SNB Capital expects recent amendments to idle land fee regulations to benefit some sectors, such as real estate development and construction (cement companies), as well as manpower supply firms, and banks that will get a boost from increased demand for mortgage loans.
In a recent report, the brokerage indicated that its top picks in the Saudi stock market include Riyadh Cement, Yamama Cement, Riyadh Cables, Alinma Bank, Saudi Awwal Bank (SAB), and Al Mawarid.
It anticipated increased pressure on the shares of companies holding large land areas, as well as REITs with high exposure to the residential sector in Riyadh (such as Al Waha REIT and Jadwa REIT Saudi).
The REITs most exposed to the new regulations include Al Waha REIT, Al Khabeer REIT, SEDCO Capital, Mulkia, Jadwa Saudi, Bonyan, and Al Maather REIT.
The new regulations, according to the research house, are expected to have a broad impact on the economy and the markets, as they will help address structural challenges in the real estate sector, paving the way for strong growth driven by mega projects and major events in the coming years.
From a macroeconomic perspective, SNB Capital indicated that the idle land fees amendments is part of a broader framework aimed at achieving balance in the real estate sector, particularly in Riyadh, with the goal of increasing homeownership rates. The amendments are expected to boost supply, thereby balancing prices, reducing inflation, and stimulating mortgage loan growth.
The brokerage stated that the increase in supply and price reduction will be achieved by making more commercial and residential land and units available, as well as reintroducing vacant units into the market — all contributing to stabilizing property and rental prices.
It also expects a shift in the strategy of real estate investors through focusing on other cities, exploring innovative real estate products, and/or moving into other asset classes such as equities and fixed income. Strong partnerships between developers and landowners are also anticipated.
According to Argaam data, the Cabinet approved in April amending the idle land fee regulations, which included raising the maximum annual fee rate to no more than 10% of the property value. This also included reconsidering the land size subject to the fees — the land or combined lands within the applicable scope must be at least 5,000 square meters, as specified by the regulations.
Cabinet members also greenlit the updated organizational structure and guide for the Ministry of Investment.