Saudi housing minister Majed al-Hogail has unveiled a new construction programme, which aims to build 1.5 million homes over the next seven to eight years.
Under the scheme, the Saudi government will offer foreign and local property developers a partnership deal, whereby the developer would take the role of investor and bear the risk. In turn, the ministry will support projects by helping arrange financing.
“We are preparing five or six types of partnership between the ministry and the developer,” said Hogail, at a news conference on Wednesday, according to Reuters.
The programme aims to tackle the shortage of affordable housing in the country, an increasing social and economic problem as its young population of 21 million continues to grow.
Past efforts have seen the government set aside large amounts of state money to build homes. However, these have seen slow progress due to bureaucracy and a shortage of land.
The government is now taking a different approach in addressing the issue, seeking to play the role of regulator while privatising the task of designing and building houses.
“We want to catalyse the private sector, to be a partner with it — we want them to play the prime role,” the newswire quoted Hogail as saying.
The government hopes to stimulate the programme by shrinking the average time required to approve and license new residential estate projects from 730 days to 60 days by 2020.
It also plans to move more aggressively to deter the hoarding of land and force plots out into the market where they can be bought and developed.
Around SAR 59bn ($15.7bn) has been allocated to a loan guarantee programme and other housing schemes over the next five years to provide financing to homebuyers and real estate developers, Reuters reported.
Hogail said Saudi’s Real Estate Development Fund, currently financing about SAR 190bn worth of projects, aims to raise money for operations by issuing Sukuk .However, the first issue seems unlikely to occur before the end of 2017 due to a tight liquidity in money markets.
Local property developer Dar Al Arkan’s share price leapt by by more than 20 per cent this week, after it was revealed to be in talks with the government regarding a partnership.
However, Hogail maintained that the kingdom is also keen in pursuing partnerships with foreign developers, due to the expertise and diverse projects they can provide. Last month, the housing ministry was given government authorisation to seek the assistance of Britain, France and China in the construction programme.
If the programme succeeds, it would provide the kingdom with a source of economic growth to offset the fall in oil prices.
It is hoped that the reform plans will double the real estate sector’s contribution to the gross domestic product to 10 per cent by 2020. Authorities will therefore “encourage” the kingdom’s local investors and landowners to get involved in income-generating development projects.
During the session, Hogail also said that details of a tax on undeveloped urban land would be released within two weeks, according to reports.