Idle land fees regs to drive real estate development, normalize prices: SNB Capital

SNB Capital issued a report on the impact of idle land fees regulation, saying that the new regulation will likely drive real-estate development, increase the supply of residential, commercial and office units and normalize prices mainly within highly inflated areas/sectors. As land holding cost will increase, we believe land hording/speculation practices will decline.

Within TASI, developers, construction and materials players are expected to be the key beneficiaries, it noted.

SNB Capital further stated that the average decline in prices would be moderate due to high demand and the strategic location of idle lands within the city.

“We also expect the impact on ready units to be limited as the new supply would take a few years to enter the market. Moreover, we expect a gradual decline in residential, office and commercial rentals,” said the research firm.

Going forward, the regulations are expected to be implemented in Jeddah and Dammam (if needed). Moreover, a regulation to reform the landlord/tenant relationship is expected to be announced soon, according to the report.

The key impacted sectors by the new regulation are real-estate, developers, contractors, construction, banks and manpower, said the research firm.

“We expect the key beneficiaries to be developers and contractors as demand would be strong for their services. The construction sector (cement, cables, steel and other materials) will also benefit (both in terms of volumes and prices) but the positive impact is expected to start gradually. Manpower sector is also expected to be a main beneficiary,” it added.

Moreover, the banking sector would play a vital rule in financing the projects and providing mortgages among completion, SNB Capital stated.

It also expects real estate focused companies to be negatively impacted due to lower prices, lower demand for idle lands and higher costs.