Skip to content Skip to Search
Skip navigation

Saudi construction under pressure to deliver on its promise

Saudi Real Estate Refinance Company said the issuance had garnered interest from institutional investors Shutterstock/Quality Stock Arts
Saudi Real Estate Refinance Company said the issuance had garnered interest from institutional investors
  • Sector worth $1.25trn
  • China increasingly important partner
  • Sustainability demands changing practices

The Saudi construction sector is growing as the state showers money on giga-projects while oil prices are high, but the industry is under increasing government pressure to deliver, industry players say. 

A market that was previously dominated by favoured government contractors such as Binladin Group and the now defunct Saudi Oger has been liberalised. This has allowed hundreds of local and global companies a piece of the action as Saudi Arabia embarks on a mammoth development programme to create a non-oil economy.

“It’s a golden opportunity now; there is enough for everyone,” says Yousef Al Sabhan, deputy general manager of Saudi Zaas Construction.

“Especially with the government making the regulations so easy. We’ve been in the market for 30 years, and now it’s much more open.”

The total value of real estate and infrastructure projects has been valued at $1.25 trillion, in addition to $250 billion of commissioned projects. 

The giga-projects include the city Neom, the Red Sea Project and Amaala tourist resorts, education and sports city Qiddiyya. Entertainment district Seven, the Roshn and Jeddah Central housing projects, make up the others, as well as five economic zones and other infrastructure schemes. 

China’s growing influence

Chinese companies have become new players for sourcing of supplies, reflecting closer political and economic ties between Riyadh and Beijing. This has alarmed the US, Saudi Arabia’s traditional ally.   

“China has also been investing in building material capacity, setting up ceramic tile plants in the last couple of years,” says Anoop Mark Fernandes, vice-president of research at Sico Capital in Bahrain. 

Bidding processes and documentation have become more transparent and easier through the government’s Etimad platform.

Many online contracting systems are being developed, as well as drone technology that allows builders to monitor sites from every angle. 

SindalahNeom
Saudi Arabia’s $500 billion giga-project Neom includes luxury destination Sindalah
Getting it done

But both developers and contractors are under pressure to produce results. 

“How do you translate a pretty image or vision that’s not going into too much detail at the early stage into something tangible?” Anastasios Dimas, regional digital delivery lead at AtkinsRéalis consulting firm asked at a construction conference in Riyadh this month. 

“Getting everyone on board with that vision is a big task in itself. There is also a lot of effort required to bring it down to scale, and it’s getting more and more difficult. It’s hard for the market to catch up with the visions.” 

Non-payment, which has blighted the sector in periods of low oil in the past, is also an issue. 

Khaled Gharaibeh, contracts director at developer Rua Al Madinah, says developers are shifting to a more collaborative approach in which contractors bid for specific elements. 

“Once chosen, they sit around the table and agree on a target budget,” Gharaibeh said at the conference.  

Phase One of Saudi developer Red Sea Global's Amaala is focused on the Triple Bay masterplan and will be ready by early 2025Amaala
Tourism forms a key element of giga-projects including the Amaala tourist resort
Adapting to sustainability

Projects such as Neom also have sustainability requirements that for many companies are a new way of working, requiring them to hire sustainability managers who make sure they work with certified vendors and suppliers. 

“Each project of Neom has different sustainability standards,” says Maryam Telmesani, sustainability officer at India’s MLB Infrastructure. 

“So, if you don’t have a company that’s ready to learn and asks questions, it’s going to be the main challenge.”

Confidence within the sector about its progress over the next year far outstrips other regions around the world, according to a recent report by construction industry analysts Procore

“Our region is not putting its foot on the brakes, irrespective of the macroeconomic headwinds and political instability,” says Madeleine Skillen a, marketing manager there. “This, for me, is a declaration.

“More than half of businesses expect projects to expand by 20 percent over the next 12 months. This is incredibly positive, a declaration for the growth that we expect over the coming years.” 

Latest articles

Sainsbury's has the second-largest share of the UK grocery market, at 15 percent, behind Tesco at 28 percent

Qatar to reduce stake in UK supermarket Sainsbury’s

Qatar’s sovereign wealth fund is selling part of its 15 percent stake in the British supermarket Sainsbury’s as the fund pushes ahead with expansion in the United States and Asia, particularly China and India. Qatar Investment Authority (QIA), the biggest shareholder in Sainsbury’s, is selling £306 million ($399 million) worth of shares in the retailer, […]

Shoppers in Kuwait's Avenues Mall – the IMF says the country needs to encourage private sector employment

Kuwait needs to push reforms for economic growth, says IMF

Kuwait must accelerate the introduction of fiscal and structural reforms that are needed to increase private sector-led growth and diversify its economy away from hydrocarbons, the International Monetary Fund said on Friday. Kuwait’s economy will contract by 3.2 percent this year because of an Opec+ oil production cut, but will grow by 2.8 percent in 2025 […]

Thani Al Zeyoudi, Minister of State for Foreign Trade of the United Arab Emirates, (UAE) speaks during the Skybridge Capital SALT New York 2021 conference in New York City, U.S., September 15, 2021. REUTERS/Brendan McDermid Dr Thani bin Ahmed Al Zeyoudi, the UAE’s minister of state for foreign trade, said 'Malaysia offers substantial opportunity for our exporters, industrialists and business leaders' UAE Malaysia Cepa

UAE and Malaysia sign Cepa to increase bilateral trade

The UAE and Malaysia have signed a free trade deal, bringing the number of deals the Gulf state has agreed with foreign governments to 12. The comprehensive economic partnership agreement (Cepa) will seek to eliminate or reduce tariffs, lower trade barriers, increase private sector collaboration and create new investment opportunities, the two countries said in a […]

Modern buildings in the city center of Riyadh, Saudi Arabia

Riyadh leads Saudi Arabia’s hot property market

Strong population and employment growth in Riyadh is driving a surge in real estate transactions as new properties cannot come on the market fast enough. A dramatic rise in the number of deals in the 12 months to the end of June was also visible in Jeddah and Dammam, according to a report this week […]