To help grow its real estate market, Saudi Arabia has undertaken projects related to residential, hospitality, and commercial development.

1. Saudi Arabia Undertakes Many
Projects to Boost Real Estate
Market
Dr. Ehsan Bayat

2. Saudi Arabia Undertakes Many Projects to
Boost Real Estate Market
 As it seeks to diversify its economy beyond oil, the
Kingdom of Saudi Arabia has focused on boosting its
real estate market by encouraging tourism and making
investment easier than ever before. These changes are
guided by the Saudi Vision 2030, which set some clear
guidelines for economic development to position the
kingdom for long-term financial stability. Added to
Vision 2030 is the National Transformation Program
(NTP) 2020, which has the direct goal of increasing
property ownership in the kingdom to 52 percent.

3. Providing New Opportunities for Potential
Real Estate Investors
 To boost its real estate market, the Saudi Arabian government has focused on increasing productivity
among developers so that potential investors have the ability to purchase new homes in good
condition at an affordable price.
 So far, the Ministry of Housing has developed a number of strategic agreements with financial
institutions, banks, and developers within the kingdom and internationally to set the right stage for
increased real estate ownership. Already, the ministry has been involved in 46 projects that will
collectively supply nearly 14,000 new homes to Saudi Arabians. So far, projects have been competed in
several locations, including Makkah, Riyadh, Jawf, Sharkiyah, and Baha.
 Because the Saudi government is focused on sustained growth in the real estate market, the projects
look beyond the matter of housing alone. Each project includes plans for increased infrastructure
around the developments, including water, roads, lighting, and green spaces, as well as planned
locations for schools.

4. Ensuring the Protection of Renters in Saudi Arabia
 The focus on the real estate industry extends beyond property ownership. The Ministry of
Housing is also trying to make it easier to rent homes in the kingdom, which could boost
confidence among potential renters. One of the major projects announced by the ministry
involves the creation of a high-tech platform for facilitating rentals. The platform is intended to
safeguard the rights of both landlords and tenants, as well as resolve some of the questions and
tensions that can arise when leasing property.
 Several challenges are confronting the kingdom’s rental sector, which accounts for half of the
entire real estate industry. The government has acknowledged that sustainable and safe housing
depends on identifying and responding to these challenges.

5. Changes to VAT Laws
 The rental market may receive a boost from new tax exemptions in the kingdom’s value added
tax (VAT) law. Recently, Saudi Arabia announced that it will exempt all residential property rent
from the tax, which makes housing more affordable for many families. However, some people
have expressed concern that this policy will discourage developers from building rental
properties, since they will have to pay taxes on the upfront construction costs, but now have no
way of recouping this money if they decide to retain the building and rent the units. As a result,
overall rents may increase to account for the difference.
 The policy retains VAT on all commercial properties, whether they are rented or sold. Commercial
properties include guest houses, hotels, and other providers of temporary accommodation.
Notably, all residential properties bought as permanent housing are excluded from the tax.

6. Strategic Support for Tourism
 Some of the projects undertaken by the Saudi Arabian government focus on boosting tourism in
the kingdom. One of these larger-scale developments is the Red Sea Tourism Project, which aims
to create luxury tourist destinations on 50 unspoiled islands along a 200-kilometer stretch of the
Red Sea coastline. While the first phase of the project is not set for completion until 2022, the
potential of these developments has attracted a considerable amount of attention from
international investors.
 Importantly, an increase in interest from foreign investors is predicted to drive demand for
commercial space in the kingdom. As more international companies seek to gain a foothold in
Saudi Arabia, they will need more physical office space. Relaxation of the rules around
commercial investment will likely encourage more companies to begin moving into the kingdom.
Furthermore, the government plans to privatize some of its holdings to boost the commercial
sector further.

7. Strategic Support for Tourism
 Outside of the Red Sea Tourism Project, the kingdom has undertaken other initiatives to drive tourism,
such as the King Abdul Aziz Airport extension, as well as Jeddah Economic City. These projects will
contribute immensely to economic development. Jeddah has already seen a marked increase in
accommodations as it positions itself as a strategic landing point for people participating in Hajj and
Umrah pilgrimages. In the third quarter of 2017, Jeddah added 300 new rooms with the opening of
Frontel Jeddah and Radisson Blu Hotel & Residence Jeddah Al Salam. The city expects to see three
times that number opening by the end of 2018.
 Other new developments will also support increased tourism. Jeddah hopes to attract a wider range of
tourists and has increasingly encouraged the construction of entertainment and leisure destinations.
For example, The North Corniche resort area is undergoing a remarkable transformation. When
completed, this seaside project will include an open-air museum, playgrounds, a promenade, and
urban park area along a 12-kilometer stretch of the city.