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Investment into Greenfield sites like economic cities remains tempting, although the level of potential involvement is still dependent on crucial elements such as Government guarantees and assurances, and the clarification of project timelines. But the Public-Private Partnership (PPP) model is one that SAGIA, and the Government in general, is eager to promote in order to marry international expertise and knowledge with Saudi financial capital to develop world-class communities that will anchor future economic development.

RELIGIOUS TOURISM Te Kingdom’s two holy cities are also attracting development interest

according to a 2010 report from global real estate advisory Jones Lang LaSalle, which highlighted opportunities for hospitality market expansion with the forecast increase of religious tourists from 7.8 million to 13.75 million by 2019. Foreigners are still prohibited from owning land in the holy cities but

savvy investors are partnering up with Saudi developers through joint venture agreements. Several upscale hotel brands have already opened properties in Makkah and Madinah including Fairmont, Oberoi and Raffles, with other leading chains such as Marriott and Sheraton also announcing new projects.

SNAPSHOT RIYADH Radwan Hariri, Head of Development & Operations, Oger Real Estate, sees huge opportunity in Riyadh’s residential and hospitality sector, as he explains: “We believe that housing and hospitality remain as the most attractive asset classes after infrastructure. The Government is focusing on attracting investment mainly into the lodging sector, although we

believe that the injection of foreign capital into the housing sector, coupled with expertise and innovation, will be very beneficial.” Khaled Madkhali, founder of Sogouf Real Estate agrees. “Te residential

sector currently offers the highest investment potential, with return reaching an average IRR of almost 15 per cent, followed by hospitality with an average IRR of 12 per cent. We believe that demand will exist [in these sectors] for the coming five years, and the market will expand, but tentatively – given the unrealistic price inflation situation in the real estate market, which is not controlled, and which is supported by the lack of a law forcing landlords to sell or develop their land,” he says.” According to Hariri, the scarcity of availability of large plots of land in

Riyadh is merely one aspect of a wider number of challenges. “Tere is also the issue of delivery with private real estate developers experiencing real problems in finding quality contractors to deliver their projects,” he says. “In terms of product, in certain asset classes we are looking at potential

excess supply, such as the Riyadh office market, contrasted with the significant problem of the expected housing supply,” he adds. Both Madkhali and Hariri are confident that Riyadh has the ability to

remain fairly well isolated from global turbulence, but not without having adequate contingency plans in place. “No economy is isolated and all economies are connected. Tat said, the Kingdom has a solid economy driven by wise leadership and the conservative policies of the Central Bank,” remarks Hariri. Madkhali adds: “We don’t believe that Riyadh is isolated [from the global situation] but it has a thicker buffer zone that will enable it to partially absorb the impact of the financial crisis for some time to come. We need to take advantage of that buffer zone and plan well to minimise damages” l


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