Builders flock to Makkah to tap pilgrimage boom

Saudi Arabian holy city is proving the exception to a Middle East property downturn
Holy Kaaba, Mecca, Saudi Arabia, Hajj, Sharia, Sharia compliance, sukuk, Islamic finance
By Reuters
Thu 09 Jun 2011 12:13 PM

The
Saudi holy city of Makkah is proving to be the exception to a Middle East
property downturn, as more and more pilgrims flock to Islam's holiest city and
fuel a hotel construction boom.

The
more than 2.5 million pilgrims who flock to Makkah for the annual Haj
pilgrimage, a duty for every able-bodied Muslim who can afford it, are
witnessing a transformation of the city's skyline with luxury hotels, high-rise
residential blocks and cranes now overlooking the Grand Mosque.

"Makkah
has now come of age," said Shuja Zaidi, vice president of projects and
general manager for Makkah Hilton & Towers in Saudi Arabia.

A
forest of high-rise buildings just next to the Grand Mosque is emerging, built
by Saudi developer Jabal Omar and costing more than $5.5bn, where Hilton and
others will open 26 new hotels and add 13,000 more rooms.

"But
there's no doubt that these rooms will also be fully occupied," said
Zaidi. "The simple growth of the Muslim population more than justifies the
expansion."

A
total of more than six million pilgrims enter Saudi for Haj and Umrah
pilgrimages each year.

The
expected spending spree by the government and developers in Makkah and the
second holy city of Medina is valued at some $120bn over the next decade and at
the present there are $20 billion of projects underway in Makkah alone,
according to Banque Saudi Fransi.

Marriott
International Inc and Hyatt International have also announced plans to manage
and operate hotels built by Jabal Omar.

That
is expected to boost Makkah's ability to accommodate pilgrims by at least 50
percent over the next decade.

Bringing
more Muslims to the holy city for salvation, according to the writs of Islam,
is something Saudi Arabia sees as its duty and the kingdom has been behind the
drive to develop and expand the city, despite grumblings by detractors.

"This
is an absolute contradiction to the nature of Makkah and the sacredness of the
House of God," Sami Angawi, an expert on Makkah and Medina based in
Jeddah.

"Both
[Makkah and Medina] are historically almost finished. You cannot go around a
central area, and you do not find anything except skyscrapers."

The
world's largest clock tower, in the style of Big Ben, now towers over a
high-rise hotel facing the Kaaba, the ancient Makkah shrine that Muslims around
the world face when they pray.

Makkah
has traditionally offered non-serviced accommodation for pilgrims, such as
small rooms with basic facilities for washing and resting. They were seen as
short-term, temporary residents, some even staying in private homes in Makkah
for a small charge.

But
all this has changed over the last few years with big, international and
regional hospitality groups moving into Makkah. Branded luxury hotels with
24-hour service from a team of male staff is now commonplace for tourists and
pilgrims. The rooms are utility-based, with bath tubs replaced with showers and
facilities for ritual ablution.

Commercial
space close to the Grand Mosque can sell for as much as $100,000 per square
metre, property experts claim, making it one of the most expensive, if not most
expensive, in the world.

By
comparison, the most expensive street in the world, reputed to be an avenue in
Monaco, is estimated at around $180,000 per square foot.

Dubai
developers Emaar Properties and Damac Properties as well as construction firm's
Arabtec and Drake and Scull are also anxious to get into the Saudi market.

Those
companies, along with rivals from Qatar, Kuwait and Egypt are betting that
success in Makkah could give them an edge in penetrating the broader Saudi
market, which is seeing a severe housing shortage due to the kingdom's booming
population.

Banque
Saudi Fransi estimates private and public developers need to build about
275,000 homes per year though 2015 to meet the country's demands for about 1.65
million new homes.

"Our
biggest backlog of about 50 percent, which comes to AED7.5bn ($2bn), is in
Saudi Arabia," said Zeina Tabari, chief corporate affairs officer at
Drake. "We are tendering for a lot of projects in Jabal Omar and around
the Makkah area. We expect a tremendous upside in Saudi Arabia."

Later
this month, the Saudi government is hosting a gathering of officials,
developers and builders at a 'Future Makkah' summit on the city's breakneck
expansion.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.