Riyadh Metro and Transit-Oriented Development: A Land Value Worked Example

An illustrative comparison of a plot next to a Riyadh Metro station and one further away, showing how density, not the station itself, drives the difference in value.

The Riyadh Metro opened to passengers from December 2024, and planning around its stations encourages transit-oriented development, meaning denser mixed-use buildings within walking distance of stations. For developers, the value of a plot near a station comes mainly from what planning allows on it and from the price buyers will pay for access, not from proximity alone. The illustrative calculation below shows both effects.

The situation

A developer is comparing two plots of 5,000 square metres each: plot A next to a metro station, where higher density is assumed to be allowed, and plot B in a comparable district further away.

Assumptions (illustrative)

• Assumed land price: SAR 6,000 per square metre for plot A and SAR 4,000 for plot B.
• Assumed allowed floor area ratio: 4.0 for plot A and 2.0 for plot B (actual ratios must be confirmed with planning authorities).
• Assumed construction cost: SAR 3,500 per square metre of gross floor area for both.
• Assumed saleable share: 85% of gross floor area.
• Assumed sale price per saleable square metre: SAR 8,000 for plot A and SAR 7,500 for plot B.

Step 1: Land cost

Plot A: 5,000 multiplied by SAR 6,000 equals SAR 30,000,000. Plot B: 5,000 multiplied by SAR 4,000 equals SAR 20,000,000.

Plot A costs 50% more to buy.

Step 2: Buildable floor area

Plot A: 5,000 multiplied by 4.0 equals 20,000 square metres. Plot B: 5,000 multiplied by 2.0 equals 10,000 square metres.

Land cost per square metre of floor area is SAR 1,500 for plot A and SAR 2,000 for plot B, so the dearer plot is cheaper per unit of building.

Step 3: Total development cost

Plot A: 20,000 multiplied by SAR 3,500 equals SAR 70,000,000, plus land equals SAR 100,000,000. Plot B: 10,000 multiplied by SAR 3,500 equals SAR 35,000,000, plus land equals SAR 55,000,000.

Plot A needs far more capital, which raises financing and sales risk.

Step 4: Sales revenue

Plot A: 20,000 multiplied by 0.85 equals 17,000 saleable square metres; multiplied by SAR 8,000 equals SAR 136,000,000. Plot B: 8,500 multiplied by SAR 7,500 equals SAR 63,750,000.

The station location is assumed to add a modest price premium on top of the larger area.

Step 5: Profit and margin on cost

Plot A: SAR 136,000,000 minus SAR 100,000,000 equals SAR 36,000,000, or 36% on cost. Plot B: SAR 63,750,000 minus SAR 55,000,000 equals SAR 8,750,000, or about 15.9% on cost.

Most of plot A's advantage comes from the density assumption, not from the price premium.

What changes the answer

• If plot A is allowed a ratio of 3.0 instead of 4.0, its floor area falls to 15,000 square metres, cost to SAR 82,500,000, revenue to SAR 102,000,000 and margin to about 23.6%.
• If the station premium disappears and plot A sells at SAR 7,500, its revenue falls to SAR 127,500,000 and margin to 27.5%.
• A slower sales pace on a much larger project adds financing cost that this simple example ignores.
• Parking requirements near stations may differ from elsewhere, which changes the saleable share.

What the numbers tell you

• Near a metro station, the planning allowance usually matters more than the location premium.
• Confirm what the plot is allowed to carry before paying a station-area price.
• A denser project needs more capital and absorbs more market demand, so test the sales pace.
• Compare plots on land cost per square metre of buildable area, not per square metre of land.

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.