RIYADH, (Reuters) – Dar Al-Arkan Real Estate Development Co, Saudi Arabia’s largest developer by market value, will spend 7.5 billion riyals ($2 billion) over a period of five years on a new residential project in Jeddah.
Construction on the new integrated project, which will have more than 10,000 units and leisure and shopping facilities, as well as schools, will begin in 2010, the company said in a statement posted on the bourse website.
“The company focuses its investments on areas where there is a wide gap between supply and demand,” it said.
The first phase of the so-called Shams El-Arouss property project will cost 1.5 billion riyals and will involve the construction of 2,000 housing units, the company said. It did not say when this first phase would be completed.
Dar al-Arkan will seek loans to help finance the project.
“The project will be financed from mixed formulae that include revenues from the project, cash flow from the company’s operations and external financing,” it said.
Dar al-Arkan reported on Saturday a 14.4 percent drop in third-quarter net profit due to what is said was a slowdown in the property market.
Saudi property developers, comprised mainly of private firms, are not as well-organized as some of their peers in the region, due mainly to mortgages being unaffordable for ordinary Saudis, as a lack of legislation means banks are reluctant to issue such financing.
Saudi real estate is still the subject of great interest from regional and international investors who are drawn to the kingdom’s rapidly growing population and the cash-laden government’s efforts to reduce a rising housing deficit.
About 30 percent of Saudis own a home and U.S. consultancy Clayton Holdings Inc — which is helping set up mortgage lenders in Saudi Arabia — estimated in 2009 that the kingdom has a deficit of 2 million residential units rising by 200,000 annually.