As part of its National Housing Program, Saudi Arabia aims to increase homeownership to 70%, up from 47% in 2016. Achieving this requires a significant increase in residential real estate supply by approximately 1.5 million housing units or 115,000 units annually. The National Transformation Program and the Ministry of Municipal and Rural Affairs and Housing (MoMRAH) have introduced innovative products and initiatives to support this goal, including market-ready units provided by developers or individual owners, access to housing support from financial institutions, and establishing a legal framework for housing programs.

In a historically ready-property market, off-plan properties offer an opportunity for both local and foreign investors to create more affordable housing options, thereby boosting the Kingdom's GDP. Off-plan sales can also stimulate growth in the banking sector to provide financial solutions for different beneficiary segments, expand the real estate brokerage market, and encourage multiple purchases from investors.

Sofkul Islam, CEO at Victorstone emphasised the significance of off-plan sales in achieving the objectives of the National Housing Program since its inception in 2016. "This approach has played a crucial role in expediting home ownership, empowering real estate developers to undertake large-scale projects, and boosting supply. Off-plan sales have catalysed transformative changes in the local real estate market, fostering collaboration among various stakeholders including business consultants, construction contractors, developers, financiers, marketing agencies, and sales brokers."

In recent years, the Kingdom has witnessed a significant increase in off-plan property sales, with a 52% growth recorded in the first half of 2023 compared to the same period in 2022. This surge has made property ownership a viable prospect for a new generation of Saudis. With substantial reforms in the local real estate market, such as the implementation of clear regulations, enhanced partnerships between public and private sectors, and developer empowerment, the Kingdom is poised to bridge the gap between residential housing supply and demand. However, challenges remain, including the need for clearer regulations, improved awareness, and trust-building measures to ensure the successful implementation of off-plan sales initiatives.

In Saudi Arabia, the prevailing preference for ready-made units presents a significant obstacle to off-plan sales. Buyers typically prioritise tangible products over waiting for properties to be completed in the future. To address this, a cultural shift towards embracing off-plan sales is necessary. Effective marketing plays a key role in this shift, as developers must raise awareness among local consumers about the advantages of purchasing off-plan properties and implement strategic pricing strategies.

Off-plan sales projects often encounter difficulties due to their remote locations from city centres and essential amenities. Developers need to acknowledge the importance of proximity to amenities, transportation, schools, and other facilities.

The gradual increase in interest rates, particularly in 2023, has negatively impacted off-plan sales. Higher interest rates slow down the housing market, as banks may struggle to meet the financing needs of multiple projects, leading to liquidity challenges. Striking a balance between liquidity and financing demands becomes crucial to address this challenge.

Saudi Arabia is grappling with a shortage of developers possessing the requisite knowledge and experience to align with the ambitious objectives of Vision 2030. To mitigate this, the Kingdom can enlist more regional real estate developers while also enhancing support and training opportunities for local Saudi developers.

Buyers often rely on developers' assurances and promotional materials, leading to concerns regarding the quality of off-plan properties. Project delays and handover issues further erode client confidence and investment returns. Implementing robust quality assurance protocols and addressing factors contributing to project delays, such as construction challenges, permit delays, and market fluctuations, are imperative measures to bolster consumer trust and satisfaction.

Sofkul emphasised, "The successful execution of off-plan sales will enhance the efficacy and efficiency of Saudi Arabia's real estate market, expanding its depth by attracting more local, regional, and international developers globally."

Overcoming challenges with strategic measures can unleash the complete potential of off-plan sales, making substantial contributions to Vision 2030 objectives and nurturing a resilient, cooperative real estate landscape in the Kingdom.

Stay connected - Get market updates and property news straight to your inbox!

If you have any questions, get in touch and speak to a knowledgeable member of the team.