Race to the Holy City

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It is already the most expensive real estate on the planet and it is about to become a whole lot more costly as investment floods into property around the holiest site for the world's one billion Muslims.

As the bulldozers move into the old city of Makkah some scholars accuse developers and banks of making vast profits while destroying cultural sites.

Every year millions of Muslims descend on the Holy City of Makkah to perform the Hajj and Umrah pilgrimages.

Now global investors are being invited to invest in the redevelopment of what is already the most expensive real estate on the planet.

Makkah is expected to attract some US$100bn in investment over the next decade and international investment is already flooding into the Holy City where scores of new skyscrapers, shopping malls, hotels and timeshare apartments are planned.

"Investors are looking for a safe haven and Makkah is as close as you can get to a recession proof-market. Makkah will always have Hajj season and Umra season," says Imad Awad, head of equity capital markets at NBD Investment Bank, which is advising on a private placement for a new property company established to redevelop part of the site.

"Muslims are becoming more and more affluent, incomes are rising and these people have a spiritual side of their life and they will always want to visit Makkah," he says.

But the race to redevelop the Holy City has drawn criticism from some Islamic scholars fearful that cultural sites are being destroyed while developers ramp up their profits.

The surging price of crude which reached a record high of US$139.89 a barrel on June 16, is pumping billions of dollars into the Saudi Arabian economy and driving demand for real estate among the nation with the highest number of millionaires in the world.

Wealth is also burgeoning among the region's Muslim nations according to the World Wealth report released earlier this week by Merrill Lynch which revealed the number of super-rich in the region jumped by 15.6% in 2007 to around 400,000.

Saudi Arabia, the world's top oil exporter, had the highest number of millionaires at 101,000, up from 90,000 in 2006. The number of Muslim pilgrims travelling to Saudi Arabia is also rising and expected to grow at a rate of up to 10% over the next three years.

Hundreds of homes are being demolished around the Hamra to make way for a vast redevelopment of the site by order of HRH King Abdullah, while around 230,000 sq m of land is being cleared for the construction of high-rise apartments, many of which will be sold as timeshares to visitors.

"The whole area surrounding the holy sites is being developed, all the old buildings are being demolished, and in their place, more modern buildings that can accommodate more pilgrims are being constructed," says Dr Fahas Bin Al-Jarboa, deputy secretary general at the Supreme Commission for Tourism in Saudi Arabia. "We expect Mecca to change dramatically." But for some scholars the change is too dramatic.

"We are now witnessing the last seconds of Makkah as it was created by God with its landscape and mountains," says Dr Sami Angawi, architect and founder of the Centre for the Custodian of the two Holy Mosques Institute for Hajj Research, which draws on research from 160 scholars.

"Now they want to take away the mountains and make Makkah into a flat piece of land. The traditional city should have been left alone and we should have expanded outside like every sensible city has done in the world," he says.

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