Dahlan said that 37 percent of Saudis do not own houses and pay rent, while 30 percent live in inadequate housing facilities. He also pointed out that the Kingdom is in need of 350 million sq meters to accommodate a growing population with 67 percent of the population currently searching for affordable housing.

According to statistics presented by Dahlan, 85 percent of the Saudi population lives in major cities such as Riyadh, Jeddah and Dammam, with Jeddah listed as the city with the highest population density.

Those who spoke in the first session were Joseph Danko, managing director of Urban Programs- CH2M Hill; Thai Ker Liu, director of RSP Architects Planners and Engineers in Singapore, and David Smith, founder of Affordable Housing Institute (AHI).

The specialists provided their insight regarding the characteristics and features of competitive cities in the 21st century, while addressing the key questions of how cities compete, how they attract capital and whether newly built cities compete better than existing cities.

In relaying Singapore’s successful experience in public housing, Liu highlighted that creating cities that stimulate economic growth and provide citizens with a high quality of living, should be the driving factors underlying urban planning. Liu said that 95 percent of the population in Singapore owns a house, an astounding figure given the high-density population of the island nation, which was a huge endeavor undertaken by the government over five decades.

Danko provided three key points that define competitive cities from his perspective, namely the need to embrace sustainable solutions in urban planning, accentuating the unique characteristics of a city and emphasizing a shared public realm.

He also underlined that urbanization has led to an unprecedented consumption of natural resources, which mandates a shift to sustainable economic solutions in development.

Smith reinforced the previous speakers’ comments regarding how successful urbanization is the driving force behind prosperous cities and affordable housing is what makes cities function properly.

“Urbanization is here already, cities that don’t plan their city landscapes will be met with unplanned urbanization,” he said.

The SR 1 billion contract is for the first phase of the Mutrafiah Housing Project at Jubail Industrial City, which includes the construction of 800 villas, the first of which will be available for occupancy in late 2014.

In its entirety, the Mutrafiah Housing Project will include 3,600 villas, representing a milestone in the Maaden Home Ownership Program (HOP) for employees.

All the villas and apartments are to be built at Jubail Industrial City within the confines of the Royal Commission lands which provide ready access to all the amenities required for a modern urban lifestyle, built in a green environment with close proximity to the sea.

“The HOP program demonstrates Ma’aden’s commitment to the security, health and well-being of its employees by helping to provide them with comfortable family housing,” said Maaden CEO Khalid Al-Mudaifer.

“Our employees are our partners in success; their dedication and performance will help Maaden achieve our vision of becoming a world class minerals enterprise. Today’s announcement is an investment in them.”

In addition to the Mutrafiah Project, another 256 family apartments at Jalmudah District in Jubail industrial City are currently under construction with the first batch of units targeted to be handed over by Q2 2013 for occupancy.

Maaden has appointed AECOM Arabia Ltd. as the Project Management Consultant to assist in managing their housing projects in Jubail Industrial City.

There is an acute housing shortage in Jeddah. Real estate agents say that available housing units in the city do not exceed five percent of all units in the city.

This has resulted in two-room apartments going for a minimum of SR 28,000 a year and four-room apartments going for more than SR 40,000.

Muhammad Salah, a young Yemeni living in Jeddah, said, “I’m looking for a four-room apartment with a reasonable price so that I can move in when I get married next month. I’ve been looking for four months but without any luck.” Salah blames landlords’ self-indulgence for the lack of affordable apartments. In the past, he said, it was no difficult to find a four-room apartment for no more than SR 20,000.

“Now,” he said, “landlords are cashing in on the huge demand for residential apartments.” A committee from JCCI found that apartment sales in the city were down some 20 percent because of high prices.

Some apartments, the committee found, were being sold at up to 50 percent above the fair price.

For their part, some landlords claim that an increase in the price of building materials has forced them to raise prices.

“Construction material prices have increased by 20 percent. Therefore, prices reflect building costs. Any landlord must be interested in making back the cost of a building within two year,” according to Abdullah Saneea, landlord of a new building.

Saeed Taleb, a young Saudi in search of a three-room apartment said, “I am still staying in a hotel after moving to Jeddah from Riyadh. I have failed to find a suitable home with a reasonable rent. There has been an unreasonable hike in the rents of residential apartments,” he said.

“After wasting lot of time searching for a flat, I could find only a small apartment for an annual rent of SR 25,000. But I was surprised to find out this apartment was only for families.”

“Among the limits and challenges facing Saudi developers, is for example the regulations concerning the Municipality’s issuance of licenses, which must have a shorter processing time from the current minimum of at least two years up to a maximum of four years. In addition, the government should revise the mortgage law further, as we feel that the implementation of the current draft will have a negative effect on developers and financing companies,” said Riyad Ahmed Al-Thaqafi, CEO, Ewaan, said as he gave the keynote address called.

