Public-private alliances: the way out of Saudi housing troubles?
The government relaxed the eligibility criteria to make the loan application easier and accessible to all Saudi nationals.
Best Choice Real Estate Development, a leading Saudi Arabian real estate investment and development firm based in Riyadh, underscored the role of the private sector in addressing the housing shortage in Saudi Arabia during its participation at the recently concluded 5th Jeddah Urban Development and Real Estate Investment Event – Cityscape Jeddah 2014. During the conference, Samer Choucair, Best Choice’s Deputy Chief Executive Officer and Head of Investment, presented the challenges, solutions implemented to solve the current issues, and the immense opportunities in the Kingdom’s housing sector. He presented to regional and international investors, decision makers, key government officials, and senior executives who attended the event.
In his presentation, Choucair pointed out that, while the Saudi Government has made major progress towards meeting the high demand for affordable houses, private real estate developers must do its part and work alongside the public sector to find realistic long-term solutions to the housing shortage. He noted that some developers have already been engaged in a series of meetings with the Housing Ministry for possible partnerships.
“It is also good to note that regional real estate developers used to focus on luxury housing, but many developers are now shifting their gaze to affordable housing units amidst the high demand from low-income and middle-income families. We understand that the challenge of narrowing the gap between the lack of supply and the high demand is enormous, and Best Choice fully supports the government in its efforts to address the problem. We express our support by offering comprehensive real estate investment and development solutions to the Kingdom as well as other key markets,” he said.
Currently, most Saudi nationals still continue to live in rented accommodations. Rising rents and failure to meet bank qualifications for housing loans are making it difficult for many Saudi citizens to own a house. High land prices and high construction costs are also compounding the housing shortage.
The government moved to address the housing deficit through implementation of reforms and policies. In 2011, The Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz, allocated SR250 billion for the construction of 500,000 affordable houses in the coming years. This led to the establishment of the Housing Ministry. Aside from overseeing the massive housing project, the ministry also launched national programs to determine who are eligible for land and loans as well as organize housing rents to keep them low.
King Abdullah also increased the loan amount offered by the Real Estate Development Fund from SAR 300,000 to SAR 500,000 starting 2011. Further, the government relaxed the eligibility criteria to make the loan application easier and accessible to all Saudi nationals. Massive investments in infrastructure projects such as building of economic cities were also made.
Amidst strong public-private partnership and government-led initiatives, industry experts say real estate activity in the Kingdom is expected to grow by 5.8 per cent and its share to the Gross Domestic Product is poised to hit 7.2 per cent in 2014 compared to 6.8 per cent in 2013.
Choucair concluded: “These are indeed exciting times for the housing industry in the Kingdom, which is the region’s biggest real estate market. The high demand is fueling the steady market growth. Best Choice capitalizes on this by offering sustainable and high quality housing solutions in the Kingdom and beyond, reaching other key areas in the region. Rest assured that we will remain committed to this mission as we continue to provide comprehensive property solutions through our strategic mix of quality developments, quality markets, and quality people.”
Choucair also presented two case studies focusing on Turkey and Brazil’s respective housing sectors. He discussed how the two countries successfully addressed their housing deficits by implementing sound reforms and other measures.