Housing Program and First-Time Buyers: Working Back from Affordability to a Unit Size

An illustrative calculation showing how a developer targeting Housing Program buyers starts from household affordability and ends with a maximum unit size and cost.

The Housing Program aims to raise home ownership among Saudi citizens to 70% by 2030, which creates demand for homes that first-time buyers can finance. The useful way to design for that demand is to start from what a household can borrow and work backwards to land, cost and size. The example below shows the method with illustrative numbers.

The situation

A foreign developer partnering on a residential scheme in a Saudi city wants to know what size and specification of villa or townhouse fits a typical first-time buyer, before choosing a plot or a design.

Assumptions (illustrative)

• Assumed target household monthly income: SAR 18,000.
• Assumed share of income a lender allows for the instalment: one third (the real limit depends on lender and regulator rules).
• Assumed lender factor: each SAR 1,000 of monthly instalment supports SAR 180,000 of home finance.
• Assumed buyer contribution: 10% of the price, with 90% financed.
• Assumed developer margin: 15% of the sale price, and assumed land cost per unit: SAR 380,000.
• Assumed infrastructure, fees and soft costs per unit: SAR 140,000, and assumed build cost: SAR 2,500 per square metre.

Step 1: Monthly instalment capacity

SAR 18,000 multiplied by one third equals SAR 6,000 per month.

This is the ceiling on what the household can service. Everything downstream depends on it, so it is worth confirming with lenders rather than guessing.

Step 2: Maximum finance amount

SAR 6,000 divided by SAR 1,000 equals 6; 6 multiplied by SAR 180,000 equals SAR 1,080,000.

The lender factor bundles interest rate and term into one number. A higher rate or shorter term lowers it and shrinks the whole product.

Step 3: Maximum sale price

SAR 1,080,000 divided by 0.9 equals SAR 1,200,000.

Because the buyer funds 10% and the lender 90%, the price the household can reach is the finance amount grossed up by the financed share.

Step 4: Cost ceiling after margin

SAR 1,200,000 multiplied by 0.15 equals SAR 180,000; SAR 1,200,000 minus SAR 180,000 equals SAR 1,020,000.

This is the most the developer can spend per unit, all in, and still earn the assumed margin.

Step 5: Budget left for the building

SAR 1,020,000 minus SAR 380,000 land equals SAR 640,000; SAR 640,000 minus SAR 140,000 soft costs equals SAR 500,000.

Land and soft costs are taken first because they are hard to reduce once a plot is chosen. The building gets what remains.

Step 6: Maximum built area

SAR 500,000 divided by SAR 2,500 per square metre equals 200 square metres.

The product must deliver a family home in about 200 square metres of built area at this specification, or the land must be cheaper, or the margin lower.

What changes the answer

• If land costs SAR 450,000 per unit instead of SAR 380,000, the building budget falls to SAR 430,000 and the area to 172 square metres.
• If the lender factor drops from SAR 180,000 to SAR 160,000 because rates rise, finance falls to SAR 960,000 and the price ceiling to about SAR 1,066,667.
• A buyer contribution of 5% instead of 10% raises the price ceiling, but only if lenders and the relevant support schemes allow it.
• A higher specification at SAR 3,000 per square metre cuts the area on the same budget to about 167 square metres.

What the numbers tell you

• Affordability, not construction cost, sets the product for first-time buyers.
• Land price per unit is the biggest lever a developer controls, which makes plot selection and density decisions critical.
• Interest rate movements change the product size quickly, so the design should allow for a smaller variant.
• Support schemes for citizen buyers can change the affordability line, so check their current terms before fixing the product.

Limits of this example

Every figure above is an illustrative assumption used to show the method, not a quote, valuation or market rate. Costs, rates, fees and regulations change and must be confirmed with the relevant authority, lender or supplier before you commit.

If a Vision 2030 programme or market trend is shaping your investment case, Domira can test it against real land, construction costs and local demand in the city you are considering before you commit capital.