GCC market eyeing mergers and reduction in unit prices, says Saudi real estate company

Solutions to minimise business risks in Covid-19 environment include up to 25% reduction in prices

Real estate developers in the GCC are mulling as much as a 25% reduction in unit prices along with company mergers to ensure business continuity under the adverse effects of the Covid-19 pandemic on the region’s property sector, according to Saudi-based Maximiliano Development Management Services (MDMS).

According to Marwa A Murad, managing director of MDMS, the impact of the Covid-19 pandemic is being felt in major industries in the region, including the real estate market, where developers are eyeing measures to minimize business risks and significantly increase the ease of doing business.

The measures are aimed at mitigating the ongoing challenges, strengthening their positions and deepening their relationships with employees, investors, end-users and other stakeholders, MDMS said.

“One of the major risks facing the real estate market is the inability of buyers to pay the instalments, so strategies must be adopted such as the reduction in unit prices by 25% in the event of cash sales and small developers who may face the risk of bankruptcy might consider merging with another developer to protect their business,” Murad said.

Since the virus outbreak, there has been stiff competition between real estate developers and it will intensify as the unprecedented crisis has created a supply-demand imbalance in the sector, he added.

“The risk facing the real estate market is the inability of customers to pay the installments, thus causing a delay in construction work. As a result, developers may require a shorter period for the instalments, which eventually leads to an oversupply of units, thereby creating a negative business cycle.

“The depth and breadth of the coronavirus outbreak’s economic impact on the real estate sector are still uncertain but real estate players will be well served to take immediate action to improve their businesses and also keep an eye on a future that could be meaningfully different.”

MDMS a key player in the Saudi construction industry, has been working closely with the kingdom’s National Housing Company (NHC) to develop housing projects for Saudi citizens. Among several other key projects in Saudi Arabia, it collaborated with the NHC as the sales consultant for the first and second phases of the Murcia project, one of the largest projects in Riyadh with more than 5,000 villas and apartments.

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