Real estate development in Makkah faces obstacles

The Industrial Commercial Chamber in Makkah stated that the investment environment in the holy capital is not in favor of residential neighborhood developers.
Makkah is the Kingdom’s most attractive site for such projects. However, investment conditions need to be enhanced to help boost this sector.
A report by the chamber states, despite the urban activity renaissance in Makkah, development is challenged by lack of labor and a skilled workforce, bureaucracy, and mortgages problems.
The report recommends employing Islamic bonds to meet developers’ financial needs, and involving small investors in big projects to support their development and participation in boosting the national economy.
Focusing on low and medium income citizens should be on the agenda, such as supporting Makkah Oasis and the alternative housing projects, which are in need of infrastructure work.
The vague future of the new development projects is another added obstacle facing the development sector.
Amid the lack of proper planning and road maps, Investors refrain from joining development projects such as central area surrounding the Haram Al-Sharif.
A qualitative change in legislation is needed to meet the growing need of developing residential neighborhoods, the report advises, to create a balance between the supply and demand in the sector.
The report suggests accelerating permits and license issuance procedures as well as applying innovative financing solutions. “Development stakeholders are challenged by the lack of funding, lack of access to other investors and finalizing municipality procedures,” the report explains, warning that weak earnings of housing projects discourage investment in this sector.
However, some procedures are already being done to help investors.
The recent Shoura Council’s approval to exclude banks and corporations enlisted in the international stock market from the ban on non-Saudi real-estate ownership in Mecca and Medina will raise investment in this sector.
In addition, the annual 3 percent increase of population in Makkah downplays the possibility a price-fall for land and real estate prices.
The report predicts SR70 billion paid in compensation for removing residential neighborhoods located in the scope of government projects in the coming three years, to create new investment opportunities in construction, real estate, rock cutting and demolition markets.
These projects are expected to enhance confidence in investment in Makkah attracting big investors, especially in light of security and economic stability and the absence of any fees or taxes.
New compensation, expected to be paid during the current year, include removing properties in the first and second Da’ri projects and King Abdul Aziz road, in addition to removing properties in favor of huge governmental projects such as expanding the northern squares of Haram Al-Sharif.
New economic opportunities will be open for random neighborhoods to become commercial areas for hosting pilgrims.
The report stressed that Makkah’s building schemes are in accordance with international standards and concludes on the hopeful note that that the government will find solutions to the obstacles facing investors.