Emaar Properties PJSC, the Dubai-based builder of the world’s tallest tower, is exploring opportunities to develop housing communities in neighboring Saudi Arabia where an oil-fueled construction boom is underway.
The developer is in talks with the kingdom’s housing ministry to build large mixed-use developments, according to Emaar founder Mohamed Alabbar. Emaar could start working on a 4,000-unit housing project if they reach an agreement, he said.
“We’re in serious discussions with the ministry of housing on working together,” Alabbar said in an interview in Abu Dhabi. “We’re quite active” and “we have stuff we’re looking at.”
Saudi Arabia is drawing the attention of international developers and builders amid a state-push to boost homeownership in the kingdom. Construction contracts worth $250 billion have been awarded in the country since 2016 as the oil producer seeks to transform itself into a top tourism destination and end its reliance on revenue from hydrocarbons.
Giga Projects
Emaar has been involved in Saudi Arabian real estate developments for many years. In 2008, it started work on the King Abdullah Economic City project through Emaar Economic City. The development has recently been repurposed as a special economic zone in a bid to revive the area.
The kingdom has announced plans to build 660,000 homes — almost as much as Dubai’s entire housing supply — as well as 289,000 hotel rooms, 6 million square meters of office space and 5.3 million square meters of retail space, according to real-estate consultant Knight Frank.
Saudi Arabia is also working on giga projects such a new city called Neom on the kingdom’s west coast, which includes the Red Sea project over an area of 28,000 square kilometers (11,000 square miles) — about the size of Belgium.
Despite the heightened activity in the kingdom, Alabbar said Saudi Arabia should consider subsidizing returns for developers when they don’t reach agreed levels on new projects.
“Some of the sites are green-field and it might take five years to seven years, for a developer to get a good return above 8% for example,” he said. “Then the government should subsidize the developer if he makes 4%, then they’ll have to come up and top up and pay them say, 5%.”
Dubai Boom
In Emaar’s home market of Dubai, a housing boom, which is showing no signs of slowing, is unsettling the property tycoon.
“Dubai is flying. The UAE is flying, but this is the time to think what can go wrong?,” Alabbar said. “Execution and the health of the balance sheet of contractors” are among his biggest concerns.
Demand for property is on a tear as Dubai’s handling of the pandemic and its liberal visa policies attract more foreign buyers. Home prices and rents have reached record levels amid an influx of Russians looking to protect their wealth after the invasion of Ukraine, and as crypto millionaires, and hedge fund executives set up in the city.
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Emaar is using the city’s booming economy as an opportunity to manage its finances and plans to repay a bond that’s maturing in about two years.
“The interest rate is too high and our cash position is good,” he said.