Property boom round the corner in Saudi Arabia

Our Saudi Correspondent

Another round of property boom is expected in Saudi Arabia. The Saudi property sector will need around $640 billion in investments over the next 20 years to build five million new housing units, according to a new strategic plan launched by Jeddah Municipality. The total investment in the kingdom’s real estate sector will exceed $400 billion this year.

Jeddah alone will need almost a million housing units over the next 20 years to accommodate the increasing number of expatriates and an influx of nationals from rural areas.

The new boom is expected to increase the need for more foreign workers, especially in the construction sector. Most of them will be sourced from India.

The strategic plan said this can be achieved through the construction of low-cost housing units. Saudi Arabia is formulating a new mortgage law which will increase the number property investors spurring local developers to increase construction of housing units. The mortgage law is expected to give lenders more rights including the ability to foreclose on properties in default.

The Shariah-compliant legislation, which has not been finalised yet, allows lenders to enforce their mortgages by reporting debtors to a central authority and forcing them to either repay their debt or vacate a property, according to property experts.

The real estate sector in Saudi Arabia, which has not been hit by the economic downturn like in other GCC countries, plays a vital role in the non-oil economy of the kingdom. Its contribution to the gross domestic product, which stood at of 6.8% in 2004, is expected to rise to 7.2% in 2009.