By John Irish
Kingdom's largest developer remains confident that property sector is still surging.
Dar al-Arkan, the largest Saudi developer by market value, said on Monday it expected the kingdom to buck any Gulf downward trend as economic fundamentals remained strong and demand for property was still surging.
Managing director Abdullatif bin Abdullah al-Shelash said that Saudi Arabia's real estate sector was a "sleeping giant" and had yet to mature like neighbouring states.
"Investment in real estate is just at the beginning and it it has not matured like other Gulf Arab countries," he said, speaking on the sidelines of a real estate exhibition in Dubai.
The industry was also likely to be given a boost once a mortgage law, which has been approved by the Shoura Coucil is ratified by King Abdullah.
Dar Al-Arkan, which targets the middle-class sector among Saudi Arabia's 19 million indigenous population, has already set up a mortgage finance company with partners ahead of the proposed law, which Shelash said would be a "milestone." for the kingdom.
"There is a need to have that industry in place ... even with the subprime crisis," he said.
Despite more challenging market conditions fuelled by a global liquidity crisis, Shelash said Saudi Arabia was more equipped to weather the storm with oil prices still hovering around $100 a barrel.
"What caused the US mortgage crisis was excess of providing credit to people that could not afford it, in Saudi it is the opposite," he said, adding that the kingdom had taken measures to increase liquidity in the market. We don't have the same issues."
Foreign investors, particularly from the Gulf could turn to the kingdom.
"Foreign investors are a bit worried and there is a lot of ambiguity in the market ... they are looking at emerging markets and Saudi Arabia," he said.
The company, which won approval from its general assembly to sell Islamic bonds, could tap the debt markets by year-end to finance new projects to be announced over the coming months.
"We might but we still have not finalised," he said when asked if his company might tap the debt market by the end of 2008.
Any bond sale would be denominated in Saudi riyals and issued in Saudi Arabia to tap the local banking sector with the bonds listed on the Tadawul, he said, without elaborating. The Saudi riyal is pegged to the US dollar.
Shelash declined to give a forecast for the third quarter. Profit grew in the second quarter by 45 percent.
"We are still seeing room for growth in Saudi Arabia and focusing on residential needs." (Reuters)