PIF expects $1trn real estate spending over next decade

Reuters

• SAR4trn to be invested in real estate
• Focused in 12 cities
• Spending earmarked for giga-projects

Saudi Arabia’s Public Investment Fund (PIF) says it intends to invest SAR4 trillion ($1.1 trillion) in the real estate sector over the next 10 years, mainly developing 12 cities as part of the Saudi Downtown project. 

The Saudi Downtown Company was established in 2022 as a fully owned subsidiary of the PIF to develop city centres of Medina, Al-Ahsa, Khobar, Buraydah, Taif, Arar, Hail, Tabuk, Dumat Al-Jandal, Jizan, Najran and Al-Baha. The Riyadh and Jeddah downtown projects are being managed by separate entities. 

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Ahmed Al-Shanqiti, head of PIF’s National Development Programme, made the comment at a Northern Borders investment forum on November 26, the news site Argaam reported. He said the downtown projects would aim to source materials from local industries. 

It was not clear if this figure was separate from previously stated commitments to spending on development projects. 

PIF invested SAR84 billion locally in 2021 and planned to invest another SAR150 billion in 2022. Its annual report, published in July, said a minimum SAR150 billion would go to local investments annually.

Gross assets under management in both real estate and infrastructure, and in giga-projects, have grown year on year. 

Focus on giga-projects

One economic analyst, who asked not to be identified, said $4 trillion had previously been cited as the figure for total spending on real estate from 2016, when the Vision 2030 project to diversify the Saudi economy away from oil was first announced. 

A report by real estate consultant Knight Frank published in September said total real estate spending including giga-projects since 2016 had crossed the $1.25 trillion mark. 

PIF’s main remit has been to fund the giga-projects at the heart of the development plans, deploying 76 percent of its assets domestically in 2022, the report said. 

The fund has raised tens of billions to fund the projects over the past year, including a $17 billion loan in November 2022 and $5.5 billion from green bonds in February 2023. In October it mandated banks to issue a dollar-denominated Islamic bond. 

This year the government also transferred another 4 percent of Saudi Aramco shares worth $80 billion to PIF. 

One of the largest wealth funds in the world, valued in October at $778 billion, It had a total of $85 billion in loans and borrowings at the end of 2022, an almost 30 percent increase from the end of 2021. 

Its sources of funding are investment earnings, government cash injections, government asset transfers, and loans and debt instruments. 

Oil output cuts brought in this year to prop up oil prices have caused a significant slowdown in Saudi Arabia’s economic growth.

The government expects GDP growth to slow sharply in 2023 to 0.03 percent, from 8.7 percent in 2022, with a budget deficit of 2 percent of GDP.

Bloomberg reported last week that the government is on the verge of finalising a $11 billion syndicated loan, the biggest globally by a government this year.