The building sector in Saudi Arabia was worth $41bn in 2014, accounting for 5.4% of the kingdom’s gross domestic product (GDP), according to an HSBC report. According to analysts, however, Egyptian developers have close to no shares in the booming market.
This sets a sharp contrast from Saudi investments in the Egyptian construction sector. According to Egypt’s General Authority for Investment and Free Zones, a total of 107 Saudi construction sector firms were established in Egypt since 2011. These were set up with a total capital of over $578m, of which nearly $278mn were paid.
Ahmed Abdel-Hady, deputy General Manager of Vision Real Estate Marketing and Sales, a unit of Murabahat Real Estate Solutions Company, said the key reason behind the absence of Egyptian developers in the Saudi market is the kingdom’s restricting legislations.
“Saudi laws, unlike Egypt’s, bar foreigners from owning land. This is why Saudi developers can easily acquire land and build away, while Egyptian developers struggle to access the kingdom’s construction sector,” he said. He added, however, that the only exception to this is Egypt’s The Arab Contractors company.
The state-owned construction firm was part of at least seven construction companies in the kingdom, according to its website.
With a population of 27 million people, and a need to build 100,000 housing units by 2020 to meet a housing shortage, the Saudi market is an attractive one to any developer.
Egypt’s Talaat Mostafa Group has attempted to benefit from this market in 2007 through establishing Thabat, a joint venture with a number of Saudi firms, with the aim of building Nasamat Al-Royadh project. The 3m sqm projectwas to be the first fully integrated city in Saudi Arabia, comprising of 2,031 villas and 2,112 apartments, along with schools and other facilities.
In 2013, however, the company exited the project and venture.
According to Seif Farag, Professor of Urban Economics, differences between the two markets reduced chances of Egyptian developers accessing the Saudi real estate sector.
“While Egypt’s real estate market depends massively on mass production, where developers build units in bulk, Saudi largely sees individual construction of houses, with the government providing mortgage loans, and a local developer handling one house at a time,” he explained, adding that this, along with legal restrictions, limited Egyptian developers’ interest.