The image above showcases a recently launched residential project in Diriyah Gate, Riyadh, blending traditional Arabic (Najdi) designs with the modern amenities of the renowned hospitality brand, Ritz-Carlton.

Meanwhile, Riyadh’s commercial sector is witnessing robust demand for office space, driven by significant developments like the King Abdullah Financial District. The city and its surroundings are slated for several giga projects, underscoring the government’s commitment to enhancing infrastructure and consolidating demand for high-quality, premium living. Projects such as New Murabba, Qiddiya, and King Salman Park aim to attract diverse residents and investors, creating new micro-communities across Riyadh’s districts. Scheduled for completion starting from 2027-28, these developments are expected to spur infrastructure growth and invite private sector participation alongside governmental initiatives.

Looking ahead, private developers will explore opportunities like Joint Ventures, Co-Development, Build to Suit, and Build Operate Transfer models to engage deeply in Riyadh’s evolving ecosystem, facilitating significant roles in development without direct land ownership. This approach supports the city’s urban expansion goals and offers flexibility in meeting rising demands for diverse residential and commercial spaces.

Key trends in Riyadh’s future developments include adopting best international practices across major projects, from design and construction to project management and operations. The emphasis on LEED-certified buildings in new commercial developments aligns with the preferences of multinational companies, reflecting a shift towards sustainable and efficient infrastructure. Additionally, the commercial real estate market in Riyadh is witnessing increased international interest, driven by high occupancy rates in Grade ‘A’ office spaces and concurrent demand for upscale and upper upscale business hotels.

The high demand for commercial assets such as Grade ‘A’ offices in Riyadh has significantly shortened the payback period for developers. Alongside this trend, there is a growing emphasis on sustainability and technology integration in real estate projects. This includes environmentally friendly designs and smart city initiatives, which are increasingly crucial for developers aiming to align with global standards.

As Riyadh adopts international best practices and forms a new development ecosystem, certain project categories are poised to be lucrative for investors and new market entrants:

• Modern living residential and gated communities.
• Grade ‘A’ office towers and business parks.
• Mixed-use projects featuring hospitality components to cater to growing business travel needs.
• Mixed-use projects incorporating innovative recreational elements such as entertainment and F&B.

Entering the Saudi real estate market offers promising opportunities aligned with the Kingdom’s Vision 2030 goals. However, there are key considerations for developers looking to enter this dynamic market:

• Foreign investors typically need a foreign investment licence from the Ministry of Investment Saudi Arabia.
• Real estate companies can achieve 100% foreign ownership if the project value exceeds SAR 30 million and is completed within five years.
• Less restrictive requirements apply to developers wholly owned by GCC nationals.
• Developers must register with WAFI for off-plan development and sales, obtaining marketing and sales licences on a project-by-project basis where applicable.

Equity structures such as joint ventures, structured as LLCs or JSCs, are common vehicles for developers partnering in real estate projects. These ventures often involve landowners, equity providers, institutional investors, and contractors or professional teams contributing services in exchange for shares in the project company.

Real Estate funds have emerged as a popular alternative to joint ventures, especially when developers require limited recourse financing. These funds are sponsored and overseen by a fund manager who manages the project. Developers, appointed by the fund, often serve dual roles as development managers and may hold units within the fund.

Regarding land registration in Saudi Arabia, traditionally, the notary public office was responsible for registering title deeds and transferring property titles in each city. However, the country is transitioning towards a centralised land registry managed by the Real Estate General Authority. This initiative has begun implementation in areas such as Riyadh and Jeddah.

Now, it is possible to register property transfers at a notary public office outside the city where the property is located. Additionally, property transfers can be registered before a private notary licensed by the Ministry of Justice. In some regions, subject to specific conditions, registration and transfer of property titles can even be completed entirely online, eliminating the need to visit a notary public office. Online searches for property information are also available, although a final title check at the notary public office remains advisable before finalising transactions.

Financing: Banks in Saudi Arabia adopt a cautious approach to lending in the real estate sector. Debt facilities are typically over-collateralised, and limited recourse financing is not commonly offered. Loan-to-value (LTV) ratios for development financing can be conservative, with some as low as 50%. Notably, not all banks consider land as equity in development financing; instead, land is treated primarily as collateral. Banks typically require the borrower to provide cash equity that must be utilised before drawing down debt.

Tax: Saudi Arabia imposes corporate taxes and withholding taxes on foreign investors, establishing it as a taxed jurisdiction. Additionally, a system of Zakat, in accordance with Islamic law, applies to Saudi Arabian shareholders. Given these tax complexities, it is crucial for developers to seek professional tax advice when structuring both their corporate entity for market entry and the project-specific vehicle used for real estate development.

Conclusion: In summary, developers who leverage these trends to innovate and deliver projects that meet evolving market demands, while carefully navigating the regulatory and financial landscape of Saudi Arabia, stand to capitalise on significant opportunities in the Saudi real estate market. By ensuring a well-structured approach to market entry and project execution, developers can position themselves to succeed and carve out a profitable niche in this dynamic sector.

About Wisefields
Wisefields is a specialist law firm with a singular focus on the real estate, hotels, and tourism industry. Established by the two leading real estate and hotels lawyers in the Middle East, Bilal Ambikapathy and Moustafa Said, the only two lawyers in Saudi Arabia consistently ranked by legal directories year after year as leading individuals with tier 1 practices in the real estate sector in Saudi Arabia. Both Moustafa and Bilal are Australian-qualified lawyers having worked in tier 1 Australian, British, and American law firms throughout their careers. They bring extensive international experience with deep local knowledge in the context of the dynamic and rapidly evolving real estate, hotels, and tourism landscape in the Middle East.

About Savills
Savills Global Residential Development Consultancy has an extensive track record advising a range of clients, including institutional, corporate, and private clients, on their branded residential strategy. Based in the Savills global headquarters in London, the team has an international remit working in conjunction with the Savills network across the globe to ensure advisory services take into consideration both local and international market dynamics and trends. The specialist team provides a range of professional services for branded and non-branded residential, hotel, and integrated resort projects, from luxury small-scale resort developments to large, mixed-use urban regeneration projects.

Since its inception, the global residential development team has grown from strength to strength to now be considered market leaders and thought pioneers in the luxury and branded residential market sectors. Savills is constantly updating sector intelligence and its market-leading research for clients that feed into feasibility reports and brand premium studies. This broad service offering is enhanced by the network that has been established in the last decade with brands, developers, and investors who are active in the branded residential sector. As a central point of contact for these parties, Savills is ideally positioned to negotiate hotel and residential licence and management agreements.

Contacts
Wisefields
Bilal Ambikapathy
Partner
T: +966 (0) 56 4088 719
E: bilal.ambikapathy@wisefieldslaw.com

Moustafa Said
Partner
T: +971 (0) 50 558 6472
E: moustafa.said@wisefieldslaw.com

Savills
Rahul Bansal
Head of Strategic Consultancy, GCC
T: +971 (0)4 365 7700
E: rahul.bansal@savills.me