RIYADH: Saudi Arabia’s real estate loans surged 15.12 percent year on year to a record SR883.3 billion ($235.54 billion) by the end of 2024, driven by robust demand from both retail and corporate borrowers, official data showed.
According to the Kingdom’s central bank, also known as SAMA, corporate real estate loans saw a 26.23 percent increase, reaching SR202.04 billion, while lending to individuals accounted for 77.13 percent of the total, climbing 12.19 percent to SR681.24 billion.
Real estate financing now comprises around 30 percent of total Saudi bank loans, which stood at SR2.96 trillion at the end of 2024.
This evolution signals growing confidence in the Kingdom’s market, with institutional capital fueling the expansion of high-end commercial hubs and integrated residential complexes — key pillars of Saudi Arabia’s economic diversification strategy.
“The market is reaching a high level of sophistication as local and international institutional investors take an overweight position with a medium to long term view,” Elias Abou Samra, CEO of Rafal Real Estate, told Arab News.
“Such investors are more bankable than the typical retail investor with better access to corporate lending,” he added.
This divergence suggests that while individual buyers continue to fuel the bulk of the market, corporate clients are increasingly taking advantage of favorable financing conditions to invest in large-scale, mixed-use projects.
These corporate investments often involve sophisticated financing arrangements and long-term planning that cater to a broader vision of urban development under Saudi Arabia’s Vision 2030.
Abou Samra noted that mega projects such as Sports Boulevard and King Salman Park are attracting global investor interest as they progress into their initial development phases.
“During the post-COVID years between 2021 and 2023, a number of developers mushroomed with granular low-rise developments that were mainly funded by off-plan sales, with marginal reliance on corporate lending,” Abou Samra said.
“The profile of today’s projects are mixed-use with a reasonable concentration of commercial and income generating developments demanding higher reliance on debt as a major source of funding,” he added.
As these mega projects unfold, the influx of institutional capital not only supports the scaling and sustainability of these ventures but also contributes to a more stable and diversified real estate market in the Kingdom.
Financing partnership
When asked whether real estate companies have partnered with Saudi banks to facilitate property purchases, Abou Samra explained that the Ministry of Housing has developed an integrated value chain covering every stage of the real estate development process — from planning and financing to construction, sales, and post-sale services — all within a highly regulated framework.
This comprehensive system not only ensures adherence to national standards but also streamlines processes to minimize delays and inefficiencies for developers, according to Abou Samra.
Since 2024, RAFAL, has aligned its community development strategies with this government-led approach by operating under the National Housing Co.
This partnership enables the real estate company to leverage the ministry’s end-to-end solutions, ensuring its projects benefit from streamlined financing options, faster loan origination, and efficient off-plan sales mechanisms.
As a result, the company enhances its operational efficiency and is well-positioned to meet the growing market demand for quality, well-regulated residential and mixed-use developments.
Abou Samra noted that in its latest development, Tilal Khuzam — located just west of King Khaled International Airport — nearly 3,600 apartments were introduced to the market.
The initial phase, accounting for 25 percent of the total project, was fully sold within just four months.
He attributed this rapid sales success to the efficient, integrated approach facilitated by the National Housing Co. and the Real Estate General Authority.
“Under Sakani, off-plan sales buyers are matched with the most competitive lenders through a swift digital process that does not exceed two weeks from contract signature,” Abou Samra said.
Rising price challenges
Knight Frank’s the Saudi Report 2025, released in February, revealed that the Kingdom’s real estate market is under significant price pressure due to soaring demand in key urban areas, driving property prices to record levels and potentially impacting affordability.
This surge in demand is likely fueled by factors such as increased urbanization, a growing middle class, and strategic investments under Vision 2030.
As a result, record-high prices are making properties less affordable for average buyers and potentially straining the broader housing market.
This trend not only challenges affordability but also underscores the need for targeted policy interventions and innovative financing solutions to balance growth with accessibility.
According to the report, the most significant price increases have been recorded in major urban centers, notably Riyadh and Jeddah. In these cities, many prime districts have experienced double-digit growth, driven by urbanization and strategic investments under Vision 2030.
Additionally, emerging urban hubs in the Eastern Province are also witnessing rapid price escalations, signaling a broader trend of rising property values across key Saudi cities.
Abou Samra told Arab News: “We are witnessing a decoupling between Riyadh and most other cities. While the capital continues to demonstrate signs of overheating — reflected in high absorption rates for off-plan sales and vacancy rates below 3 percent for delivered units — other cities maintain a healthy demand at sustainable prices.”
According to the CEO, Riyadh is evolving from a traditional, locally focused market into a dynamic international hub. The city is increasingly attracting resident expatriates and foreign buyers, especially as many anticipate a relaxation of foreign ownership regulations in 2025.
This shift is transforming market preferences, with demand moving away from traditional villas toward modern apartment complexes that cater to a vibrant urban lifestyle.
The trend is driven by an influx of expatriates, along with a growing number of young Saudis relocating from other regions of the Kingdom.
“Riyadh is also witnessing increased demand for buy-to-let units, as rental yields hover between 8 percent and 10 percent across the city, averaging more than double the yields of its G20 peers,” Abou Samra added.
This refers to properties purchased primarily for rental purposes rather than owner occupancy. Investors buy these units to generate rental income and potentially benefit from long-term capital appreciation.
Future interest rates and lending
In line with the US Federal Reserve’s monetary policy, Saudi Arabia’s benchmark interest rates follow the US’s lead due to the riyal’s fixed peg to the dollar.
Rates peaked at 6 percent in July 2023 as the SAMA mirrored the Fed’s tightening measures. However, beginning in September 2024, the trend reversed with three successive rate cuts — a 50-basis-point reduction, followed by two further cuts of 25 basis points in November and December — bringing the benchmark rate down to 5 percent.
This lowering of benchmark rates could lead to a corresponding decline in lending rates, making borrowing more affordable and stimulating increased demand for real estate financing.
Meanwhile, the Fed recently opted to keep rates unchanged, emphasizing that inflation remains a critical factor that could keep policy on hold if price pressures reaccelerate.
According to Abou Samra, even though experts expect interest rates to remain above 4 percent for the next two years — a “higher-for-longer” scenario — the real estate sector has shown remarkable agility.
He noted that the Ministry of Municipalities and Housing, along with its affiliates such as Real Estate General Authority, National Housing Co, and Sakani, as well as Wafi and Damanat, has swiftly developed alternative funding options to reduce reliance on traditional bank debt.
This proactive approach helps cushion the impact of higher borrowing costs on real estate projects, ensuring that financing remains accessible despite the tougher interest rate environment.
“They have introduced payment installments for lands located within NHC master plans and regulated off-plan sales processes through escrow accounts that preserve the rights of both buyers and developers,” Abou Samra said.
“This new ecosystem has served in keeping prices reasonably within the reach of Saudi buyer despite global inflation and an overheated market locally,” he added.
