Posted inOpinion

Saudi Arabia’s real estate strategy takes flight with Aero City

The Middle East’s real estate landscape, especially Saudi Arabia is undergoing a transformation fuelled by government visions and demographic shifts. Explore the key policy drivers, investment opportunities, and the future outlook for this dynamic market

Saudi Arabia’s real estate strategy takes flight with Aero City

The Middle East real estate market is undergoing a significant transformation. Driven by ambitious government visions and demographic shifts caused by the influx of youth, the region is witnessing a surge in demand for modern, diversified real estate assets.

The CBRE Middle East Real Estate 2024 Outlook states that the region is expected to continue its upward trajectory on the back of strong economic growth, strong demand and limited supply. The planned or under-construction real estate projects in the region are currently valued at an estimated total of $1.68 trillion, up from $1.38 trillion a year ago. Of this, Saudi Arabia accounts for 63.1% or about $1.06 trillion, followed by the UAE at $409 billion, making up 24.4% of the total market.

Policy as a cornerstone to economic diversification in Saudi Arabia

At the heart of this transformation lies a combination of government initiatives and policies that are actively shaping market trends. Visionary government policies are fuelling the engine of development across the Middle East, as governments recognise the pivotal role real estate plays in economic diversification and social development.

For instance, Vision 2030 in Saudi Arabia prioritises diversifying the economy beyond oil, with real estate playing a crucial role. This translates into mega-projects like NEOM and gigaprojects like Qiddiya, fostering a demand for commercial, residential, and tourism-related real estate. Streamlined regulations are simplifying the investment process and enhancing transparency as governments implement stricter guidelines to protect investors and ensure market stability. Other than robust regulatory bodies, standardised contracts and escrow accounts for off-plan purchases are some of the important steps that boost investor confidence.

Reforms in ownership laws modernising states such as Saudi Arabia hold immense potential in continuing the growth of real estate. Since 2000, foreign investment in real estate has been governed by the Council of Ministers Resolution No. 89, which provides specific allowances but imposes restrictions on foreign real estate ownership: Obtaining approval from the Ministry of Investment is mandatory for foreigners and entities are allowed to own properties required for their professional or economic activities.

Non-Saudi residents can own residential assets following a license from the Ministry of Interior. In both scenarios, the time-consuming approval process is a major hindrance in addition to the rule that foreigners looking to buy property must also have a residency visa (Iqama), live in the property themselves and not treat it as an ‘investment’, and are required to sell the property upon leaving the country or cancellation of the Iqama. 

Relaxing laws pertaining to foreign ownership of real estate in Saudi Arabia will provide a much-needed safety net, making the region more accessible to international investors. In turn, it paves the way for injecting fresh capital and expertise, fostering innovation and competition within the real estate sector.

Significant investments in infrastructure in the Middle East are boosting connectivity and creating new economic zones, unlocking previously underutilised land for development, and attracting investors and developers. Besides, focus on sustainability and technology including adherence to green building codes, smart city initiatives, and the integration of proptech solutions are being actively promoted, catering to the growing demand for environmentally responsible and technologically advanced real estate solutions.

Building the Jeddah Arena Airport City

Located beside King Abdulaziz International Airport in Jeddah, the airport city serves as a prime example of how government policies can translate into successful real estate development. Envisioned as a mixed-use development that is expected to throw its doors open in December 2025,  this will be home to global corporations as well as an entertainment precinct that will feature parklands modelled after Central Park, six international chains of hotels, a museum of arts and culture, retail shopping, food experiences, and a family entertainment zone.

Sustainable design is a key feature of the project that promotes the use of responsibly sourced materials to build the city, deploying renewable energy technology and efficient space design, such as linking the airport’s railway station to the dedicated mosque in the city, to power it. Innovative use of sustainability tools such as evaporative cooling to reduce the heat sensation and shading cooler areas with a canopy of indigenous trees are being deployed to create this sustainable new-generation city district. 

In the coming days, governments are expected to prioritise projects aligned with their national diversification goals, promoting mixed-use development, technology parks, and tourism infrastructure. Environmentally conscious development practices and the integration of smart technologies will be prioritized, catering to a growing demand for sustainable and efficient real estate solutions.

Public-Private Partnerships (PPPs) are likely to see increased uptake as governments may find leveraging private sector expertise for infrastructure development and project execution a useful implementation device. To fit the evolving requirements, regulatory frameworks will be required to remain nimble, ensuring investor protection as well as fostering a competitive market environment.

The relationship between government and real estate in the Middle East is symbiotic. Government initiatives create a conducive environment for market growth, while real estate development fuels economic diversification and social progress. By understanding and capitalising on these policy-driven trends, investors and developers can navigate the exciting future of the Middle Eastern real estate market.