Saudi Arabia seeks to regulate the real estate market through clear systems and legislation, most notably the Off-Plan Sale System. This system allows real estate developers and individuals to sell or exchange units before their construction is completed. Managed under the supervision of the Ministry of Municipalities and Housing (formerly Ministry of Housing) and REGA, it establishes the rules necessary to guarantee the rights of all parties and protect investments.

The Off-Plan Sale program (Wafi) is a vital tool for driving real estate investment, offering buyers the chance to secure units at competitive prices while providing developers with the necessary financing to complete their projects.

What is Off-Plan Sale?

Off-plan sale refers to a unit or land offered for sale before its construction or development is finished. The developer markets it to investors according to a regulated mechanism. This model allows:

Developers: To achieve financial returns that help complete projects.
Buyers: To benefit from discounts and offers intended to stimulate demand.
Investors: To access the Saudi market through a flexible and transparent process.

Off-Plan Sale Conditions (Ministry of Housing / REGA)

To protect buyers and ensure developer commitment, the following regulations are enforced:

Compliance: Adherence to all regulations issued by the Ministry and the General Real Estate Authority.
Down Payments: The down payment must not exceed a specified percentage and must be paid via official bank accounts or checks.
Delay Compensation: If a developer delays delivery past the agreed date, they are required to pay compensation equivalent to 5% of the unit's value to the buyer.
Structural Guarantees: Developers must provide guarantees for the building's structural integrity.
Operational Warranties: Provision of warranties for basic services (electricity, water) for a period of no less than 12 months.
Strict Timelines: Full commitment to the announced project schedule; changes require official approval.

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Advantages of Off-Plan Investing

Lower prices compared to ready-made properties.
Potential for significant capital appreciation as construction progresses.
Reduced maintenance costs during the initial years.
Flexible payment plans and early-bird discounts.

The Wafi Off-Plan Cycle

Licensing: Developer applies to the Wafi program with legal and engineering plans.
Approval: Wafi reviews the technical and legal aspects before granting the license.
Escrow Account: A project-specific bank account is opened. Funds are only released based on construction milestones.
Marketing & Sales: Official marketing begins after advertisement approval.
Monitoring: Wafi tracks progress against the project schedule.
Delivery: Units are handed over according to agreed specifications.
Closure: The escrow account is closed once all obligations are met.

Payment Methods

Standard Buyers: Typically commit to a 20% down payment upon purchase.
Sakani Beneficiaries: May pay as little as 5% during the first three years, with monthly installments.
Contracts: While Wafi provides a guidance model, the legally binding contract is the one signed directly between the developer and the buyer.

Potential Risks to Consider

Delays if developers do not strictly adhere to timelines.
Marketing occurring before all permits are fully finalized.
Financial risks if payments are made outside official escrow accounts.

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