New regulatory, immigration, business and finance legislations are crucial for the real estate sector in Makkah and Madinah to achieve its true potential, according to Alpha1Estates International, a leading Islamic real estate advisory firm.
Alpha1Estates International, which was set up in 2006, became the first company to market Saudi Arabian property globally and also the first to market property in both Makkah and Madinah.
In subsequent years, it launched the world’s first bespoke real estate consultancy programme and joint-investment fund focused on the holy cities.
Alpha1Estates has proposed five critical pieces of legislation which focus on globalising the sector to non-Saudi Muslims, which will lead to greater investments, prosperity and quality of life in the holy cities.
“The focus on investing and building hard infrastructure, such as air, land and rail transport, in these cities is being enhanced but it is the focus on soft infrastructure which is critical for the future,” said Malik Al-Alawi, chairman of Alpha1Estates International.
‘Our five main proposals for new legislation include: easing of immigration and travel for non-Saudi Muslims; setting up a real estate regulatory authority to monitor buying and selling of real estate and prevent monopolies; empowering non-Saudi Muslim ownership, leasing and investment of real estate; easing non-Saudi Muslims setting up a company, working or studying in the Kingdom, and introducing and scaling Islamic mortgage financing in the Kingdom,’ stated Al-Alawi.
According to him, th real estate investment in Makkah and Madinah accounts for 40 per cent of total real estate investments in the Kingdom, standing at over $120 billion over the next decade.
‘Introducing these news laws will not only allow the sector to develop to world-class standards, but also generate unprecedented revenue for the Kingdom and its citizens,’ he added.
As forecast by Alpha1Estates exactly one year ago, 2011 has been a much better year for the real estate sector in the holy cities than 2010.
The land prices in these cities are the most expensive in the world at between $70,000 and $110,000 per square metre, and hitting as high as $133,000 per square metre in Makkah.
Over ten million pilgrims from 140 countries visit these cities annually for Hajj and Umrah, contributing SR30 billion ($8 billion) per year, the second-most lucrative source of the Kingdom’s revenue after oil.
Expatriates form 40 per cent of the Makkah’s population, and the city currently accounts for 11 per cent of the Kingdom’s GDP.
The Ihsan al-Haramain Index, the first index to solely track Saudi-listed companies involved in real estate development in Makkah and Madinah, has also been published, said Alpha1Estates.
‘The index jumped by more than 13 per cent – compared to a fall of 21 per cent in 2010 – and bucked the trend of Tadawul (Saudi Stock Exchange) Real Estate Development Index which fell by over 1.6 per cent this year,’ said Al-Alawi.
According to him, Madinah is the best investment in real estate in the region with real estate stock focused on Madinah outperforming Makkah at nearly 17 per cent compared to over 9 per cent.
‘Two major Madinah-focused real estate stocks have reaped 26 per cent and 39 per cent returns this year,’ he added.