HOUSING MARKET RENOVATIONS
TBY talks to Majed Al-Hogail, Minister of Housing, on opportunities, challenges, and partnerships in Saudi Arabia's housing market.

BIOGRAPHY
Majed Al-Hogail was appointed Minister of Housing in July 2015. He served as Deputy Finance Director at the Saudi Arabian Monetary Agency (SAMA) from 1990 to 1998. He was a member of the board of directors of a number of companies, investment funds, and non-profit organizations, including Al-Jazirah bank, Wafa insurance company, Al-Jazirah and Nass Holding, Rafal real estate development company, the Saudi Commercial Arbitration Center, and the Riyadh Chamber of Commerce.What are some of the major current opportunities and challenges in the Saudi housing market?
The Saudi housing market is undergoing an unprecedented transformation to meet the growing demand for affordable housing. Today, the Ministry of Housing portal has 1.1 million families registered for government support in purchasing a home, and 500,000 registered on the Real Estate Development Fund (REDF) portal. This transformation has met with many considerable challenges, including low productivity in the construction sector, increased building material costs, and the fact that the majority of homes supplied were supplied by single homebuilders, and only 200,000 homes out of 6 million homes were financed by the financial sector. These one-off challenges are additions to fundamental inefficiencies that have existed in the market historically, including low level of private sector contribution to supply and high reliance on government funding. The case for transformation is further amplified by the demographics of the country with over 60%, more than 5 million people, below the age of 35. This youth bulge only makes the current market status more challenging.
Which models is the ministry pushing to engage citizens and the private sector in these emerging opportunities?
To enact a true partnership with the private sector, the ministry took a holistic view of the housing ecosystem and its drivers when activating transformational solutions. The PPP model is unproven in Saudi Arabia with only a few success stories to tell. It was therefore imperative that the private sector be engaged and enabled across all components of the housing ecosystem. There have been important milestones in the transformational plan with a few described below. First, the ministry created a sustainable lending subsidized program through partnering with the financial institutions. This was done by relocating the lending activity from the REDF to the more efficient financial institutions. Furthermore, it subsidized the interest rates charged by the banks on its beneficiaries, and the REDF to use its USD50 billion assets to invest back into the real estate development sector, which is a major cash injection into the supply side of the sector. In addition, the ministry has worked closely with the Public Investment Fund to establish the country's first mortgage refinance company, increasing both the synergies with the REDF and increasing liquidity in the market to help create more than USD20 billion liquidity in the financial system just for 2017. Second, the Saudi Arabian Monetary Authority (SAMA), with the Ministry of Housing, led a major economic incentive for the sector by lowering the home down payment requirement from 30 to 15%. The ministry also established its own regulated closed joint stock company to create a vehicle to partner with developers and other stakeholders and move faster and leaner in creating JVs, SPVs, funds, and other investments. In addition, the ministry decided to gather accurate data on the market, beneficiaries, and overall economic activity in the sector, and is establishing the National Housing Data Centre, where it will be able to share accurate data with developers on demand and help developers produce housing units that have a relevant and secured buyer. Finally, the ministry needed to create various incentives and schemes for the private sector to support the development of affordable housing in the price range of USD150,000-220,000 per unit. Today, the ministry has launched the first two waves of requests for proposals to develop its own land, and has provided financial incentives to promote participation from the private sector, such as advanced payment up to 20% of the project cost to developers free of charge, underwriting to secure lower lending cost from financial institutions, and higher financial support for developers using energy efficient installations and fast home construction technology.

TABLE OF CONTENTS
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