A new mortgage law earmarked for Saudi Arabia could boost activity in the Kingdom's construction industry by up to a third, according to Mu'taz Sawwaf, the CEO of Construction Products Holding Company (CPC).
Speaking exclusively to Oxford Business Group (OBG), the global publishing, research and consultancy firm, Sawwaf said that the new legislation, which is expected to be introduced in the future should help to make processes smoother and inject confidence into the industry.
Sawwaf stressed that the industry was already moving, buoyed by a combination of banks easing their lending policies and a list of construction projects, valued at an estimated $200bn, issued by the government.
"Even now, without a mortgage law in the country, construction is moving, since banks and other financial institutions are already giving mortgages," he said. "But I estimate that once the law is passed, it will push construction work forward and increase activity by around 20-30%. Contractors will be happy to do more work and factories will become more productive."
Sawwaf was speaking to OBG as part of the research for the Group's forthcoming report on Saudi Arabia's economic activity and investment opportunities. OBG's publication will include a detailed, sector-by-sector guide for foreign investors, together with a wide range of interviews with the most prominent political, economic and business leaders.
While Sawwaf was confident that the country's contractors would be able to keep pace with the demand to build new homes in Saudi Arabia, he acknowledged that the government faced a challenge in issuing permits for the projects. Figures indicate that the number of housing units required to meet demand will reach between 1.5m and 4.5m by 2015.
"Many international firms have entered the market so it will be possible to meet the upcoming demand," he said. "However, we are talking about massive building projects and questions remain about whether the government will be able to issue building permits for these projects on time."
Although the Kingdom's contractors are joining forces to bid on projects, Sawwaf remains unconvinced that they would want to follow this through with full consolidation of their business. "Most players in the market are quite happy with the current situation which has a number of smaller contractors working in different markets," he said. "Instead, we are witnessing a trend for companies to come together in consortia and bid on projects together in order to minimise individual risk and maximise the potential of winning the tenders. I see this trend continuing but not leading to full consolidation."
OBG's forthcoming report will mark the culmination of more than six months of on-the-ground research by a team of analysts, assessing trends and developments in all major sectors of the economy. It will provide information on opportunities for foreign direct investment into Saudi Arabia's economy and will be a guide to the many facets of the Kingdom, including its macroeconomics, infrastructure, political landscape, banking and sectoral developments. The report will be available in print form or online.
