World Business

Saudi Arabia rolls out red carpet

By Zainab Fattah (China Daily)
Updated: 2010-06-04 10:17

An artist's inpression of King Abdullah Economic City. [Bloomberg]

First inhabitants

About 40 families already live in KAEC and Emaar Economic City plans to hand over 470 houses to buyers this year in the project's first phase, Al-Rasheed said. The second stage, including homes for 40,000, is scheduled for completion in 2014.

The project hasn't escaped the economic crisis, even with a Saudi housing shortage and the kingdom's oil wealth. About 15 percent of homebuyers defaulted on purchases and the company was forced to delay construction of 16 towers as customers struggled to make payments.

Al-Rasheed said he's now seeing an "uptick" in home sales, mostly among middle-income buyers, prompting the company to start its 22,000-unit Hawadi housing project a year earlier than planned. It will start by building 750 units where prices will range from 400,000 riyals ($107,000) to 1.3 million riyals, he said.

"We are going to hit our stride with Hawadi," Al-Rasheed said. "It's affordable and within the typical mortgage range. Anybody can invest in something like this."

Emaar Economic City is in talks with banks to finance Hawadi. Part of the funding will come from sales of houses before they are built, a type of transaction that was only made legal in the rest of the kingdom last month. Al-Rasheed wouldn't say whether the company would seek loans or sell bonds.

The delayed 16-tower development will be started again in six months after the project is redesigned and retendered to take advantage of declining construction costs, Al-Rasheed said. The 1.4 billion-riyal contract had been awarded to Jeddah-based Saudi Binladin Group in April 2008.

Emaar Economic City closed at 8.55 riyals in Riyadh trading on Wednesday, down from 30.5 riyals on Oct 7, 2006, the first day of trading. The company reported a loss in 12 of the 13 quarters since first releasing results in March 2007, according to data compiled by Bloomberg.

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"If you're developing a city, you put in a lot of infrastructure," the CEO said. "That is paid off over the long term."

KAEC is situated between Rabigh Refining and Petrochemicals Co's plant, known as Petrorabigh, and the King Abdullah University of Science and Technology, the first in the kingdom where men and women will share classrooms.

"Like a lot of cities, we started with industries such as plastic and aluminum," Al-Rasheed said. "We are linked with Petrorabigh, they are building a railway to connect us and ship their materials through our port."

Saudi Binladin Group will help develop and operate the port serving KAEC. Emaar Economic City is discussing ways for Dubai-based maritime operator DP World Ltd to participate in the project, Al-Rasheed said. The port is set to open by the end of 2011, almost a year behind schedule.

Emaar Economic City plans to prepare infrastructure for 2.5 million square meters of industrial land in the city after completing 1.5 million square meters. It's also developing 100,000 square meters of office space for the project.

"Offices are like any other commercial development," Al-Rasheed said. "They require demand and a good regulatory environment, and we have both."

Bloomberg News