Interview: Majed Al Hogail
To what extent will the rollout of new mortgage schemes bolster investor confidence?
MAJED AL HOGAIL: Two new mortgage schemes have led to massive market growth in 2018. First, interest subsidies have increased the affordability of home financing to end beneficiaries. Second, a mortgage guarantee scheme has boosted accessibility to home financing for private sector employees, self-employed people and entrepreneurs, military personnel who retire prematurely, and senior citizens who are close to retirement. Many innovative new offerings have also been introduced as part of the Sakani programme, provided by the Ministry of Housing and the Real Estate Development Fund (REDF) to allocate residential products across Saudi Arabia. For example, the down payment guarantee programme reduces the down payment required for new homes from 15% to 5%. In addition, the military scheme provides an interest-free loan from the REDF to military personnel covering 20% of property value, including the down payment. As a result of these schemes and programmes, the mortgage market saw growth of 64% in 2018. Growth in the fourth quarter of 2018, compared to the first quarter of the same year, increased by 98%. This increase in demand has already led to a slight increase in property prices, and we have seen medium-sized developers increasing their activities and investing in the development of new projects as a result. We expect this growth to continue to accelerate in 2019, leading to a huge boost in investor confidence. We are on track to deliver our home ownership target by 2020 and, according to GaStat, as of mid-2018 we had already achieved 60.49% of the target.
How can public-private partnerships (PPPs) streamline housing schemes and reduce costs?
AL HOGAIL: In 2017 we started to shape the PPP model by introducing an ambitious programme called Shrakat. Since its inception, Shrakat has recruited 66 local and international real estate developers, who have significant potential in terms of striking new deals with developers and landlords. This programme has added value across the board by giving citizens access to over 140,993 diversified home solutions and attractive financing.
In addition to this, private developers have gained increased access to the general population, resulting in a reduction in investment risks and an increase in value. This PPP model will also enhance the real estate sector by incentivising developers who are using advanced building technologies. In 2018, the model introduced procedures that reduced the cost and time of construction by applying a number of building technology initiatives.
What kinds of public development can add the greatest value in urban areas?
AL HOGAIL: A key target of Vision 2030 is to develop sustainable cities that fulfil citizens’ requirements in all aspects of their lives by using spatial advantages of cities while taking into consideration the economic, social and environmental impacts. Land use charges, uncomfortable sidewalks and a shortage of green areas are key challenges currently facing the Kingdom’s city centres. To solve this, initiatives were launched under Vision 2030 and the National Transformation Programme to increase the quality of life by upgrading the physical environment.
This overarching strategy is being worked on in partnership with other governmental agencies, with the purpose of identifying a successful approach to redevelopment that is in accordance with modern standards and best practices. By using examples from other countries as a source of inspiration and to attain knowledge, the obtained benefits can be maximised and city centres can gradually be transformed so that they are more pleasant for the community.
