What is off-plan sales?
The off-plan sales program aims to organize off-plan sales activity to ensure trust and safety among dealers, protect the rights of buyers, and encourage the entry of new investors. Saudi Arabia and the Ministry of Housing were among the first countries to use the off-plan sales method and provided investors with many properties in various regions of the Kingdom. This program enhances property ownership opportunities at a lower cost for buyers and allows developers to obtain direct financing through buyers’ payments. The Ministry of Commerce and Industry is working to develop procedures and regulations related to off-plan sales projects in cooperation with the competent authorities.
Off-plan Sale: A Property at a Lower Price and Potential for Profit
The off-plan sales method gives the buyer the opportunity to acquire a property at a lower cost, sometimes reaching 30% less than the prices available in ready-made units in the market. You can also benefit from a flexible payment plan with more flexible monthly payments, as well as a down payment starting from 5% of the total value. For example, if the value of the house is 500 thousand riyals, the buyer’s payment will be 700 riyals per month for the first three years during the construction period.
Purchasing off-plan is a suitable investment option, as the value of the property can rise upon completion of the project, allowing you to achieve a profit and higher investment returns.
Off-plan sales contribute to providing direct financing to the real estate developer through buyers’ payments, which helps provide financial liquidity to developers and creates investment opportunities and various real estate projects.
However, legal guarantees must be in place to prevent violations and fraud, and here Saudi Arabia has taken an advanced step through the Ministry of Housing by regulating this emerging sector in the real estate market. Systems and procedures have been put in place to protect the rights of all parties and increase the level of transparency in buying and selling operations, including providing guarantees extending for a period of 10 years.
Off-plan Sale and its Facilitated Programmes
Projects of Vision 2030 focus largely on the housing and real estate sector, as they aim to increase the percentage of citizens’ ownership of their homes to about 70% by 2030. In this context, the “Wafi” program was issued by the Ministry of Housing in the Kingdom of Saudi Arabia to enable the option to sell off-plan, i.e. the ability to buy a house that has not yet been built.
The “Wafi” program was launched at the end of 2016, adopting successful experiences from other countries. The program aims to activate the off-plan sales system, as it accurately regulates the sale and rental of real estate units. Any individual practicing any real estate activity, whether selling, renting, or preparing a marketing advertisement, is required to obtain a license from the real estate developer.
The program features the ability to sell residential units under construction, while providing sufficient guarantees to protect consumer rights.
Conditions of Off-plan Sale
To submit a license application electronically through the Wafi Ministry of Housing website (wafi.housing.sa), you must follow the following steps and submit the required documents:
- Visit the Wafi program website via the link (wafi.housing.sa).
- Fill out the electronic license application form and provide the required information.
- Attach a copy of the exhibition rental contract and submit all documents in Arabic.
- Attach a copy of the project ownership documents, certified by the relevant authorities in the project area.
- Attach a copy of the project license, certified by the competent authorities.
- Submit documents proving the rights of Saudis to own property in the project area.
- Paying the costs of licensing the external display of projects, which amount to 20,000 Saudi riyals inside the Gulf countries, and 30,000 Saudi riyals outside the Gulf countries, through the available electronic payment system (SADAD system).
- After submitting the application and completing the procedures, you can follow the development of the application and obtain the necessary license to display your real estate project.
Conditions for Showing Internal Properties for Off-plan Sales in Exhibitions
To enter the license application electronically through the Ministry of Housing’s Wafi website, you can follow the following steps:
- Visit the Wafi website via the designated link and log in to your account, or create a new account.
- Fill out the electronic license application form with information, and upload the required documents.
- Attach a copy of the commercial register.
- Attach a copy of the membership certificate for membership in the Chamber of Commerce and Industry.
- Attach a copy of the exhibition rental or reservation contract.
- Attach a copy of the marketing contract between the real estate marketer and the developer.
- Submitting a pledge from the real estate marketer not to receive any amounts or sign contracts within the Kingdom, and the pledge must be approved by the Saudi Chamber of Commerce.
- Paying the costs of the internal show license, amounting to 15 thousand riyals for every 5 days, is done through the available electronic payment system (SADAD system).
