Real Estate

Dar Al Arkan profit dip no cause for alarm

May 22, 2023, 12:36 PM

A residential community in Riyadh. Real estate deals in Saudi Arabia fell by nearly a third during the first half of 2023

Saudi real estate firm revenue dipped 52.8% year-on-year in Q1
Company saw increase in rental income
Kingdom’s construction sector remains optimistic about outlook

Saudi Arabian real estate firm Dar Al Arkan posted a 47 percent profit dip in the first quarter of the year to SAR117.6 million ($31.3 million), from SAR221 million a year earlier.

The decrease was attributed to lower property sales in Q1 and higher financing burdens, the company said in a filing to the Tadawul Saudi stock exchange.

Revenue for the quarter dropped 52.8 percent year-on-year to SAR765.3 million.

These factors dented Dar Al Arkan’s overall performance, even as rental income rose along with other non-operating revenues from Islamic “murabaha” transactions, according to the filing.

Murabaha is an Islamic financing structure in which the seller and buyer agree to the cost and mark-up of an asset.

Net profit did, however, rise 141.5 percent on a quarter-on-quarter basis, from SAR48.7 million in the fourth quarter of 2022.

Shareholders’ equity, after minority interest, stood at SAR19.17 billion as of March 31, compared to SAR19.38 billion in the same quarter of 2022.

Dar Al Arkan’s results come despite soaring levels of construction activity in Saudi Arabia, as the kingdom pushes forward with an unprecedented level of projects to support its economic growth and diversification agenda.

Saudi Arabia accounts for more than half ($64 billion) of a combined $110 billion of contracts expected to be awarded in the GCC this year, according to Middle East data provider Meed Projects’ 2023 outlook.

An estimated $1.1 trillion of projects are underway in the kingdom already at various stages of planning and construction, according to Knight Frank.

Despite the Dar Al Arkan results, a survey published today by construction management software provider Procore found that the majority (93 percent) of construction decision-makers in Saudi Arabia and the UAE said they were “confident” about market conditions over the next 12 months.

Almost nine in 10 (88 percent) of survey respondents said they expect the number and value of projects completed by their companies to increase over the same period.

However, the large volume of work underway in the kingdom is having a negative impact on construction pipelines elsewhere in the Gulf as Saudi mega-projects lure talent away from neighbouring countries and soak up firms’ capacity.

Dar Al Arkan is one of the largest property companies in Saudi Arabia with more than $8 billion of assets. Its independent subsidiary Dar Global completed a $600 million listing on the London Stock Exchange in February.