Labour shortage likely to delay projects in Saudi Arabia

15 December 2013

Crackdown on illegal labour has prompted many workers to flee

Labour shortages resulting from a crackdown on illegal workers in Saudi Arabia are likely to delay real estate projects and raise construction costs, according to a new report from the Middle East office of US-based consultancy Jones Lang LaSalle (JLL).

JLL said that despite a “strong demand” for new capital schemes in Jeddah and Riyadh, resource constraints will hinder project delivery.

“Real GDP [gross domestic product] growth is forecast to be 4 per cent in Saudi Arabia for 2013 and Saudi banks are increasing their lending to real estate end-users to the highest level recorded during the past five years,” says Alan Robertson, chief executive officer (CEO) of JLL in the Middle East and North Africa (Mena) region.

“While major new capital projects are driving strong demand across the office, retail and hotel sectors in Riyadh and Jeddah, labour shortages will likely delay schemes and increase construction costs.”

In April, Saudi Arabia launched an amnesty programme in which illegal workers were allowed to change their sponsorship without obtaining their sponsors’ permission and exit the kingdom without penalty. In July, the Labour Ministry reported that four million foreign workers had corrected their visa status.

Due to concerns that not all of the labourers who had been trying to correct their status would be able to do so in time, the government extended the original three-month deadline to 3 November.

More than one million illegal workers fled the kingdom during the amnesty period, according to the Passport Department. In addition, more than 137,000 people have been deported in the first month since the amnesty period ended, as Saudi authorities have been conducting widespread inspections of commercial premises in a search for illegal workers.

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