“Real Estate Market in Saudi Arabia is Stable” says Alargan

Interview with Eng. Eyad Al-Bunyan, CEO and Managing Director of Alargan

What is the outlook for the real estate prices?

We have not felt that there has been any reduction in prices up to now. The market is still stable. The prices in Saudi Arabia, especially in the areas where we work, in the Western Central region and in the Eastern provinces are still stable.

The situation in the real estate market is that there is a lack of financing. We have seen that there are a few regulations and there are fees on the white land. They have also increased the mortgage down payment to 30%. There is a long waiting list to get a loan from the REDF. What are the latest developments?

There is a lot to be developed within the government authorities. We are expecting a lot of developments within the next couple of months from the government. They have started announcing some products that would support the real estate housing industry and the development of housing units. Within the next four months, by the end of Q1, we are expecting a lot of new regulations, laws and products that would support the housing development in Saudi Arabia such. Which is hoping to solve the long waiting list for government loans and the real estate fund.

It is also a very promising market, you have a lot of young people that are entering the work force that don’t own a house, population growth is still there and there is a lack of good quality housing. What is the outlook in your opinion for the coming years?

We believe there will be huge demand coming in the next couple of years, especially with the new products that the government is trying to issue to support low and middle income families so that they can own a house. Once those are issued and approved by the authorities I think there will be big demand for housing in Saudi Arabia.

Do you feel that there are any liquidity issues?

I don’t think so. There is however a big issue with the 30%, which we expect the SAMA to review and perhaps revise their position on that.

Regarding the economy, did you feel any kind of slowdown when it comes to the economy and the oil prices?

Not at all. We don’t expect any effects any time soon. It is going to continue in the same way for the next year. We are continuing to build; we have 3,500 homes under construction today.

You don’t feel any negative effects from the cuts in the government budget?

Not yet. It takes at least a year to feel it in the market.

The budget is still one of the largest in the country’s history. What are your feelings about the new government?

They are active and energetic. The decision making process has become shorter than we are used to which is positive.

What in your opinion are the major themes or trends within the real estate market these days?

The taxation on white land is what many people are talking about. Once that is clear, things will change because there is no clarity in the position of the government regarding this law yet.

People are worried about how they are going to apply this law and what they really mean by white land, will it be a 600m2 plot of land or a 1 million m2 plot of land? And where is it? Is it within the CBD of Riyadh or the main cities etc? They have not specified yet. Once they clear that up, things will be boosted again.

Has the mortgage law been fully implemented?

They have started applying part of the chapters of the mortgage law but the main chapters have not started yet. We expect them to start working on those by the middle of next year.

People can take out a mortgage from the bank?

Yes.

Thus what is the problem with the law?

The structure of mortgages today in this country is very similar to a personal loan rather than a real mortgage. They take the home and transfer the title deed by the name of the bank or the mortgage lender. Instead of transferring, it they are supposed to pledge the land.

They also pledge your salary so it is actually a double guarantee; they are guarantying the leverage by owning the property 100% and also by pledging your salary, which is very similar to the personal loans.