Saudi purchasers embrace off-plan sales despite continued concerns over quality, build time According to real estate consultancy company, Knight Frank, off-plan units represent around 9 percent of total existing housing stock, but a massive 60 percent of total future supply in Saudi Arabia JEDDAH: Off-plan property sales represent a growing sector of the Saudi real estate market, but some consumers are still wary of developers’ abilities to deliver quality homes on time. The sector has been steadily increasing its share of total residential sales and data from the Wafi program, which regulates off-plan property activity in the Kingdom, revealed that in the first quarter of the year, 23 new licenses were granted to sell off-plan units. The licenses referred to 1,644 projects and a total of 143,655 homes worth SR100 billion ($26.67 billion). According to real estate consultancy company, Knight Frank, off-plan units represent around 9 percent of total existing housing stock, but a massive 60 percent of total future supply in Saudi Arabia. The firm questioned 1,000 adult Saudi nationals for its national housing survey of the Kingdom for 2020. Asked how likely they were to buy an off-plan property, 26 percent said very, 37 percent fairly, 14 percent not very, and 13 percent said not at all. “As the residential market sees more institutional developers enter the market and with regulations being enacted to protect buyers, such as the Wafi program, there will be greater levels of confidence in buying off-plan going forward,” Taimur Khan, an associate partner at Knight Frank, told Arab News. Of those who said they were unlikely to buy an off-plan property, 45 percent indicated that the reason was due to a lack of trust in developers over quality, while 19 percent said they were not confident that the unit would be delivered on time. Attia Mohammed Al-Horairi, an agent from the Jeddah-based Asaleeb Al-Tawasol Real Estate Agency, said most Saudi buyers wanted a unit that they could see and was ready to move into. “Most people want to see tangible products before deciding to buy them, especially with the support they are promised by the Housing Ministry, whose solutions and products do not include buying houses and residential units from developers who are not approved by the ministry,” he added. Al-Horairi also pointed out that many buyers could not purchase homes without some financial support and, therefore, could not afford to buy off-plan properties from developers that were not approved. “If banks took the initiative to support these people with certain measures and regulation, the demand on off-plan projects will remarkably increase. Off-plan buyers have fears that uncertified developers would not construct their future houses or residential units as agreed,” he said. The agent added that in a number of cases buyers have had to resort to legal action when off-plan properties have not been delivered. “Victims have filed lawsuits in courts against dishonest investors. Such news makes others think twice before signing such contracts with untrustworthy investors,” he said. Naif Al-Harthi, a legal representative for Taif-based Al-Sakan Al-Masheed, and Tawasul Al-Emdad for Investment and Property Development, noted that time was an important factor in property purchases and many Saudi homebuyers did “not want to wait for two or three years to own their homes.” Mohammed Afifi, business development director at Maximiliano Development Management Services (MDMS), said trust was still a key factor. “Trust in the developer and in the market is fundamental for off-plan projects. Following past stories of poorly treated buyers who have little legal resource and developers who do not update buyers, many buyers are very cautious now when dealing with off-plan projects. “Off-plan sales are vital to the real estate industry because they attract guaranteed profit, so developers must restore the trust of the buyer and be transparent in their transactions to ensure a successful project,” he added. With the government aiming to increase homeownership in the Kingdom to 70 percent by 2030, from 50 percent in 2018, off-plan may soon become more commonplace. “Off-plan sales are a proven global concept and if used appropriately can help mitigate the risks that may be faced by real estate developers and will help the real estate industry get back to business,” Afifi said.