The implementation of the new mortgage law in Saudi Arabia is expected to modernize the Kingdom’s real estate market through attracting foreign investments. Non-Saudi real estate companies will be able to contribute in building residential units, especially when the market is opening up to all citizens including middle-class.
Real estate and banking officials told Arab News that Saudi Arabia would offer a bunch of facilities to investors in a bid to attract more foreign investment. They stated that such investments would support the national economy and revive related sectors such as construction. According to experts, competition will be tough since the new mortgage law ensures the fairness of the transaction and the safety of the financial system.
“After the implementation of mortgage law, we expect Saudi market to witness an increase in the amount of foreign investment to 70 percent. Many real estate companies have been looking to invest in the Saudi real estate market. However, new Emirati, Japanese, and Korean companies would join the Saudi real estate market very soon. I believe that Makkah is the most demanded residential area where a Korean company will start the building of five residential projects very soon,” said Aziza Mansour, chairman of the board of Aziza Mansour Co. Ltd.
She added: “I expect a tough competition in Saudi real estate market between both local and foreign investors. I believe that foreign investors will win the competition due to several reasons. Actually, foreign investments always follow a flexible strategy, which makes both land’s owner and customers satisfied.”
According to Mansour, banks would face many obstacles that prevent them from dominating Saudi real estate sector.
“Lands’ owners prefer to cooperate with foreign investors as they are more committed than Saudis. For example, they finish the project on time. They also ask the land’s owner to pay a certain amount of money without calling for extras or profits. Furthermore, foreign real estate companies much successful in marketing where their offers attract residents mostly. In addition, they are too skillful where they do their job professionally,” she said.
Saudi real estate companies usually sell a villa for SR 8 million. The foreign company sells the same villa with SR 8.5 million but with better finishing, stated Mansour.
Anas Al-Marhoumi, banking expert, stated that players in the Saudi real estate market will increase where both banks and foreign companies will compete in addition to local real estate companies.
“Such tough competition will benefit the residents, where banks will try its best to attract large number of clients by decreasing the profits and set a flexible law to facilitate repayment of the loan,” he said.
Al-Marhoumi added: “The entering of foreign real estate companies will change the style of the Saudi apartments too,” For example, he said, “The space of the apartment will be decreased to 250 meters at a cost of SR 800,000. I believe that foreign real estate companies will decrease the apartment’s space to set suitable prices that everyone can offer.”
Ahmad Al-Sharqawi, general manager of the real estate development division in the Zaki Farsi group, said that the lion’s share in Saudi market for real estate development would be for companies that have Saudi-Saudi partnerships, or Saudi-foreign partnerships.
According to statistics, the need for residential units in the Saudi real estate market over the next five years will gradually increase.
“Saudi Arabia will be a top investment area over coming two or three years as billions of riyals will be invested in the Saudi real estate sector, he said.
“If the opportunity given for partnerships between national and foreign companies, we will find success in the formulation of strategies and new real estate prices that will be subjected to competition in the supply and demand,” he added.