arabia’s real estate sector is set for significant growth, with projections of reaching $69.51 billion in 2024 and expected to rise to $101.62 billion by 2029. This expansion aligns closely with the kingdom’s Vision 2030, which focuses on housing, tourism and commercial development.
Chief Operating Officer of Armada Casa, Wassim Hamdanieh. Delivered
Wassim Hamdanieh, COO of Armada Casa, a supplier of high-quality building materials, spoke to Arab News at the event. He said his company plans to establish key partnerships to expand its portfolio of high-quality building materials.
“With Vision 2030 driving rapid growth, our focus is on precision, detail-oriented developments that align with the country’s urban and sustainability goals, enabling us to shape the future of Saudi Arabia’s real estate landscape with unparalleled quality and innovation,” he said.
In another panel discussion, titled “Setting Saudi Above the Competing Boundaries”, Navdeep Hanjra, vice-president of planning and development at the Royal Commission for AlUla, highlighted the region’s enormous potential.
“AlUla covers 22,000 square kilometres, almost the size of Belgium, and has beautiful landscapes and important nature reserves. The master plans show its uniqueness and diversity,” she said.
Hanjra elaborated on the five masterplans, highlighting the ‘Journey through Time’, which takes visitors from the ancient Nabataean era to Hegra, Saudi Arabia’s first UNESCO World Heritage Site.
The “Path to Prosperity” masterplan aims to grow the current population from 44,000 to 222,000, and transform AlUla into a sustainable city that balances tourism and community development.
Navdeep Hanjra, Vice President of Planning and Development at the Royal Commission for AlUla. Screenshot
The Vice President stressed that 70 percent of AlUla’s territory consists of nature reserves, which ensure the preservation and regeneration of historical landscapes.
When asked whether AlUla would remain a limited tourist destination or open up further, Hanjra explained that a structured framework plan, developed five years ago, guides the development of the region.
This plan includes clear boundaries for urban development, target groups for visitors and twelve guiding principles focusing on cultural and natural heritage, sustainability and socio-economic factors.
These principles aim to support and preserve the existing community, while promoting sustainable development and renaturalizing the landscape for future generations.
