The Saudi Arabian unit of Arabtec Holding has won a US$1.33 billion (Dh4.88bn) contract to build 5,000 villas for the Saudi BinLadin Group, Arabtec says.
This is the second major project awarded to Arabtec in Saudi Arabia after it established the subsidiary in March last year to capitalise on huge investments by the government to ease a housing shortage.
The company is also constructing 46 buildings as part of the Princess Noura University in Riyadh. "The award of this project demonstrates the strategic importance of the Saudi market for Arabtec," said Riad Kamal, the chief executive of the developer.
But the company's foray into Saudi Arabia, as part of a strategy to compensate for a loss of projects in the UAE, has not been without its challenges.
Arabtec exited a Dh2bn deal to build Lamar Towers in Jeddah this year due to payment issues. The project was awarded last summer by Dubai's Cayan Investment and Development and the Saudi company Zahran Real Estate.
Cayan is also no longer involved in the development, a spokesman for the company confirmed. Arabtec also withdrew from competition for a contract to build the 1.1km-tall Kingdom Tower, part of the Kingdom City development in Jeddah, this year after it disagreed with some of the project's requirements.
The company has about 6,000 staff in Saudi Arabia and has plans to increase this to 10,000 by the end of this year, Mr Kamal said in May. An estimated $50bn is being spent on construction in Saudi Arabia this year alone, the country's National Commercial Bank (NCB) says.
About 150,000 homes a year are needed in the affordable housing sector, said Matthieu de Clercq, a consultant in the Dubai office of AT Kearney.
The country is also planning to build 92 hospitals and 1,200 schools in the next five years as it develops infrastructure for a population that is forecast to reach 33 million by 2020.
Saudi Arabia is also building six "economic cities", including the $26.6bn King Abdullah Economic City, as part of a plan to promote private investment and generate jobs for a population in which one in five are under the age of 25.