(MENAFN - Arab News) Building owners in the Kingdom's metropolitan cities are poised to demolish their old buildings and erect new multiple-floor units that could possibly increase the number of existing housing units by more than 40 percent.
Local media quoted experts who said that this phenomenon has increased during the last five years in old districts in big cities.
The municipalities have allowed owners to add more floors in residential buildings, rents have increased and the Real Estate Development Fund (REDF) is now offering credit facilities, said Jeddah-based financial adviser Faisal Sairafi.
He predicted that the demolition of old buildings for new replacements would continue for years to come with the growing demand on housing units, especially as statistics indicate that nearly 60 percent of Saudis do not own their own houses.
"If the demolition-and-replacement approach continues at the current pace, it will contribute to easing the prevalent bottlenecks in the real estate market: Both the rental and sales prices of housing units," he said.
Sairafi said low risks and small capital requirements associated with this area of investment have expanded the base of investors, notably medium class people, who see real estate investment as a secure haven for them. The number of applications for licenses to reconstruct old buildings has increased by 300 percent in the last 10 years in most parts of the Kingdom.
The number stood at 112,362 in 2011, compared to 37,585 in 2003, according to data of the Ministry of Municipal and Rural Affairs.
In Jeddah alone, some 14,476 licenses were issued last year, an increase of 30 percent compared to the previous year, said Yasir Adas, head of Licenses at Jeddah Province.
Abdullah Al-Bluwi, a key real estate broker in Jeddah, said that adding more floors to buildings or the demolition of buildings to construct new ones has become common practice in old districts of the city. He said the replacements currently represent 60 percent of construction activity in these districts, notably in northern districts such as Al-Faisaliyya, Bawadi, Safa, Aziziyyah, and Salamah.
Abdullah Al-Ahmari, the head of the Real Estate Evaluation and Auction Committee at the Jeddah Chamber of Commerce and Industry (JCCI) said this phenomenon would exert more pressure on the infrastructure of such districts during the next few years due to the growing population as a result of an increase in housing units.
He stressed that the new drive (of demolition and replacements) was meant to find a solution to the housing problem and termed it a "timely solution" as it seeks to find more housing units for the needy. He urged the municipalities to reconsider these decisions by shifting the thickly populated neighborhoods to new land plans. These have been designed to fully absorb new streets, utilities and other infrastructure projects.
The phenomenon is no longer limited to one city in the Kingdom but, rather, has become common practice in many cities, Al-Ahmari said. The number of licenses approved for demolition and replacements in Riyadh stood at nearly 27,000 in 2012 compared to 20,013 in 2010, an increase of 30 percent, Al-Ahmari said, quoting data released by the Riyadh Municipality.
