Reconstruction of old buildings in KSA could increase housing by 40%

Experts say demolition and replacement approach will contribute to easing bottlenecks in major cities

Saudi Arabian building owners are stepping up demolition and reconstruction of old buildings.

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The demolition and reconstruction of old buildings in Saudi Arabia could increase the number of existing housing units by more than 40% and help resolve a growing housing shortage, real estate experts have said.

Building owners in the Kingdom’s major cities plan to demolish their old properties and erect multiple-floor units, said the Jeddah based financial advisor Faisal Sairafi. He added that the municipalities in the Kingdom allow owners to add more floors in residential buildings, while rents have increased and the Real Estate Development Fund is now offering credit facilities.

Sairafi predicted that the demolition of older buildings and the construction of replacements would continue for years to come as demand for housing continues to grow, a report in Arab News said. Statistics show that nearly 60% of Saudis do not own their own homes.

“If the demolition-and-replacement approach continues at the current pace, it will contribute to easing the prevalent bottlenecks in the real estate market: Both the rental and sales prices of housing units,” he said.

Sairafi added that low risks and small capital requirements associated with this area of investment have seen the number of investors involved increase, with the middle class especially prevalent as they see real estate investment as a ‘secure haven’.

Data released by the Ministry of Municipal and Rural Affairs found that the number of applications to reconstruct old buildings increased by 300% over the last 10 years. In 2011, the number of applications stood at 112,362, compared to 37,585 in 2003, the Ministry said.

In Jeddah alone, some 14,476 licenses were issued last year, a 30% increase compared to the previous year, Yasir Adas, head of licenses at Jeddah Provinces, said.

The replacement industry currently represents 60% of construction activity in the Kingdom, said Abdullah Al Bluwi, a real estate broker in Jeddah. He pointed out that adding floors to older buildings or the demolition of buildings to construct new ones has been a common practice in older districts of major cities.

Abdullah Al-Ahmari, the head of the Real Estate Evaluation and Auction Committee at the Jeddah Chamber of Commerce and Industry (JCCI) said this phenomenon would exert more pressure on the infrastructure of such districts during the next few years due to the growing population as a result of an increase in housing units.

He stressed that the new drive (of demolition and replacements) was meant to find a solution to the housing problem and termed it a “timely solution” as it seeks to find more housing units for the needy. He urged the municipalities to reconsider these decisions by shifting the thickly populated neighborhoods to new land plans.

These have been designed to fully absorb new streets, utilities and other infrastructure projects.

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