Saudi govt plans home development
Saudi Arabia is taking an unprecedented hands-on role in housing finance and development as it seeks to re-energise a plan to build more than a million homes and make ownership more affordable. The Housing Ministry plans to create its own development company and start a mortgage-guarantee fund to encourage banks to increase lending, Minister Majed al-Hogail said in an interview in Riyadh on Thursday.
“We are looking to improve the productivity of the local developers” but also trying to attract international developers and teaming consultants and builders for some projects, he said.
Despite its vast oil wealth, the country faces a shortage of more than 1.5 million homes over the next five years and most young families are unable to own their homes due to a lack of lending and construction that falls far short of the growing population’s needs.
One of the first acts of the new government was to impose a tax on urban land that’s not being developed by its owners. With that hurdle out of the way, the ministry is turning to a profitsharing plan that helped Dubai turn desert land into a thriving metropolis.
The Tadawul All Share Real Estate Development Industries Index climbed 1.6 per cent as of 12.05pm in Riyadh on Tuesday. Construction stocks rose 1.2 per cent.
The new development company will give businesses plots of land to build homes and help them secure financing by providing some loan guarantees. The funding assistance will also be extended to some home buyers.
The country must attract large foreign builders because the capacity of local contractors is too small to manage the scale of projects that the country envisages, Al Hogail said.
The ministry is in talks with Turkish, Egyptian, Chinese and Arabian Gulf builders, he said. Saudi Arabia signed a preliminary agreement with a Korean-Saudi group to erect 100,000 homes in the capital, Riyadh, valued at $20 billion and the minister said he expects a final deal soon. The companies are Hanwha Engineering & Construction, Daewoo Engineering & Construction and Saudi Pan Kingdom for Trading, Ind. & Contracting known as Sapac.
Housing density
The development and financing measures are part of a raft of actions the new government is taking as the country tries to diversify its economy to prepare for a post-petroleum future. The housing ministry is looking to double housing density limits, create an office where all development approvals can be granted in the same place and allow the sale of homes before they’re built.
The ministry is lobbying the central bank to allow lenders to differentiate between first home buyers and others seeking mortgages. —