Saudi Arabia’s Al-Rayadah Investment Company, the investment arm of the kingdom’s Public Pension Agency, has floated a construction tender for its low-cost housing project in Jizan.

The scope of the tender involves infrastructure work at the development, which is on land issued by the Public Pension Agency.

The deadline to purchase tender documents is 10 November, while the submission date is 21 January 2014.

Faced with a huge shortage of affordable housing, Saudi Arabia needs to construct 85,000 homes a year to keep pace with a population growing at a rate of 2.5 per cent a year. About 60 per cent of Saudi nationals are estimated to live in rented accommodation.

Inflated land prices in the kingdom have prevented private firms from developing low-cost housing schemes because they could not deliver an end product that lower-income segments of society could afford. At the root of this problem are vast quantities of unused land owned by wealthy families, which are being held as investments.

In April, the government freed up thousands of acres of state-owned land for construction in a bid to address the issue, but land prices still represent more than 50 per cent of the development costs for a home in the kingdom, deterring the launch of new low-cost housing projects.