Saudi Real-Estate: demand for housing estimated at 200,000 units per year

Interview with Hamad A. Al Showair, Managing Director of Hamad Al-Showair Group

The real state sector in the Kingdom is regarded as one of the important economic sectors. In fact, the real estate sector is regarded one of the key supporting factors of development, that’s why the Kingdom has paid much attention to this sector in all its development plans. The state has set out some systems to motivate the sector, one of these systems is the real estate finance system that is considered as an essential support. There is also the system of “Allegiance map,” which is regarded as one of the finance systems, lease system and the system of the so called “implementation jurisdiction” that accelerates solving the problems of real estate sector.

This sector will be a promising and prosperous sector, particularly in the construction field and development of housing schemes in urban boundary, so I think all this support and turn the sector into an industry.

Can you tell us about the importance of the sector?

The real estate sector is regarded one of the dynamic sectors in development, it is a target sector for all community segments and a safe channel because it depends on a set of pillars that depend on the strength of KSA economy, and the urgent demand for housing units. Now we can see that the percentage of KSA youth under age of 30 is about 70% of population, accordingly all those youth need houses. According to the recent statistics, the demand for housing units in the KSA is more than 200,000 housing units per year.
All these factors give a significant importance to the sector.

According to the recent statistics, the demand for housing units in the KSA is more than 200,000 housing units per year.
All these factors give a significant importance to the sector.

Definitely, the sector faces some challenges and obstacles, among them the finance as it is regarded the minimum finance in the neighbouring countries or in the developed countries. We still demand more finance and hope that banks and financial institutions will enhance the supply of finance for the sector’s enterprises. Most of such enterprises are housing or developing enterprises.

Another challenge is the lack of reference, so we hope we will have a reference or a national body that would organize and supervise all the systems of the real estate sector.

Another challenge is the lack of reference, so we hope we will have a reference or a national body that would organize and supervise all the systems of the real estate sector.

Also, another challenge is the lack of information centres that can provide investors with future outlooks about the real estate sector.

If we go back to the motivations that the state undertook to motivate the real estate sector, we will find the establishment of the Saudi Authority for Accredited Valuers (Taqeem), which is a good step to maintain and evaluate the real estate wealth properly in accordance with the international laws. The Authority for Accredited Valuers will give the Saudi youth the opportunity to get involved in this industry as it does need Saudi youth, energy and competencies. The authority still offers training courses for Saudi youth to involve them in this industry to turn the sector into a professional and industrial one.

Can you tell us about your company, how established and developed it along these years? What are your available key projects?

Most of Hamad Al-Showair Group’s work is in the development of lands or as they are called “raw or white lands;” we have developed many areas in north and east of Riyadh. All the areas that were developed have now been turned into residential districts that are a desirable target for investors.

What are the key construction projects you have accomplished?

There are many schemes in north Riyadh districts, in the so called “Al Narjes district”—residential districts that are 70% accomplished.

What do you think of the applied taxes?

Up until now, the Shoura council has discussed this issue and reached a vision that has not been published yet, however, I believe we cannot judge that mechanism until we can see the executive regulation of the application of taxes on the lands. The executive regulation will give us a clear understanding about the application, so it is too soon to speak about it now.

There’s almost 115,000 registered contractors up to 2013 in KSA, which is a huge number.
And 2,000 of them are having valid classifications that are certificated. There’s indeed a strong competition.

The KSA is kind of a big continent, and the state pays much attention to the infrastructure and spends a lot in this field, so I think that the country still needs residential projects in general and commercial projects—malls and others. The country still needs this kind of projects as it is very big in space and has a lot of cities in the west area of Makkah, Jeddah and Medina. As you now this area annually receives more than two million Hajjs (pilgrims).

However, there’s still a gap—the image is still not clear, as I said earlier—there are no information centres.

The KSA is one of the most expensive places to build houses, so an average price for a meter squared is $1580 (as opposed to $1360 in Dubai), so it’s expensive to build properties here. Does that have an effect on the margin of profitability?

This is true, and I think it is expensive because of high slandered specifications for the projects which affects the cost of the projects. Indeed this may be one of the obstacles that the investor encounter.