Holland Gulf Chamber of Commerce » Investment

Makkah records SAR59bn real estate deals in 2013

jochemgeheniau — Tue, 21 Jan 2014 09:11:21 +0000

Real estate index for Makkah region surprised all forecasts that said deals in the sector will point to the downside during 2013.
The numbers, values, and scopes of the deals up to the end of last year witnessed a rise of 350 percent compared with a year before.
The value of deals during the year stood at SR59.4 billion, against SR16.1 billion in the year before, an increase of 350 percent.
The number of deals during 2012 registered a pickup of 4.677 deals and increased to a record of 17.920 deals last year, an increase of up to more than 400 percent.
Real estate experts expected the index to rise in the holy capital this year, and the value of deals in the sector to rocket up to SR80 billion in view of the massive development project in the real estate sector, and the generous expenditure on the infrastructure of the city.
Head of the Real Estate Committee at Makkah Chamber of Commerce and Industry Mansour Abu Al-Reesh stated that the bearish real estate market forecasts by some analysts were not based on scientific grounds or on studies of the markets, adding: “They were just inaccurate speculations.”
Abu Al-Reesh projected real estate market to witness a big upbeat, and a rise in the value of the sector’s deals to more than SR80 billion because of the giant projects in the city, mainly the projects of public transportation, the ring roads or circumferential highways, the train stations and the development of slums that entailed expropriating thousands of properties and pumping more than SR100 billion as compensations into the market.
“Investment infrastructure in the holy city has become attractive to more and more investors who recently moved to establish large investment portfolios in building large residential projects, such as hotels and residential towers.
Yusuf bin Awad Al-Ahmadi, a developer said real estate investing in Makkah had become one of the most successful investments. “This has led to the revival of the real estate market, in addition to the disbursement of compensation related to the expropriated properties for the expansion of the Grand Mosque,” he added.
Another developer, Meshal Al-Zaiydi said the market is bound to have more deals this year because of the state’s expenditure on development projects. “The construction of quality hotels and the other residential projects will increase the capacity of the city to accommodate more numbers of Umrah and other seasonal pilgrims,” he said, adding that the majority of beneficiaries of the compensations are expected to buy new properties, which will lead to an increase of land development and residential projects.
Al-Zaiydi revealed that many capital owners and real estate investors moved to invest in the holy city where several conglomerates emerged to buy lands for constructions.
Agreeing with him, another developer, Tawfiq Suehra said real estate market in Makkah was witnessing a rebound.
“The attractive investment environment in Makkah has become the focus of many real estate investors and venture capitalists who have moved to form large conglomerates, pumping huge liquidity in the market.”
“This year, 2014, of all real estate investments, the hotel sector will receive bigger investments than before, with capitalists moving toward safe investments in Makkah in view of the increasing number of Umrah and seasonal pilgrims that will come once expansion and construction projects are completed,” said Fayez Zaqzoq, a developer.
On the other hand, real estate expert Marie bin Mubarak bin Mahfooz said real estate prices will spike this year because of the increasing demand on lands and properties. “This quantum leap in the real estate market during the last five years made real estate investors and venture capitalists dribbling,” he added.

SAR581bn for solar power projects

jochemgeheniau — Wed, 13 Nov 2013 08:59:48 +0000

The Gulf Cooperation Council (GCC) countries are set to invest $155 billion (SR581.25 billion) for the construction of energy generating plants from non-traditional sources, notably solar energy, local media reported quoting a specialized energy report.
However, the drive of energy firms from the private sector to renewable energy projects is still under the required level while the government-owned companies have big capitals to invest in this type of activity, which sometimes falls within “sovereign decisions,” the report, released by Abu Dhabi-based Crescent Petroleum, said.
Availability of funding ways to develop energy sources is among the major challenges facing both public and private sector companies in this regard, the report said.
In particular, the private sector firms bear the brunt of challenges to get the required funding and, if attained, could give them the ability to participate in energy decision-making processes and acquire an increasing share of investments, the report said.
The report said both the public and private sector companies had to jointly consider the possibility of going into joint stock companies, which would bring positive results at the level of companies, new stockholders, financial markets and the energy sector as well.
This tendency is hoped to provide financial flows at reduced costs with a view to boosting long-term investment activities, the report said. Accordingly, the step will allow (GCC) governments direct spending to activate and promote other productive sectors at the least costs with high efficiency, it added.
The report emphasized the growing tendency toward the IPO (initial public offering) for energy firms in light of inability of the current financial regulations and legislations to directly fund the expansion of energy projects, notably the establishment of a regional oil exchange market.
Experts say the six GCC countries have already envisioned solar installation projects which will generate more than 84 GW of power when complete in a three-year period.
Saudi Arabia, in particular, hopes to double its installed electricity capacity by building 54 GW of renewable energy by 2032, of which 41 GW will be obtained from the sun. Abu Dhabi also seeks to generate 7 percent of its electricity from renewable sources by 2020.

