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Tue 29 Mar 2011 06:04 PM

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Saudi mortgage law a boost for contractors, says Shuaa

Low- to mid-level developers to benefit most from real estate boom, say analysts

Saudi mortgage law a boost for contractors, says Shuaa
MORTGAGE LAW The mortgage law in Saudi will facilitate bank ownership and repossession of properties, Shuaa said. (Bloomberg Images)

A top governing council's approval of a mortgage law in Saudi Arabia will lead to formation of specialised mortgage companies and a rise in availability of funds, boosting the prospects of contractors and developers, Shuaa Capital said.

The Shura Council's approval of the mortgage law will facilitate bank ownership and repossession of properties, though the proposed law requires a number of steps to be fully implemented, Shuaa said in a note.

Dar Al Arkan Real Estate Development Co, Saudi Arabia's largest developer by market value may be a major beneficiary as it is the largest developer of low-to-mid income housing in the Kingdom - the segment with the highest need for funding access, Shuaa Capital said.

Developers Emaar Properties, the builder of the world's largest tower Burj Khalifa, Saudi Real Estate and Emaar Economic City are also expected to gain once the mortgage law is implemented.

The brokerage said contractors are better placed to benefit as they build for developers as well as the Saudi government.

"They (contractors) do not just build housing and offices, but also schools, hospitals... district cooling and roads... all the ancillary facilities that follow housing developments," Shuaa said.

The contractors best positioned to benefit from the rise in public and private development spending in Saudi Arabia include companies like - Arabtec Holding, Drake & Scull International, Al Khodari and Sons Co and Mohammad Al Mojil Group, the brokerage said.

Arabtec, with 32 percent of its backlog in the kingdom, an established joint-venture with one of the major contractors in Saudi Arabia as well as a long-history of executing mega projects, is well positioned to reap the rewards.

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