Naif Fahad Bin Saedan, CEO, Olaya Real Estate • Interview

Olaya Real Estate is positive that government efforts to boost the sector will pay off long term.

How would you describe your portfolio?

In the commercial area, we have opportunities in education and medicine as well as food and beverages. We are always trying to figure out how to attract new consumers by studying their needs, which are constantly changing. We are thinking about creating a great living community for Saudi Arabia that is not a compound. We are thinking of changing our main business of developing land by creating homes within gated communities. There have been some concerns about what a family needs; now it is clear that they are looking for quieter and safer environments. The main focus today is on the commercial sector.

What are your regional and international expansion plans?

The market in Saudi Arabia is big and the population can handle it. Our company did a project in London four years ago. We also worked with a Saudi-Tunisia real estate company. We also partnered with an American real estate developer, which is working in the residential sector with one of our sister companies. The primary goal of our partnership program is to develop win-win, long-lasting relationships on unique projects.

How may Saudi Arabia’s diversification encourage growth?

Economic diversification is important for building sustainable economic growth. Thus, an economy that is highly dependent on income from a natural resource is in danger of instability or even collapse if the price of the commodity decreases on the global market. Additionally, economic diversification contributes positively to creating jobs, fighting corruption, and improving the institutional quality of countries. The Saudi government has issued 10 development plans since 1970, each covering five years, and economic diversification is a main objective of all these plans. This paper examines the government’s efforts to diversify the economy using four variables: oil share of GDP, private sector share of GDP, oil exports as a percentage of the country’s exports, and oil revenues as a percentage of total revenues. The current analysis covers nine development plans from 1970 through 2013. The analysis concludes that, after more than 40 years of development plans aiming to diversify the Saudi economy, oil is still the main engine driving the economy. The Saudi government needs to fully consider economic diversification as a tool for better governance.

What are your expectations for the future of the sector?

The long-term prospects of Saudi Arabia's real estate sector remain optimistic due to the various government initiatives aimed at stimulating the market. Most sectors have remained subdued as highlighted by lower activity levels in 2018, but the implementation of various urban regeneration initiatives including mixeduse communities and large-scale infrastructure projects may act as a catalyst for the real estate market. While we see this current market conditions prevailing in the short term, we remain broadly positive as a result of government initiatives looking to address key challenges restraining the residential sector in Saudi Arabia, including high land prices, supply/demand imbalances, and affordability, among others. Regulatory efforts such as the white land tax, the large housing schemes, and the mortgage law display clear intent from the government to engage with the issues facing the residential market in the Kingdom. While efforts are slowly filtering through, we see these initiatives as a step in the right direction for a more active real estate market over the coming years.