Gulf Related, an Abu Dhabi-based developer, has started construction on a 525-unit residential compound for expatriates in Riyadh as it seeks to tap demand for housing in the kingdom. "Saudi Arabia is a high-growth economy with a young and fast-growing population and large residential developments are needed to meet the pent-up demand for housing," said Karim El Solh, the chief executive of Gulf Capital, the alternative investment company that owns Gulf Related in a joint venture with Related Companies, a United States developer.
Gulf Capital yesterday announced the signing of a 450 million Saudi riyal (Dh440.7m) financing deal with National Commercial Bank, the Saudi Arabia-based lender, to help finance the project. The remaining 200m riyals needed for the project will come from private equity. Demand for housing in Saudi Arabia is projected at 1.3 million residential units over the next seven years, largely driven by domestic demand from Saudis, who make up more than two thirds of the population of almost 27 million people.
But while the government has announced initiatives to support housing for nationals, little focus has been given to help the expat segment.
Riyadh's expat base, which accounts for about two fifths of the city's population, is forecast to grow by 6 per cent per annum and is expected to reach 2.8 million by 2015, according to the companies.
The development, which will be built on two plots of land in the north-western part of Riyadh on an area of 157,000 square metres, consists of a residential compound that includes 525 villas, town houses, duplexes and apartment units.
As a result of the demand for expat housing, Gulf Related hopes to achieve returns of 10 to 12 per cent per year for the complex, set to be complete in 2015, said Emile Habib, the managing director of Gulf Related. The project had the potential to be replicated across the region, he said.
"We are trying to build a platform and roll this project out across the kingdom and the region," said Mr Habib.
Gulf Related is progressing with retail developments in Abu Dhabi. It is partnering with Mubadala Development to build the 51,000 square metre The Galleria mall, the luxury retail element of Sowwah Square, which it is set to open in August. In January, it announced plans for a US$1 billion shopping and leisure complex next to the Sowwah Square financial centre.
For Gulf Capital, the project in Riyadh is the latest in a string of investments by the company and its subsidiaries in sectors offering high-growth potential. It has created what is says it the largest credit fund in the region to help finance fast-growing companies, while its subsidiary, Techno Group Investment Holdings, has healthcare operations in Egypt, Jordan, the GCC and Turkey.