Here’s a look at the top trends shaping the real estate industry in Saudi Arabia, from JLL Saudi Arabia’s new report.

1. 6 Important Real Estate Trends
to Watch in Saudi Arabia
Ehsan Bayat

2. In December, King Salman of the Kingdom of Saudi
Arabia (KSA) released the government’s 2016 annual
budget, and based on these projections, real estate
investors are looking forward to growth in the sector.
The real estate industry is one of the most valuable
economic sectors in Saudi Arabia, with steady returns,
low-risk investment opportunities, and strong demand.
In a recent article in The Saudi Gazette, RAFAL Real Estate
Development director of marketing and strategy Essam
Al-Ghamdi noted his approval of the new legislation. He
predicted that the plans for action set forth by the
government, including domestic development
initiatives, will revitalize the Saudi economy.
Image courtesy WikiMedia

3. A leading investment and advisory firm in the region also responded by publishing the 2016 Top
Trends for KSA Real Estate report. JLL Saudi Arabia national director Jamil Ghaznawi presented high
hopes for the inaugural installment of the report, which was created with the intention of becoming
the go-to annual market assessment for regional stakeholders.
In 2016 Top Trends for KSA Real Estate, the company outlined several trends expected to shape the
Saudi real estate industry this year. Here is a brief overview of each point:

4. Taxes on undeveloped urban land
Taxes placed on undeveloped plots within city limits, referred to as “white land,” are expected to
generate as much as 75 billion Saudi riyal, while simultaneously reducing surrounding real estate
prices and helping to address the estimated 1.5 million housing unit shortage. The imposed taxes
will eliminate any benefits of retaining undeveloped land, and it will compel owners to sell their land
for development. This will help balance supply and demand in the country’s housing stock, and
provide more affordable, urban housing options, rather than encouraging developers to build out
into the desert.

5. Reduced home financing provisions
In addition to tax reforms, the Saudi government
is currently weighing a decision to decrease
down payment requirements by 15 percent.
Pressure for the change has mounted as a result
of the growing percentage of the population that
is unable to afford the current standard of 30
percent. Rental costs have increased as well, and
home financing reform could help stabilize these
prices as well. In addition, plans are in place to
transform the state-owned Saudi Real Estate
Development Fund (REDF) into a bank to help
with funding issues.

6. Shift in government spending priorities
Saudi government officials have indicated their commitment to funding infrastructure projects and
other construction deemed vital. However, the new spending model may put a hold on future
projects, as authorities focus instead on finishing those projects that are already approved or
underway. In addition, the directive calls for reduced spending on less urgent transport
infrastructure projects, even if in progress, and to direct those funds to projects financed by Public
Private Partnerships (PPP).
One purpose of delaying these projects is to target the risk of oversupply. By steadily slowing some
initiatives and bringing others to a complete halt, the government aims to balance market dynamics
and foster a strong environment for economic and real estate growth.

7. More affordable housing developments
The socioeconomic layout of Saudi Arabia includes a middle income segment that accounts for more
than 60 percent of households, and that statistic alone points to the demand for more affordable
real estate. In 2016, government and private contractors are expected to join forces to help remedy
the current shortage. Besides imposing taxes on undeveloped urban plots and reducing down
payment requirements, a series of development projects may provide the necessary supply of
middle-income housing.
One such development is the ESKAN project guided by the KSA Ministry of Housing. Upon
completion, ESKAN will add more than 500,000 units of affordable housing for Saudi citizens.

8. Hospitality industry to fluctuate
Demand in the Saudi hospitality industry is anticipated to
wane in 2016 as a result of more hotel owners and
operators consolidating business in the region, as well as
constraints from the overall market. Tourists and pilgrims
traveling to Makkah and other holy sites in the country
could provide the needed boost in revenue, however.
Recently, Prince Sultan bin Salman, president of the Saudi
Commission for Tourism and National Heritage, hosted a
workshop that provided an overview of the Moroccan
desert tourism industry and explored the ways Saudi
Arabia could emulate it. The workshop was part of a larger
strategy to preserve Saudi Arabia’s natural heritage and
use its vast desert landscapes to create a secondary
tourism industry not based on religious travel.

9. Increase in transactions among Middle East investors
One of the final trends observed by the 2016 Top Trends for KSA Real Estate report is the projected
increase in investors seeking to diversify their portfolios. Many will attempt this by selling assets,
which is significant because Middle East investors purchased more than $11 billion in oversea real
estate acquisitions in 2015. Thus, analysts assume that an increase in real estate transactions will
take place this year.