$2.9bn fund to develop 2,600 properties in Mecca

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• Development in Al Kidwa area
• Royal Commission to oversee works
• Goal to increase religious tourism

The Royal Commission for Makkah City and Holy Sites has launched a SAR10.93 billion ($2.91 billion) fund to develop real estate in the holy city of Mecca.

The fund will develop the Al Kidwa area close to Holy Masjid in partnership with Riyadh-based developer Thakher Development Company and investment bank Albilad Capital, the government-owned commission said in a statement.

The project will cover an area of 686,056 square metres and include the development of 2,614 properties within the project.

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The details of the project and cost were not disclosed.

The new partnership aligns with the objectives to contribute to Saudi Arabia’s ambitious vision to host 30 million Umrah performers and six million pilgrims by 2030.

The Royal Commission will play an important role in supporting the fund and overseeing the project development works, Thakher CEO Abdulaziz bin Saleh Al-Aboudi said in a statement.

Thakher Development will be responsible for developing the master plan and infrastructure of the project. Albilad Capital will manage the fund.

Reuters in November reported that the Public Investment Fund, the kingdom’s sovereign wealth fund, was working with Lazard on funding options and a potential initial public offering of Masar, a $27 billion, 1.2 million sq m mega-project in the western part of Mecca.

Global real estate advisory firm Alpha1Estates said at the start of the year that its real estate index for Mecca and Madinah had fallen by 21.5 percent in 2022.

This compared to a jump of 12.9 percent in 2021 and was attributed to a slump in the global economy, central bank interest rate hikes and the re-emergence of overseas pilgrims to the Holy Cities following pandemic-enforced restrictions.

Saudi Arabia is looking to attract more religious tourism, with Hajj and Umrah visitor numbers due to treble to over 30 million by 2030.

“Saudi Arabia has been investing heavily in infrastructure and facilities, including the expansions to the Haram in Mecca and Medina,” said Reem El Shafaki, leader of DinarStandard’s travel and tourism practice.

In Mecca average occupancies rose by 11.3 percentage points in the second quarter of this year compared to the same period in 2019, according to the latest data from CBRE Middle East.

Average daily rates surged by 41 percent, resulting in a revenue per available room growth of 70.5 percent.

Saudi Arabia is developing a series of new communities as part of its Vision 2030 project to diversify the economy away from oil.

These include the futuristic city Neom, economic cities and residential areas in which Saudis are encouraged to buy their own homes. 

The total value of real estate and infrastructure projects in Saudi Arabia is $1.25 trillion. These are in addition to $250 billion of commissioned projects.

Most of these are in housing, as the kingdom plans to reach a population of 50 million by 2030, real estate consultancy Knight Frank said in a report last week.