One of the fastest-growing sectors in the KSA is construction, due to the many projects currently promoted by the government. This sector is currently in the best moment for investors to set up a construction company in Saudi Arabia. Likewise, this development can be attributed to Vision 2030, in which the nation remarks its focus on the construction of mega projects.
In this article, you can see what are the compelling reasons to be able to extend your construction activities to the country. Additionally, you can see the details for obtaining licenses and other procedures to be able to operate in Saudi Arabia. Let us see:
1. What are the reasons for setting up a construction company in Saudi Arabia?
2. What are the sectors that define the construction market in the country?
3. How to establish your construction company in Saudi Arabia?
4. How can we help you set up your construction company in Saudi Arabia?
1. What are the reasons for setting up a construction company in Saudi Arabia?
The construction business in Saudi Arabia is still on the rise, despite the fact that in 2020, the value of contracts decreased. In addition, with the injection of a large sum by the Public Investment Fund (PIF), there is much more confidence among investors. In this way, there are several reasons for why many of them consider carrying out a Saudi Arabia company formation in the construction sector.
1.1 Increase in housing and residential projects
Right now, Saudi Arabia estimates massive growth in the demand for housing projects. In addition, continuity is guaranteed thanks to the increase in loans and financial facilities. Similarly, public and private projects are driving the resurgence of the sector after the pause in 2020.
Additionally, there is a variety of ongoing and future projects that aid in the growth of this sector. One of them is the Coastal Village Hub, a tourist and residential center currently under construction of about 28,000 square kilometers. In addition, there is the housing program, facilitated by the respective Ministry, known as Sakani, which includes self-construction products.
Similarly, under this scheme, there are other projects such as Murcia (in Riyadh), the Khayala project, Omrania, among others. Therefore, your construction company in Saudi Arabia can take part in these or other projects.
1.2 Government megaprojects
The Public Investment Fund (PIF) maintains its support for megaprojects related to tourism, leisure, and infrastructure. In this way, it changes the image of the country, attracting investors from the region, as well as foreigners. Likewise, the government promotes this vision with the commitment that these projects advance steadily.
In addition, these projects play a fundamental role as the construction sector continues its recovery. The government remains focused on Vision-2030, hoping to achieve great objectives during this period. For this reason, it is one of the best times to consider a Saudi Arabia company formation in the construction sector.
In this sense, there are several projects to be awarded to companies that meet the standards required by the government.
1.3 Public Investment Fund (PIF)
The Public Investment Fund or PIF is the entity in charge of the investment to obtain benefits for the nation. In this way, in 2020, the PIF made a significant injection of capital and boosted economic growth. The fund is currently focusing on stimulating investments in several business sectors.
Furthermore, due to this positive situation, there will be more and new job opportunities in all sectors of economy. Those who plan to set up business in Saudi Arabia these days are looking at a very positive landscape.
1.4 Increase in public-private partnerships
Something that is becoming more common in the country is the establishment of a direct presence of regional companies from 2021. While the construction sector recovers, public-private partnerships increase to a certain extent. Thanks to the partnerships between these sectors, construction is gaining the momentum it had lost during the COVID-19 pandemic.
Therefore, a Saudi Arabian company formation will benefit both parties: the nation and those who provide the service. However, keep in mind that if you are looking to establish a construction company, you must assess the situation based on economic conditions. Additionally, take into account the regulatory frameworks of the country in order to gain more confidence.
Moreover, due to the increase in foreign investment, the government aims to continue its support and creation of new incentives. Also, despite some difficulties for foreign companies, there are advances for those that provide services. For example, many companies can obtain licenses that allow them to operate without a physical presence in the country.
Likewise, you should take into consideration that thanks to international recognition, there is more confidence on the part of global investors. Similarly, since the second quarter of 2021, the interest of multinationals has increased. This has happened especially in the retail sector and hospitality, consequently increasing the construction sector.
1.5 Modernization of the sector
A construction company in Saudi Arabia that implements the best available technologies in the construction sector has an even greater advantage. This is because the country is implementing new technologies, new operational approaches, and projects based on this fact. In addition, other resources such as the use of AI, robotics, and even 3D printing have made construction enter the digital world.
Likewise, all this will allow work to be more efficient, which helps to compensate for future demand.
2. What are the sectors that define the construction market in the country?
The construction sector in Saudi Arabia has 6 key sectors. These are:
- Commercial Construction
- Industrial construction
- Infrastructure construction
- Construction for energy and public services
- Institutional construction
- Residential construction
Below is a description of each of them. Read on to find the one in which you will work for your Saudi Arabia business setup.
2.1 Commercial construction
This sector, in particular, is experiencing real growth today thanks to big upcoming projects. One of them is the support that the government is providing to the tourism sector through the Tourism Partners Program. In this way, this allows an increase in projects in the medium and long term in the commercial sector.