He added that there is a need for the government to appoint an agency that will regulate land prices to stop price escalation and manipulation. The government should also work to change the community culture of a majority of the population’s belief that they need a 200 or more square-meter home in order to own a house.

Al-Thaqafi also said that the two factors that would affect the housing sector through 2025 is rising population growth and decreasing income levels. In Saudi Arabia and the GCC, the main driver causing a housing crisis in major cities is urbanization or the migration of rural residents to live in the cities of Jeddah, Riyadh and Dammam.

“It is expected by 2025 that urbanization will increase the population of large cities by between 52 and 58 percent, causing more demand for housing that very few will be able to afford due to increased inflation and a lower income level,” Al-Thaqafi said.

A lack of affordable housing and the increase of unemployment are the main social instigators underlying the social unrest over the past two years in the Arab world.

Among solutions offered by Al-Thaqafi is to improve development management processes such as an increased use of construction technology, stoppage of land prices speculation and education of consumers to prefer and enjoy living in smaller and more affordable residences.

He said that another idea could be the implementation of a new governmental body for financing real estate projects backed by the Capital Market Authority (CMA) that could provide project financing in place of banks, which usually do not want to offer financing for most projects.

“The government must realize that it cannot compete with the private sector in this matter, but must work with private sector developers in finding solutions,” Al-Thaqafi said.

Representing a semi- government-back project, Mohammed Bawaked, executive vice president, Jeddah Development & Urban Regeneration Company, owned by the Jeddah Municipality, spoke about their new development in Jeddah called, Salman Bay.

The mega-housing project is being developed on an inland bay about 20 kilometers north of Jeddah on about 3.2 million square meters of land as part of the city’s future development plans. It will accommodate 25,000 units of apartment buildings dedicated to affordable housing. It will cater to 95,000 residents.

“While working to develop this project, we found many obstacles such as mainly financing issues with banks not wanting to offer financing,” Bawaked said. “We ended up overcoming this by finding internal financing by proposing to the contracting company to implement the work with no down payment, in which they accepted.”

He also said that other challenges lie in choosing the appropriate design to be of a comfortable size that consumers would like and still be deemed, “affordable.”

“It was difficult. We performed the study many times and had to change the design several times before coming up with a suitable design. In addition, we have arranged deals with the Saudi Electric Company (SEC), National Water Company (NWC) and stakeholders to come up with high level, but reasonably priced housing,” he said.

said that he agrees that there are many changes that must be made in order to find solutions, the most important being the public and private sector’s mutual participation in solving the housing crisis. The second, that instead of blaming the government, all developers must realize they have a role to play in cooperating.

“We are all capable of making positive changes if we all take up the responsibility,” he said.

Rayadah Investment Company, the real estate arm of the Saudi Public Pension Agency, showcased its mega residential project in north Jeddah, which is expected to cover 10 percent of the total real estate market needs for the next 10 years. Located in Obhur, Al Raeda Residential project comprises 8,000 units on a 2.5 million-square-meter site.

It is divided into 10 neighborhoods, five allocated for residential buildings, and five for villas, in addition to central zone for multipurpose usages. The project also comprises 24 schools, 15 mosques, general hospital, health club and a hotel supported with commercial shops to service guests.

Maceen Capital, a specialized and dynamic investment group, is present at Cityscape Jeddah this year to promote its SR 83 million real estate fund invested in developing a residential project in north Jeddah -Villatee Residential Project consisting of 52 upscale villas in a unique location in Obhur. The villas are available in five different architectural designs and sizes catering to different tastes and lifestyles.

“The location was selected very carefully to offer a unique living experience where new Jeddah is being shaped,” said Bader Al-Hammad, CEO of Maceen Capital. “The project is scheduled to be completed in two years and all services and facilities are available in location to guarantee a quiet, flexible and successful lifestyle.”

“Bawabat Makkah is a visionary city to be built on the western edge of the Makkah Holy Region, adjacent to the boundary line of the Jeddah-Makkah Expressway. The area of the city will occupy approximately 1.8 square km land and will provide much needed suitable residential housing to an estimated population of 25,000 people,” Khaled Al-Telmesani, CEO of Sumou stated.

Masharef Residential Project, developed by Kinan International Real Estate Development, also grabbed visitors’ attention. The 1 million M2 project site is located north of Jeddah and offers a wide range of products such as villas, apartments and residential/commercial lands. Kinan’s project targets the mid-income segment and the first two phases of the project has already been sold. Handover of units for the first phase began at the end of 2012.

