UAE developer Arada revives Riyadh plans as land prices drop

• CEO: Saudi market is ‘compelling’
• Negotiating on two sites in capital city
• Law reforms make deal more appealing

Arada Developments, backed by the son of Saudi Prince Alwaleed bin Talal and a member of Sharjah’s royal family, will announce its first project in Saudi Arabia this year, seven years after signalling plans to open an office in Riyadh.

Higher home prices and slipping land costs have made Saudi Arabia a compelling market, Arada group CEO Ahmed Alkhoshaibi told AGBI, adding that the initiative follows years of it “not working on paper”. 

The UAE-headquartered group is “negotiating” sites for two large-scale masterplans in Riyadh, one in a “prime area” and another in an “up-and-coming” location. Alkhoshaibi did not give further details, but said the developments’ scale could be compared to Aljada in Sharjah.

This 24 million square-foot development, dubbed the new downtown of Sharjah, is expected to have 25,000 homes, hotels, schools, an education district, retail and offices. 

One of the Riyadh projects will be announced later this year. 

“I wouldn’t enter a market if prices were high,” Alkhoshaibi said. “I have to deliver a certain product. Arada equity is more important to me than any profitability on any project. We want the brand to be trusted globally. To do that, the first step is the land price.”

“Saudi [land prices] are going down now, mainly because of the land tax,” said Alkhoshaibi.

Supplied/Arada

In August last year, Saudi authorities updated the decade-old White Land and Vacant Property Levies Law, raising a 2.5 percent annual tax on undeveloped plots to a maximum of 10 percent. By January, 60,000 landowners in Riyadh had been billed. 

“Before that, the price of land didn’t make sense,” Alkhoshaibi said. “Your construction costs were not covered by the selling price. Now the selling price has gone up and land prices are going down. It’s starting to stack.”

Arada’s move was also driven by Saudi Arabia’s new law allowing foreigners to buy property in the Gulf state, according to the CEO. He said this would enable the developer to cross-sell between its markets in the UAE, London, Australia and now Saudi Arabia.

Alkhoshaibi said Arada could deliver thousands of homes a year in Riyadh, but did not give a timeline. In the UAE, the group is delivering 4,000 homes this year, he said. 

Land prices dropped modestly last year – down 2.4 percent in Q4 and 0.9 percent in Q3, according to the Saudi General Authority for Statistics. Property prices dropped for the first time in five years last quarter, though were still above 2020 levels when Arada originally wanted to enter the market. 

It is too early to tell exactly how land prices will react to the white land tax, but Alkhoshaibi made clear his Riyadh plans were a direct result of the recent reforms.

“In the past six months, it has completely changed. We used to call [landowners]. Now they call us.”

The tax, and other measures in Saudi Arabia’s real estate market such as rental freezes, are part of a push to improve the affordability of homes. While Alkhoshaibi is drawn to higher property prices, he said Arada would mainly develop “inclusive” homes in the country.

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“Arada has a whole spectrum [of prices]. We can do inclusive housing and we can do ultra-luxury. Saudi is the same,” he said.

“Affordable [housing] is more challenging to deliver in Saudi because of stacking [costs]. But our growth will be in affordability. I don’t like the word ‘affordability’. Especially in Saudi, it’s associated with low-cost housing. [Ours will be] accessible luxury.” 

He expects to charge up to SAR700 per sq ft for homes. The Riyadh apartment average is SAR570, according to a Cavendish Maxwell report published last December.

One other step Arada is taking to ease its Saudi entry is keeping things in-house. The company will bring over its Australian contracting business, Roberts Co, to the UAE, where a team will work between the Emirates and Saudi Arabia.