PPP can help solve Saudi housing shortage

March 16, 2017

undefinedundefinedPlunging oil prices and stringent public spending have prompted the Saudi Government to reconsider its approach to addressing the shortage of affordable housing in the Kingdom. With limited resources, public-private partnerships (PPPs) could provide a solution to satisfying housing demand and rising home ownership rates from 47% to 52% by 2020.

Manifold benefits of the PPP model

Economies of scale associated with large-scale construction of housing units lower the average cost, making units more affordable. This would support the government’s plan to reduce housing units cost from 10 to 5 multiples of gross individual annual income. Moreover, experienced developers would be able to shorten construction timeframes keeping the quality of units consistent. As a consequence, the lengthy waiting list of Saudis who have qualified for a home under the current government scheme, currently reaching up to 18 years, would also shorten.

Emerging concept in Saudi 

The Kingdom’s first PPP venture, the expansion of Prince Mohammed bin Abdulaziz Airport, only completed in 2015. To date, there have been no completed residential projects using a PPP model in the country. However, first steps have been made, like the recent MoUs with Turkey, South Korea and China, as well as with a number of local developers (including Emaar Middle East).  The most notable of these MoUs has so far been the launch of East Gate in 2016, a large-scale residential project consisting of 7,000 units in Eastern Riyadh. The project marks the first PPP executed by the Ministry of Housing. 

Strong interest from investors

Saudi is the largest country of the Gulf Cooperation Council in terms of both population and economy. However, to encourage investors to convert interest into action, the government needs to create a PPP friendly environment that may be achieved through a number of actions.

Reducing licensing approval timelines 

The National Transformation Programme 2020 already aims at reducing the time required to approve and license new residential real estate developments from 730 days to 60 days.  Second, connecting services such as water and electricity to master plans located further from the city centre should be done in a reasonable timeline. Third, labourers’ shortage in the market should beaddressed, as this has resulted in the delay of many large-scale projects across the country over the last four years.

Most importantly, however, as with the introduction of any new models involving a number of parties, a legal and regulatory framework, needs to be developed. For this reason, the National Centre for Privatisation was formed late last year. The Centre specifically aims to develop, regulate, legislate and oversee the privatisation process of a number of public entities (including healthcare, education and airports) in line with the Saudi Vision 2030 and the National Transformation Programme.

Although still at the early stages, the National Centre for Privatisation has already announced 85 investment opportunities from 17 Saudi government entities which will most likely attract investors looking to enter the Saudi construction market. Having such a specialised regulatory body in place to manage PPP processes will also likely prevent red tape delays along the supply chain and overall project delivery.

The Big 5 Saudi 2017

The Big 5 Saudi 2017 is expected to attract thousands of industry players from around the world to gain a share of the Kingdom’s lucrative construction sector. Taking place from 27-30 March 2017 at the Jeddah Centre for Forums & Events, the show is expected to host over 300 exhibitors from more than 20 countries. Alongside the exhibition, 48 free-to-attend and CPD (Continuous Professional Development) - certified workshops, to help industry professionals develop their skills and knowledge will take place. Delivered by industry experts, this year’s sessions will focus on Project Management, Innovation & Technology and Sustainability.

About the speaker

Jamil has 12 years of experience in Saudi Arabia’s market with an emphasis in Capital markets & Land Transactions, real estate business development and investment. Previously, he held senior executive positions with Ewaan Global Residential Company looking after strategy and business development as well as real estate finance.

Jamil has worked on Alfareeda & Almayaar residential communities, among other projects, and has set up development companies. Recently he was instrumental in the identification and negotiation for large land purchase for a Saudi Bank and sale of residential compound both in Riyadh.

A Saudi national, Jamil holds a BSc in Business Administration from the American Intercontinental University in Los Angeles and a MSC in Accountancy from California State University Fullerton. He is a Certified Public Accountant (CPA) from the State of California.

 

 

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