The Saudi General Real Estate Authority is studying about 15 applications to launch real estate contributions under its new system, according to Abdullah Al-Daheem, the CEO of the real estate development sector at the authority, told Al-Eqtisadiah.

He added that the authority issued 4 licenses for real estate contributions after the issuance of the new system in cooperation with the Capital Market Authority in 2024.

In last January, the first offering of a real estate contribution under the new system in Saudi Arabia was closed to implement a residential project in Riyadh with an investment size of 84 million riyals and an offering value of up to 36 million riyals, with the offering fully covered.

The CEO of the General Real Estate Authority, Abdullah Al-Hammad, said at the time via platform X: '12 minutes were enough to close the first fully regulated real estate contribution offering, which is an indicator of the level of confidence the Saudi real estate market has reached. What we witnessed shows the development of financing tools and enhances investment in the development industry, accelerating the pace of projects.'

According to those responsible for organizing contributions under the new system, as told to Al-Eqtisadiah, among the most prominent differences in the new system—which was introduced to address the numerous defaults in old contributions—are: the contributor must submit a feasibility study for the project, in addition to the involvement of important parties such as an engineering consultant, a legal accountant, the presence of contribution managers, and a financial company to handle the fundraising process. The new conditions also include prohibiting fundraising through individuals and requiring the presence of a specialized financial company to collect shareholders' funds, with a maximum limit of 100 million riyals.

The new system for real estate contributions addressed the main causes of defaults and fraud by regulating the process of offering contributions, requiring a license from the General Real Estate Authority and approval from the Capital Market Authority before collecting funds.

It also mandated the integrity of property ownership through a valid legal deed that is proven sound and can be vacated, in addition to fulfilling all necessary technical requirements such as approving the survey and regulatory plan. It also strengthened the protection of shareholders' rights by requiring qualification and classification of those licensed to practice the activity, and setting the contribution period not exceeding three years to limit delays in liquidation.

Al-Daheem said that off-plan sales projects in Saudi Arabia reached 800 projects with a financial value of nearly 750 billion riyals.

Off-plan sales projects have jumped by more than 100% over the past three years, according to the CEO, with about 700 projects collectively out of the total projects.

He considered that these figures indicate the size of the Saudi economy, demonstrated by the density of real estate projects that meet current market demands.

The off-plan sales system is a regulatory mechanism that allows real estate developers to sell property units to buyers before or during the construction phase, based on approved engineering plans. This effective system contributes to providing flexible financing options for investors, and gives buyers the opportunity to own properties at suitable prices with strict government guarantees that protect the rights of the parties involved.

No significant impacts from supply chains

Regarding the geopolitical impacts on supply chains in the real estate sector, especially off-plan sales projects, Al-Daheem said that the Real Estate Authority is working with a system including the Ministry of Industry and the Council of Chambers to resolve challenges facing the market. He noted that there may be delays in material delivery and price increases, but these have not affected project completion times, which is the important thing.

He added: 'The prices of contracts for sold residential units in those projects will not change. If there is any impact, it may be on residential units that have not been sold yet, although we have not observed anything noticeable so far.'

Al-Daheem considered that the real estate environment has reached a stage of maturity with the completion of the off-plan sales regulations and the new real estate contributions system in cooperation with the Capital Market Authority.