In Dubai, Saudi customers’ first response is ‘we want to be in Downtown.’ There is not much land available there, but we’ve already decided our next development will be in the same area.
of high-quality branded real estate, where you roll out a certain number of properties. Luxury brands like Bentley or Rolex have standard designs, but they also produce limited editions that guarantee exclusivity.
“Cavalli is the perfect partner. They have experience in interior design with materials like tiles, textiles and marbles. The Roberto Cavalli shop in Riyadh is one of their top five best-selling shops in the world.
“We’re working on things with Cavalli in Saudi. It has to be acceptable to local culture and taste, of course, but it also has to be commercial. I think there is a longing in the Saudi market for a product like this, especially for the younger generation of house buyers,” said El-Chaar.
In the Kingdom, DAAR is focused mostly on the residential market, with developments in Riyadh, Jeddah, Makkah and Madinah. The two “big priorities” are the Shams Ar Riyadh development to the north of the city, and another along Palestine Road in Jeddah, which El-Chaar said is becoming the “development spine” of the Red Sea city.
“It’s 130m higher than the rest of the city, which makes a good deal of sense from a climate perspective,” he added.
But he sees the opportunity for a new kind of residential brand in Saudi Arabia. “We’re looking to produce more villas, town houses, two-story houses, but with new products and new brands. If you look at the villa market now in Saudi, it seems like they are all the same design. There is no innovation. But there is clearly a demand for individuality because people still like to build their own residence. We’re looking to appeal to that,” he said.
Themed residential estates, with different villa designs, colors and facades, such as have been pioneered by Emaar and Damac in Dubai, look to be the way of the future in Saudi Arabian real estate.
El-Chaar also sees a lot of potential in the market for serviced apartments in Saudi Arabia, especially in Riyadh, where they are often more attractive for short-stay visitors than hotels rooms and also for Saudi citizens looking for weekend accommodation.
But there are significant differences between the property markets of Saudi Arabia and the UAE. One is that property is regarded as a long-term investment. “In Saudi, real estate is often the first option for investment. It’s part of the culture, part of the process of preserving wealth and hand it down to the next generation,” he said.
The other big difference is in the attitude to off-plan sales, which UAE developers have made a speciality, sometimes with negative effects, as during the global financial crisis in 2009-10, when real estate values virtually collapsed in the UAE.
“The off-plan model is not that well developed in Saudi Arabia, but it will become more so. An off-plan law was passed around 2012 and an agency set up, and became a separate agency of the ministry of housing last year. We are going to register for the off-plan model. The strategy is beginning to show through already,” he said.
Like in the wider economy and in social issues, the property market in the Kingdom is on the verge of a transformation. “There are big changes coming. The real estate laws have always been clear, but off-plan sales and mortgage promotions will change things. The government has signed up with the banks to provide “profit share” arrangements that offer incentives to potential mortgage holders.
“There has never really been a property crash in the Kingdom, just normal phases of the business cycle, not a liquidity issue. And there are steps that have been taken to protect the market. For example, the Public Investment Fund will buy portfolios of mortgages from banks to protect them from volatility,” he added.
The other major recent initiative in Saudi Arabia real estate was the “white land tax” which imposed a levy on undeveloped land, which had a small effect on DAAR’s business. “But because in most places we’ve put in infrastructure that means the land is being developed, so the effect was limited,” said El-Chaar.
“Our land bank has been accumulated over the past 25 years. We bought land from a variety of people, mainly investors who owned it and would sell when they wanted to realize some value. A developer needs years to accumulate that kind of wealth,” he explained.
There are still issues to be overcome in Saudi Arabia in the real estate market, where it can take a