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Saudi Arabia’s construction sector... growth on the fast track.

Saudi construction sector to record 11pc growth

DALLAS, December 17, 2014

A rising population, plans to overcome the housing shortage, and efforts to develop the transport network and renewable energy infrastructure will set the Saudi Arabian construction industry on track to record a growth of 10.98 per cent CAGR (compound annual growth rate) until 2018, a report said.

The market recorded a CAGR of 10.06 per cent during the review period (2009-2013), noted Construction in Saudi Arabia - Key Trends and Opportunities to 2018 industry research released by RnRMarketResearch.com, a US-based market research firm.

During the review period, growth in the construction industry was supported by the Ninth Five-Year Development Plan implemented for the period 2010-2014. Growth in the tourism sector and investments in the infrastructure and residential markets will support the industry's expansion over the forecast period (2014-2018). Industrial construction will be supported by the government's focus on diversifying the country's economy.

According to the Central Department of Statistics and Information, the Saudi Arabian construction industry's contribution to GDP (gross domestic product) increased from 4.3 per cent in 2011 to 4.8 per cent in 2013.

The industry's value add increased by 8.8 per cent, from SR87.3 billion ($23.3 billion) in 2012 to SR94.9 billion ($25.3 billion) in 2013 in real terms, whereas it increased by 13.4 per cent, from SR118.5 billion ($31.6 billion) in 2012 to SR134.4 billion ($35.8 billion) in 2013 in nominal terms.

As part of the country's economic goals of diversification and job creation, the government allocated funds for the development of healthcare, infrastructure, education and social services. The government announced a 2014 budget of SR855 billion ($228 billion). Its upcoming 10th five-year development plan for 2015-2019 will focus on economic development and raising living standards through a number of welfare activities.

The country is focusing on developing the tourism sector to reduce its dependence on oil. Projects such as a 20-year National Tourism Development Project (NTDP), approved in 2005, will attract a greater number of tourists - with the volume expected to reach 45.3 million by 2025.

Investments in the travel and tourism sector are expected to reach SR33.5 billion ($8.9 billion) by 2020. In 2014, the Saudi Commission for Tourism and Antiquities (SCTA) announced plans to develop the hospitality and aviation markets, to increase the tourism sector's contribution to the economy.

In 2013, the government passed a new mortgage law to expand the real estate market.

The law proposed several changes, including banks and other financial institutes becoming licensed to offer mortgages up to a maximum loan-to-value ratio of 70.0 per cent. Factors such as population growth, gradual lifestyle changes from traditional cultural models, and the easing of restrictions in terms of acquiring loans through development funds will increase demand for housing.

GCC countries are focusing on developing transport infrastructure with an aim to encourage cross-border trade and reduce congestion as a result of rapid population growth. Saudi Arabia has several railway projects in development: the North-South railway line that connects Riyadh with ports and the mining centers at the Jordanian border, as well as the Landbridge freight link. Such projects are expected to support intra-regional trade and increase the country's export capacity.

In 2012, King Abdullah City for Atomic and Renewable Energy (KA-CARE) announced a plan to install 54 GW of renewable energy by 2032. The total installation capacity will consist of 16 GW of solar photovoltaic (PV), 25 GW of concentrated solar power (CSP), 3 GW of waste-to-energy, 9 GW of wind and 1 GW of geothermal energy. To reduce its reliance on hydrocarbon and to strengthen ties between Saudi Arabia and China, an agreement was signed for the production and peaceful use of nuclear and renewable energy in 2014.

The Saudi Railway Master Plan 2010-2040 (SRMP) aims to provide the conceptual framework for the long-term development of the country's passenger and transport railway network. Under this plan, SR365 billion ($97.3 billion) will be invested in the development of the country's railway network by 2040.

The plan includes high-priority first-level projects, with an investment of SR63 billion ($16.8 billion) for the construction of 5,500 km of railway line during 2010-2025. Medium-priority second-level projects, valued at SR209 billion ($55.7 billion), include the construction of 3,000 km of railway lines during 2026-2033, whereas third-level projects, worth SR93 billion ($24.8 billion), include the construction of 1,400 km of railway lines between 2034 and 2040. - TradeArabia News Service
 




Tags: Saudi Arabia | tourism | population |

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