2.2 Industrial construction
Thanks to improvements in industrial, manufacturing, and export activities, this sector is continuously expanding. In addition, the government helped in this drive with economic diversification. In this way, it allowed the development of industrial zones, and promoted foreign investment in the mining area.
2.3 Infrastructure construction
A construction company in Saudi Arabia in the infrastructure sector is also a good idea for a successful investment. In this case, the country expects an increase in the development of transport infrastructure and regional connectivity.
2.4 Energy and utilities
The country’s projects in general point to this particular sector, which is increasing considerably. Likewise, this is backed by investments to promote the use of renewable energies.
2.5 Institutional construction
If you are an investor considering a business setup in Riyadh, the institutional construction sector is also booming. This is thanks to investment in the education and healthcare fields.
2.6 Residential construction
With improving economic conditions and government initiatives, this is another growing sector. Also, with programs like Sakani Housing, Housing Vision Revitalization, and Idle Land Fees, the sector will experience a revitalization. This drives demand for real estate as well as allows for greater affordability for buyers.
3. How to establish your construction company in Saudi Arabia?
For a Saudi Arabia business setup, it is highly advantageous to have an experienced advisor to ensure a better process, allowing for the best results and benefits. For example, they can assist you to efficiently process a foreign investment license at SAGIA.
After your business is licensed by SAGIA, you must register it with other departments of the Saudi Arabian government. These include:
- Industry and commerce ministry.
- Ministry of Zakat and Taxes.
- Ministry of Labor.
- The Chamber of Commerce.
- The General Organization of Social Insurance.
- Local government entities.
With the license issued by the Saudi General Investment Authority (SAGIA), you can carry out your business setup in Riyadh. In this way, you will have a 100% foreign-owned investment in the country without a local partner. Further, it can operate anywhere within the KSA.
SAGIA is in charge of establishing relations between the various ministries and foreign investors in the nation. In this way, only accredited investors can enter the Kingdom of Saudi Arabia. It is for this reason that you have to prove the experience of your business in the industry, and the necessary certificates.
Likewise, you can set up a construction company in Saudi Arabia as a Limited Liability Company with 100% ownership. In this case, you need at least two shareholders, who can be in the same business group.
3.1 Elements that are part of the foreign investment permit
Among the documentation that you must present to establish your construction company are:
- Resolution of the board of directors/shareholders.
- Constitutional documents.
- Records.
- A power of attorney to authorize a legal representative.
- Detailed information about the shareholders.
- Audited financial statements less than one-year-old.
- References.
- Information on completed projects.
- Construction classification grade.
- Bank account statement.
Apart from all the information above, there are also some exemptions available.
3.2 Classification of construction companies
One of the requirements is a classified copy of the investor, which must be issued in its jurisdiction of origin. In addition, this classification must be obtained by the Ministry of Municipal and Rural Affairs of Saudi Arabia (MOMRA). Such classification is a mandatory requirement when your construction company in Saudi Arabia requires a contract. Also, this element is critical when such construction contracts are for the government or other authorities.
On the other hand, this classification defines what type of contract you can receive and the value allowed for the company that is going to carry it out. A level 1 contractor can expect a much larger contract than one with a level 5. Similarly, levels are not necessarily the same for the original location of the company.
In this sense, the MOMRA is the institution that makes the classification according to the experience and the projects that the company has completed. Likewise, when doing a business setup in Riyadh, you must ensure that you comply with the standards of the construction contract. For example, you must establish a local agency, in addition to opening a bank account for the deposit of the payment.
This can help your company obtain concessions for signing government contracts. Either way, you must do the legal reviews before signing any construction contracts. For this reason, it is key to seek company formation services to advise you on all these details.
4. How can we help you set up your construction company in Saudi Arabia?
A construction business setup in Riyadh is an excellent investment plan now that all conditions are set. This is driven by government policies through the Public Investment Fund and Vision-2030.
Nevertheless, the process could become complicated to complete when you do not have any experience setting up companies in the KSA. For this reason, we encourage you to find a local consulting firm to make the set-up process smoother and faster.
With many years of experience in the establishment of Saudi companies, we can efficiently complete all the legal and administrative requirements you will face. In addition, we can also help you open a company branch in Saudi Arabia for your existing business.
Furthermore, as a foreigner, with our visa services, you will never face any trouble regarding immigration and entry permits. We can obtain the necessary visas for you and your loved ones, so you can focus on what matters to you.
Would you like to know more about the establishment of a construction company in the KSA? Our agents are at your disposal to answer any questions you may be having, so contact us! Call us at +971 43 316 688. Alternatively, feel free to email us at contact@companyformationsaudi.com, at any time. We can provide you with the best services in the market.