The real estate and leisure sector has received significant attention from government-funded projects, led by a drive to increase tourism as a major revenue-stream for the Kingdom.
These projects include the high-profile giga-project Neom, a 26,500km2 project located in the northwest of KSA, bordering Egypt and Jordan. Other tourist-focused giga-projects include the ultra-high net worth Amaala Project (3,800km2) and the Red Sea Project (28,000km2), both located on the Red Sea coast. All three giga-projects were spearheaded by the Public Investment Fund (“PIF”).
Other PIF development projects include the Qiddiya entertainment city, a 334km2 project to be built 40km from the capital city, Riyadh; the completion of the King Abdullah Financial District in Riyadh; and the Centre of Riyadh regeneration project, which is a regeneration of a 15km2 area in historic Riyadh.
In terms of residential housing, the PIF is also leading a social housing initiative under the Communities Development Company, and it established the Saudi Real Estate Refinance Company in 2017 – a real estate refinancing company aimed at boosting home ownership in KSA, which suffers from a shortage of affordable housing. The company, which was launched in partnership with the Ministry of Housing and has received a licence from SAMA, was expected to refinance up to 75bn riyals worth of mortgage debt over five years.
Compared to the booming government-led projects, private-sector investment has been relatively flat in recent years. The introduction of the White Land Tax (a 2.5% tax on the value of land, applied on large [at least 10,000m2], undeveloped land plots within populated areas in the cities of Riyadh, Jeddah, Dammam, and Makkah), which was implemented in April 2017, was intended to stimulate development, particularly for the construction of residential units. However, the real impact of the tax is unclear given other dampening factors in the construction sector.
Foreign investment in real estate is permitted (save in the cities of Mecca and Madinah), subject to obtaining the relevant investment license from MISA.
Real Estate Investment Trusts (“REITs”) were introduced into the KSA market by the issuance of the Real Estate Investment Traded Funds Instructions on 24 October 2016 by the Capital Markets Authority (“CMA”). REITs are also subject to the Real Estate Investment Funds Regulations, issued by the CMA on 15 July 2006.