Future of the Saudi Real Estate Market: Insights

Interview with Aidrous S. Al Bar, CEO of Intimaa

What is the overall situation in the real estate market when we talk about the evaluations, the services, and sophistication of the real estate market in Saudi Arabia?

Right now the real estate market is facing a lot of changes. The Minister of Council has announced that he will charge a fee or levy tariffs on the white lands. This gives rise to a lot of rumors. People are not sure about the future of the real estate market.

So, right now you will get a different view of the real estate market. But there is a demand for real estate properties – be it residential, retail, industrial, or all other activities – not using the real estate, the raw land or white land as a commodity for buying or selling. We will see a lot of changes in this market in the future after the Minister of Council instills the rules for the tariffs that will impact the raw land.

We have also seen that they have changed the down payment rules for mortgage. They have increased it to 30%, which is also impacting the real estate sector. At the same time the Minister of Housing scraped their plans of building half a million units. There is a lot of governmental involvement in this sector, which is distorting the private sector. How does somebody function in such an environment?

By being clever and knowing what to do. The real estate market in Saudi Arabia is prospering. There are a lot of opportunities in the Saudi market. Although you can say that this 30% is impacting the whole process of buying residential houses or in the sector of funding housing for individuals. But this market has seen a lot of increase in the prices of raw land. However, the real estate market is not only about raw land. Raw land is just a part of the product. The value of any land depends on what you build on the land. To be aware of things impacting this market and to make the most of this market, people have to work carefully and cleverly.

In the residential area, there is a potential for building and for reducing construction costs and the cost of raw land. In the Saudi market, some buildings are now being built on mere 300 square meters, whereas previously it was being built on a minimum of 500 square meters. So, it all depends on the type of product, how to reduce the cost, and on how to market these products. The products will have a lot of competition. The market will be dominated by all those with better construction plans, and all those with the capacity of meeting the market needs by exceeding the needs and expectations of the consumer. All these traits are required to face the current trends in this market.   

Do you see the structure of the industry changing? Do you see a lot of new players coming into the market? Do you see more consolidation and more players going out?

There will be a lot of place for the real estate developers. The market is going to open out for development and for real estate services. Intimaa offers a lot of real estate services.  We will see a better market in providing services in areas like research, real estate visibility, valuation, property management, and in the development side of the real estate product. 

Let’s speak about the services that Intima offers – research, real estate services that signifies that indeed there is sophistication in the Saudi market. It’s not just about development now. Services are getting more important. Can you tell us a little bit about the evolution of the real estate services in the Saudi market?

Usually, when it comes to real estate, people only provide one-single service. In Intima, we provide a comprehensive real estate service under one umbrella. From the time the client decides to buy land to build on, we assist our client through the whole process of buying, to evaluation of the land, to selecting the right project, and then finding the tenant or the buyer.

We have all the real estate services cycle under one umbrella. This will give the client the confidence that he has knowledge in all the sectors of real estate. Herein lies our strength.

So, you are a one-stop shop?

Yes, a one-stop shop.

Who are your clients? The real estate companies? The individuals?

All the real estate service providers and users. We work with the clients who want the project and we work with the users. We always come between two parties – the buyer or the seller, the tenant or the owner, the contractor or the owner. Our work involves providing specialized real estate information, real estate services between two parties that need each other.

What are the specifications of each of your client group – individuals versus the corporates? What are their needs and how do you fulfil them?

Actually, the most important thing is to know what is happening in the market. You know that real estate is a cyclical industry. Sometimes the supply in the office construction is more than what is needed. Sometimes hotels are built in areas where there is no need for hotels. Our role is to look at the opportunities in the market.

Our job is to help the client in picking the right real estate product in the market. We are the eyes and ears of this industry, because of the services we offer and because we have the information. In the retail market, we always know if the market is in favor of the tenant or the owner. This is our job. We always provide services to 2 parties and we always try to be fair to both of them.

Where would you see significant investment opportunities or opportunities that can generate significant cash flow? Which area of real estate would you not recommend at the moment?

There is always a demand for any kind of real estate product. It all depends on choosing the right location, the right size, the right material, and the right price for it. In the Saudi market, there is a demand for residential properties in all areas, but where and how are questions that need to be answered. So, this is an area that we, as developers, specialize in.

We will provide them with the right information and right advice to choose the right location, size, and marketing materials for their project. But, in the real estate market, you can never say for sure that one has to completely stop one particular construction or development. All it needs is a certain kind of market and a certain kind of people to promote development.

It’s true that in the Saudi real estate market, it is difficult to find certain information about statistics and various things. So, you are adding a lot of value to close the gaps in this market.

There has been a lot of change in the Saudi market. It is getting better and better. The Ministry of Justice has put up all the right information. Now, anybody can know the sale prices of a particular property in a certain area in a city. You can look for this information in the website of the Ministry of Justice.  You can get the right price of a property.

It means a lot to the people to know the appraisal of their properties. Now, information is available in the Saudi market, but you have to know how to use it and how to benefit from it. But there is a lot of information in the market. Only a professional sector and a professional agency will be able to advice on how to use this information to benefit the buyer or seller, or the tenant and the owner. This is where we step in.

Tell us more about your clients, your milestones, your track records. Tell us about the advisory projects you have successfully carried out through out your career.

As a property management company, one of the major we are running the Red Sea Mall project under the supervision of the Red Sea Mall company. We are helping out banks, capital companies, developers in the areas of appraisal and in the high and best-use.

What is your strategy for your market positioning? What would you like to be known for in the future?

Our vision is to be a premium real estate service provider in the Kingdom. We are working towards being the number one or number two in the Kingdom in our field.