Saudi Arabia is to allow foreigners real estate investors to own property for the first time in one of four cities under construction in the country.
King Abdullah Economic City will be the first freehold city in Saudi Arabia and is being built by government controlled Emaar Economic City at a cost of $27 billion with an expected completion date of 2025. It will cover an area the size of Brussels.
‘A lot of people want to invest in the Saudi market and see it as a frontier for real estate investment because of the population explosion here,’ said Fahd Al-Rasheed, chief executive officer of Emaar Economic City, a company controlled by the Saudi Arabian government and Dubai’s biggest property developer.
The city, known as KAEC, is near Jeddah and designed to house two million people and generate a million jobs. The other three cities under construction are Knowledge Economic City in Medina, Jazan Economic City in Jazan and Prince Abdul Aziz bin Mousaed Economic city in Hail. Two more economic cities are planned in Tabuk and the Eastern Province.
KAEC is part of a $400 billion plan announced by the government in 2008 to invest in Saudi Arabia’s infrastructure and make the country less dependent on the oil industry as well as meet its population growth. Saudi Arabia’s population has more than doubled since 1986 to about 25.5 million.
Foreign investors, individuals and companies, will be able to buy under the new Economic Cities Act issued almost two months. Regulations putting the act into effect are expected soon and will cover issues such as foreclosures, repossessions and the creation of a land registry.
KAEC will have the Red Sea’s biggest port and an industrial district where French oil company Total SA and US chocolate maker Mars will operate. The city will be spread over 65 square miles. ‘Over the next five years we expect to spend more than $4 billion developing infrastructure and assets in the city. This won’t be done by us alone, but with other partners,’ Al-Rasheed said.
About 40 families already live in KAEC and Emaar Economic City plans to hand over 470 houses to buyers this year in the project’s first phase. The second stage, including homes for 40,000, is scheduled for completion in 2014.
But the project hasn’t escaped the economic crisis. A shortage of houses has not prevented about 15% of homebuyers defaulting on purchases and the company was forced to delay construction of 16 towers as customers struggled to make payments.
Al Rasheed said he’s now seeing an increase in sales, mostly among middle income buyers, prompting the company to start its 22,000 unit Hawadi housing project a year earlier than planned. ‘We are going to hit our stride with Hawadi. It’s affordable and within the typical mortgage range. Anybody can invest in something like this,’ he added.
The 16 delayed tower development will be started again in six months after the project is redesigned and retendered to take advantage of declining construction costs, Al Rasheed said.[Property Wire]