Saudi Real Estate Sector to See Growing Demand Driven by Lower Prices and Increased Supply
Kafaa Capital announced that its total financing for real estate and contracting projects has approached SAR 100 million since the commencement of its operations, with no defaults recorded to date.
In the near term, the company will focus its activities on financing real estate investment ventures and development projects, as well as distributing investment funds. It is also working to obtain the necessary licenses from the Real Estate General Authority to launch a fractional ownership product designed to provide access to investment in multiple real estate assets, with investments starting at SAR 2,000.
Yousef Al-Zumai, Founder and Chairman of Kafaa Capital, said: “We expect the current decline in prices and increase in supply to stimulate demand for real estate in the coming period, as local buyers renew their interest in property ownership for residential purposes or rental investment, alongside opportunities arising from foreign investment inflows and property ownership by non-Saudis.”
Al-Zumai explained that returns offered to investors through the company’s financing products range between 10% and 17%. He noted that financing applications are assessed based on creditworthiness, project cash flows, and the fulfillment of appropriate collateral requirements.
The company also takes into consideration the nature of payment cycles within the contracting sector, particularly contracts in which subcontractors’ receivables are linked to payments received by the main contractor, commonly known as a “Back-to-Back Agreement.” Such arrangements may result in delays in collecting receivables. The company therefore ensures that appropriate guarantees are in place to safeguard the full recovery of capital in the event of a default, while also emphasizing financing flexibility for borrowers in cases where delays occur in collecting amounts due.
With regard to fund distribution, the company will provide investors with access to real estate funds, fixed-income funds, and private funds managed by financial companies licensed by the Capital Market Authority. Through what it describes as a “mini market,” the company aims to provide investment options for managing surplus liquidity, subject to the subscription and redemption terms of each fund.
The planned fractional ownership product aims to enable small-scale savers to invest through their personal savings or monthly salary deductions, while diversifying their investments across several assets to reduce vacancy risk and diversify sources of returns. The objective is to enable investors to build real estate wealth distributed across multiple assets while benefiting from diversified recurring returns and potential capital gains over the medium and long term.
The company recently conducted a study on real estate market trends in Riyadh, covering five key geographical areas in line with the latest municipal zoning structure, to assess demand levels and identify investment opportunities.
Lower tax and fee burdens compared with major global economic capitals, combined with the growth of religious tourism and the strong momentum witnessed across the Hajj and Umrah sector, as well as opportunities associated with Premium Residency, the “Golden Visa”, are expected to be among the factors influencing market activity in the coming period, particularly in Riyadh, Jeddah and the holy cities.