- After completing these steps, you will have submitted the necessary license application to display the internal real estate exhibition.
Real estate Investment in the Kingdom of Saudi Arabia
After the Corona crisis and the economic slowdown that affected the entire world, it was necessary to find an investment path that would guarantee those with little capital and those with medium savings to place their money in a safe, good-profit, low-risk investment.
Because Saudi real estate has great opportunities for progress and success, the choice of all types of real estate investment was whether by purchasing real estate and renting it or by flipping real estate (buying a property that is not finished or in need of repair and development, then finishing or improving it and selling it after that at a higher price and a greater profit), or investing in real estate funds.
Because the Kingdom’s 2030 vision makes real estate investment a good opportunity and a new hope, real estate investment in Saudi Arabia was a new and attractive option.
The real estate sector in the Kingdom of Saudi Arabia has witnessed remarkable growth in recent years. One of the main reasons is the reforms and improvements made in the investment environment, including facilitating real estate ownership procedures for foreigners. In addition, the Saudi government has a strategic plan to develop new cities and large projects to enhance infrastructure, which attracts more investors to the real estate sector.
Types of Real Estate Investment in the Kingdom
There are multiple types of real estate investment in the Kingdom of Saudi Arabia. Investors can choose commercial properties such as offices and malls to achieve quick returns on investment. In addition, investors can buy, rent and flip residential properties such as apartments and villas and rent them to residents and visitors or sell them after a period. It is noteworthy that the profits of administrative and commercial real estate are higher, although renting residential properties is easier and faster. There are also opportunities to invest in major government projects such as new cities and integrated communities.
Real Estate Flipping
The term real estate flipping is the process of purchasing an unfinished property or in a new, unpopulated city, then investing in its development, finishing, and renovation, or waiting for several years until the area is built, then selling it at a higher price and obtaining a profit.
Growth of Investment Activities and Increased Demand for Real estate of all types
The Kingdom of Saudi Arabia combines several economic and human activities, which makes its major cities international cities that receive visitors and workers from all over the world, and its population of citizens and expatriates is thriving, and thus the demand for its types of real estate increases, not only residential real estate, but also commercial real estate, commercial offices, and malls.
Activities in the Kingdom of Saudi Arabia vary between religious tourism coming from around the world for Hajj and Umrah to visit the Two Holy Mosques, as well as entertainment and cultural tourism, and tourist seasons offered to enjoy festivals in Riyadh and cultural cities in Diriyah, and landscape tourism in Abha, Jizan, and Al-Baha. Saudi Arabia is also one of the largest producers of petroleum and its derivatives, which make it an essential headquarters for international oil companies, banks and investment institutions
Saudi Arabia Vision 2030
Crown Prince Mohammed bin Salman announced Saudi Arabia’s Vision 2030 in 2016, a massive economic plan aimed at rapidly transforming the Arab world’s largest economy. Saudi Arabia aims to achieve this by supporting the private sector, opening up its economy, reducing red tape to attract foreign direct investment, reducing the unemployment rate, and rapidly modernizing the country through social and economic reforms.
The plan aims to increase non-oil revenues five times their previous value, to reach 1 trillion Saudi riyals by 2030, compared to 163.5 billion Saudi riyals in 2015. Vision 2030 also calls for transforming the Public Investment Fund, the kingdom’s sovereign wealth fund, To the world’s largest sovereign wealth fund through partial proceeds from the privatization of the state oil company, Saudi Aramco.
Goals of Vision 2030
The goals of Saudi Vision 2030 include localizing the local oil and gas sectors from 40 percent in 2015 to 75 percent by 2030. To this end, the Kingdom’s Total Value Added Program, an Aramco program launched in December 2015, requires all of its suppliers to strive to achieve 70 percent local content and export 30 percent of locally manufactured energy goods and services by 2021 to build a competitive local supply chain.
Saudi Arabia also plans to spend SAR 100 billion in 2019 and 2020 as part of a massive new industrial strategy called the National Industrial Development and Logistics Program (NIDLP), which targets the creation of 1.6 million new jobs and aims to attract up to SAR 1.6 trillion in investments by Year 2030.