Kingdom’s real estate market stands at SAR1.5 trn

jochemgeheniau — Tue, 12 Nov 2013 08:27:21 +0000

Real estate circles are waiting for a decision from the Council of Ministers regarding the allocation and prioritization of the lands available to the citizens through the scheme of “A land and a loan.”
The parties involved in the scheme are mainly the Ministry of Housing, the Ministry of Justice, the Ministry of Municipal and Rural Affairs, the Ministry of Labor, the Saudi Electric Company, and the Saudi Credit Company.
It is expected that the criteria for allocation will include the age of the home-buyer, monthly income, and the number of family members. The new mechanism will determine the eligibility of applicants and the type of subsidy they can get.
Khalid Al-Ghamdi, chief of the real estate community in Jeddah, told Arab News that the new scheme comes at a time when the Kingdom is going through a shortage in the supply of housing units. “We need about SR500 billion to fund the construction of 1.25 million housing units by 2014. However, we expect real estate finance for this year to be around SR60 billion,” he said.
“I believe that the Saudi real estate market is still attractive enough for investors and developers to take even a small chunk of this huge market, especially during this period of slowdown in global markets. The Saudi real estate market is worth an estimated SR1.5 trillion, while the house construction market is worth an estimated SR1 trillion,” he added.
“The real estate and construction sectors in the Kingdom provide the best and most attractive investment opportunities in the region. Currently, more than 285 real estate projects worth SR260 billion are either under way or being planned. The internal demand is the strongest engine of growth for the real estate sector due to the larger size of the Kingdom and increasing population. The current demographics require that we build around 3 million housing units by 2040 to meet the needs of the growing population,” he said.
He expects that when the Mortgage Law is enacted, it will make it easier upon the citizens to own houses in the areas they like, and it will enable the business sector to contribute, in view of the banks’ reluctance to lend those home buyers who want to own a house of their own. “This law will regulate and give a legal status to mortgages. It will be a strong point in favor of the Saudi real estate market. The law will reflect the Shariah teachings with regard to financial transactions,” he said.

GCC emerging as an attractive investment destination

jochemgeheniau — Thu, 07 Nov 2013 09:48:46 +0000

JEDDAH – “GCC offers strategic advantages, such as availability of cheap energy and feedstock supply, low tax environment, well-developed infrastructure, growing population and increasing income levels, conducive for the development of various industries in the region. All these advantages if properly showcased could attract substantial investment flows from Indian corporates, who are looking to expand their global footprints and scouting for distinctive cost advantages to remain globally competitive,” said Sameena Ahmad, Managing Director, Alpen Capital.
“The GCC is emerging as an attractive investment destination for Indian companies. We as Alpen Capital specialize in the GCC-India corridor and have concluded several transactions in this sphere. There are several opportunities that exist in the GCC for Indian companies and we see a lot of interest from Indian corporates to establish a presence in the GCC. This trend is on the rise and we will continue to work closely with our clients and the respective governments to facilitate these transactions,” said Sanjay Vig, Managing Director, Alpen Capital.
A variety of catalysts for investment growth exist in GCC. While the oil industry is undeniably a pillar for the GCC economies, the region’s priority is to achieve sustained economic growth through development of non-oil sectors. This can be achieved by increasing private sector participation, strengthening local technological capabilities, developing a skilled workforce, improving the competitiveness of exports in global markets and by attracting substantial overseas investments.
Continued government spending to boost competitiveness, self-reliance and developing local skilled work force would offer potential investment opportunities in sectors such as Petrochemicals, fertilizers, plastics, pharmaceutical, sugar refining, aluminium & steel. In addition government support and infrastructure is expected to grow in sectors such as Information & Communication technology (ICT) and agriculture, food processing, education, financial services and EPC.
GCC offers substantial cost advantage for industries like petrochemicals, fertilizers, pharmaceuticals and metallurgy among others, as the region boasts of one of the lowest energy costs globally due to abundant availability of resources. Natural gas prices in GCC range between $0.8-1.5 per million British thermal units (mmbtu) compared with the global average of $4.0-6.0 per mmbtu. The availability of low-cost feedstock provides the region with distinctive competitive advantage. Average electricity prices for end users in GCC states are much lower at $3.7cents/kWh compared to countries that enjoys the reputation of being generation powerhouses ($10.5cents/kWh in USA and $9.4cents/kWh in China).
GCC’s twin surplus condition leads to economic stability: GCC’s large fiscal surplus (averaging ~9.2 percent of GDP over 2007-11) and trade surplus (averaging ~ 16.9 percent of GDP over 2007-11), low levels of public debt (averaging ~4.5 percent of GDP over 2007-11), and low external debt translate into a better rating, in terms of macro-economic health, than developed counterparts. On the other hand, economic diversification initiatives, growth in non-hydrocarbon sectors, pegged currencies, large forex reserves, well-developed infrastructure, and a moderate inflation environment provide an overall attractive business environment vis-à-vis emerging economies.