Residential property prices in Riyadh, Jeddah, Madinah and other major urban centres in Saudi Arabiahave been rising unabatedly due to limited available land as well as to the increasing cost of imported building materials. Making matters worse, there is now also a shortage of construction workers resulting from implementation of “Nitaqat,” the campaign for the Saudisation of the labour market.
The campaign seeks to free up jobs for Saudi nationals, given a 13% unemployment rate, by regulating the entry of expatriates into the kingdom’s labour market. Under the enabling edict, companies are required to hire a certain number of Saudi employees, based on the company’s size.
Raids have been carried out on establishments harbouring aliens with no or improper documentation. Since March, almost a million foreigners have left or been sent home. Just last month, 137,000 illegal workers were rounded up and deported.
Foreigners comprise approximately two-thirds of Saudi Arabia’s labour force. So the crackdown led to disruptions in vital services including delivery of drinking water, cleaning of streets, harvesting of crops and even chauffeuring for women, who are not allowed to drive in the kingdom. Expatriates who fear arrest have largely refrained from showing up at work. The construction sector in particular, reliant on cheap foreign labour, has been hard hit. Of the 200,000 firms operating as building contractors, about 100,000 have reportedly closed shop, according to local chambers of commerce.
Work on numerous construction sites has been temporarily shelved, at a time when the building sector is hard pressed to implement and complete projects worth SAR3 trillion (US$0.8 trillion) till 2020.
Even with “Nitaqat,” very few Saudi nationals would likely apply for employment as menial construction workers. Thus, the companies in the sector will continue to hire foreigners, although some delays cannot be avoided since they also have to make sure that all pertinent paperwork in support of the arrangement are in order. Project cost overruns brought about by the delays will be passed on to consumers, thereby further adding to the rise in property prices.