He said the purchasing power of many families, the slow pace of approval of residential plots and lack of finance are adding to the housing woes. “The approval of the mortgage law is a major step toward solving the problem,” he added. But the problem is unlikely to be solved even with this law. A clear real estate strategy and legislation favoring costumers rather than banks are also required. “The current bylaws and regulations need to be rewritten all over again,” said Abdurrahman Ba Eshen, an economy expert. He said that housing shortage in Saudi Arabia would turn into a crisis in 2018 if no serious action is taken now.

The ministry said that 17,600 units are currently being implemented. There is adequate land for the program.

He said the ministry has brought a foreign expert who will determine the mechanism to help distribute the housing units to individuals. Custodian of the Two Holy Mosques King Abdullah has ordered the construction of 500,000 housing units across the Kingdom as part of social welfare schemes. Construction is scheduled to be competed at the end of this year.

The housing units are intended to meet the needs of the lower income sector throughout the Kingdom.

Key criteria for receiving housing units stipulates that a beneficiary does not own a house, according to a ministry spokesman.

The foreign expert will finalize the distribution mechanism by the end of the year, he said. He said Saudi citizens will be given choice between loans provided by the Real Estate Development Fund (REDF), the housing unit or any other program approved by the Ministry.

Despite many MENA nations’ commendable efforts so far, the supply of affordable housing is falling far short of demand, and demand is rising.
The report, which will be unveiled at the upcoming Jeddah Economic Forum 2013, highlights that the widening gap of effective demand over affordable housing is proof that governments’ existing frameworks will need greater support in the years to come. The forum’s key theme ‘Housing the growing population’ will center on solutions to the housing issue and recommendations for government bodies to be able to address this.

Affordable housing delivery requires government contribution but government cannot tackle the challenge on their own. Both supply-side and demand-side strategies can mobilize the private sector and hence, make government resources go further. Housing affordability lies at the intersection of supply side (more homes) and demand side (more financing), and to tackle the growing crisis, MENA governments need to engage the private sector on both sides simultaneously.

Bassam Hage, MENA Markets Leader, Ernst & Young, said: “Most public sector initiatives to date have been on the supply side – the direct creation of affordable homes – but increasingly, forward thinkers in MENA are looking for demand-side innovations, which can help citizens find ways to secure affordable housing and also reduce public sector administration and costs.”Analysis of housing affordability, as measured by “residual income” (household budget available after paying for housing) shows wide variation, with UAE and Qatar achieving higher levels of housing affordability for nationals, while citizens of Saudi Arabia and Yemen have very low residual incomes.

Ahmed Reda, Office Managing Partner, Ernst & Young Jeddah, says: “There is an increasingly marked imbalance between rising wealth creation, on the one hand, and delivery of new homes and desirable living environment on the other. It is essential that MENA’s public and private sector leaders work together and align their strategies to arrive at sustainable solutions to a growing issue.”

The time for policy action in MENA is now, because the region’s countries are entering what the United Nations calls the “demographic window of opportunity,” representing an unprecedented period of new household formation. It is measured by the ratio of prime-earning adults (people between 16 and 64) to housing dependents (children under 16 and the elderly of 65 and over). When a nation has a “worker’s bulge,” it will rapidly form new households, and those households will want to consume more and better housing.

Ahmed added: “The demographic window for a country in MENA will typically last for about 35 years; that is the moment of opportunity that MENA countries will have to move beyond emerging market status. To do this, they will require large numbers of quality, urban, affordable homes for people to own or rent.”

This is especially urgent in MENA now, because their populations are growing at two or three times global averages. By 2050, the populations of Bahrain, Egypt, Iraq, Jordan, Kuwait, Mauritania, Oman, Saudi Arabia, Syria and Yemen are projected to more than double — and all of this net growth will be in cities, because people in these countries are moving, rural-to-urban.

Although affordable housing requires some elements of subsidy or government assistance, there is also the need for some fundamental efforts to help lower the sale price of a home to something lower-income households can afford. Interestingly, these efforts are all within the ability and mandate of the government. There are five key ways of tackling the issue, which include: land allocation, land taxation and release, streamlining of approvals, modernizing planning and building regulations and managing expectations.

More than 12,400 housing units will be constructed in different parts of the Kingdom shortly as the Real Estate Development Fund has sanctioned new loans worth SR5 billion.

Muhammad Al-Abdani, director general of the fund said the total value of loans approved for building 12,472 homes in different cities and towns would reach SR5.19 billion.

He thanked King Abdullah and Crown Prince Salman for their support to the fund, adding that it enabled his organization to extend more loans to citizens to build homes.