Saudi Arabia to start first phase of Neom project

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NEOM Bay will have white beaches with a "temperate climate" and designed to be eco-friendly and generate energy from renewable sources. (File/Supplied)
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NEOM Bay will have white beaches with a "temperate climate" and designed to be eco-friendly and generate energy from renewable sources. (File/Supplied)
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NEOM Bay will have white beaches with a "temperate climate" and designed to be eco-friendly and generate energy from renewable sources. (SPA/File)
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NEOM Bay will have white beaches with a "temperate climate" and designed to be eco-friendly and generate energy from renewable sources. (File/Supplied)
Updated 18 January 2019
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Saudi Arabia to start first phase of Neom project

  • Construction work is expected to start in the first quarter of 2019 and will be completed in 2020
  • Homes in NEOM Bay, part of $500bn mega-city, to be marketed to international buyers

LONDON: Saudi Arabia announced on Wednesday that it will start developing the first urban area of NEOM, the Kingdom’s planned $500 billion mega-city.

The founding board, chaired by Crown Prince Mohammed bin Salman, approved the masterplan concept for NEOM Bay, which will include homes, lifestyle and tourist facilities, and “innovation centers.”

The development is expected to focus on luxurious living, and will include high-end hotels and villas.

Homes in the development will be marketed to both regional and international buyers, Arab News has learned. 

Construction work is expected to start in the first quarter of 2019 and will be completed in 2020. Arab News understands that contractors have not yet been appointed but that this is due before April. Discussions with investors are said to be ongoing. 

The total value of the NEOM Bay development has not been disclosed. 

It is expected that a number of facilities will be completed by the end of this year including the current airport at Sharma, which will offer regular flights to Riyadh, a statement said.

“We are now preparing for the development of NEOM Bay area, which will provide a new concept of urban living that will enable it to become a platform for attracting the world’s top minds for creating advanced economic sectors,” Nadhmi Al-Nasr, NEOM chief executive, said.

NEOM, which was announced in 2017 and is in a pristine position on the Red Sea coast, has financial support of over $500 billion from the Public Investment Fund of Saudi Arabia.

The launch of its first urban project is expected to provide an economic impetus, experts said.

“The start of NEOM Bay will offer unique opportunities for investors and tourists alike that will provide impetus for new sector growth going forward,” said John Sfakianakis, chief economist at the Gulf Research Center, based in Saudi Arabia.

Rashid Aboobacker, director at TRI Consulting in Dubai, said there was “significant potential” for tourism in Saudi Arabia.

“The area earmarked for the NEOM project offer excellent prospects for leisure tourism, combining the Red Sea, beautiful beaches and islands and unspoiled natural beauty. If planned and developed well, it can be a major tourism destination in the future.”

But Aboobacker said much more needs to be done before the Saudi tourism industry can thrive. 

“There are several challenges including the lack of tourism infrastructure, policy and regulation related issues, and cultural and social related issues,” he told Arab News.

“The government is already channeling significant investments into developing the infrastructure as part of the Vision 2030, and have rolled out new visa policies etcetera. 

“There is lot more to be done before we can expect a major flow of international leisure tourists to the country, however we believe that more reforms will follow in due course to achieve the Vision 2030 goals.

“While developing destinations and tourism sector in general, Saudi Arabia is likely to focus on attracting niche markets whose interests and expectations will not conflict with Islamic values and cultural traditions of its society.”

Aboobacker said the Saudi market has opportunities for “all types of investors and operators within the tourism industry.” These include hotel, resort and tour operators, theme park developers, event companies and restaurant chains, he said.

John Podaras, a partner at hospitality consultancy Hotel Development Resources in Dubai, said visa regulations need to be relaxed before the Saudi tourism industry can thrive.

“The tourist visa has been introduced but the number issued is relatively small and quite restrictive,” Podaras said.

“We’ve already seen a lot of relaxation (of rules and customs), but if you want the big numbers then all the restrictions have to be removed and that requires a lot of changes.”

It was previously announced that NEOM will have its own authority, which might help in reducing many bureaucratic hurdles, including visa requirements.

Podaras pointed to the need to build infrastructure and bring in specialist companies to the development. 

He expects hotel groups to show interest in the NEOM development. 

“They’ll sign up to the project and it will be delivered or it won’t. But the point is they lose nothing by having their name associated with it,” Podaras said. 

“PR wise, it’s great. I will bet my bottom dollar that all of them are on planes to Riyadh.” 


Qatar real estate hit hard ahead of World Cup

Updated 15 February 2019
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Qatar real estate hit hard ahead of World Cup

  • Qatar plans to increase residential space by about 50 percent and office space by 40 percent in the next three years
  • The lion’s share of construction underway is for high-end residential towers, white-collar office space, and luxury hotels and shopping malls

DOHA/DUBAI: Qatar’s Doha Tower, a spike-tipped cylinder that glows orange at night, won an award when finished in 2012 amid a Gulf-wide real estate boom, but today about half of its 46 floors are empty.
The office tower, now a familiar part of the capital’s high-rise skyline, has run foul of what real estate brokers, bankers and analysts say is an oversupplied Qatar property market ahead of the 2022 World Cup that mirrors a real estate downturn in the wider Gulf region after a drop in oil prices.
Qatar has the added challenge of a diplomatic, trade and transport boycott imposed on the Gulf Arab state by Saudi Arabia, the UAE, Bahrain and Egypt over allegations that Doha supports extremist militants, a charge Qatar denies.
The protracted row has made it tough to lure would-be foreign buyers of residential or commercial space.
Residential prices are down about 10 percent from June 2017, when the boycott began, and office prices have fallen by a similar rate, according to analysts and economists. Rents are down 20 percent from three years ago, they say.
“Qatar’s property sector has been one of the main casualties from the blockade that was imposed in mid-2017,” Jason Tuvey, an economist at Capital Economics, said.
The property downturn has so far not translated into bad loans, as bankers say borrowers holding sluggish real estate assets tend to be among the country’s wealthiest.
“They have capacity to withstand the market ... I don’t see a major threat,” Doha Bank CEO Raghavan Setharaman said, when asked about his view of the real estate market.
A banker at Al-Khalij Commercial Bank said banks like his have been restructuring many property loans in recent months, extending them to 20-year payment periods from 10 in some cases, to keep business moving for developers hit by slow demand.
But with the World Cup edging closer, real estate experts say long-planned projects are now set to flood the market, even as buildings in prime locations, like Doha Tower, sit idle.
“It’ll be interesting to see what happens when they (real estate prices) are really put under pressure in a year’s time, when a lot of new supply hits the market,” Johnny Archer, Associate Director of DTZ, a Doha-based real estate firm, said.
Tiny but wealthy Qatar plans to increase residential space by about 50 percent and office space by 40 percent in the next three years, partly on expected demand from the World Cup, according to a report published last week by real estate company DTZ.
The lion’s share of construction underway is for high-end residential towers, white-collar office space, and luxury hotels and shopping malls.
FIFA requires Qatar have at least 60,000 hotel rooms in place for the month-long World Cup tournament, which Qatar estimates will draw about 1.5 million fans — more than half of its roughly 2.6 million population.
Qatar has about 26,500 rooms and will add another 15,000 by 2022, DTZ’s report estimated. The rest will be met by rooms aboard cruise ships and in desert camps, according to the local World Cup organizing committee. These camps are expected to be bedouin-style accommodation to give visitors a taste of desert life.
Much of the building is in an entirely new city, Lusail, a 38-square kilometer stretch just north of Doha dotted by commercial towers, hotels, and shopping centers at various stages of construction.
Lusail is being developed by state-controlled Qatari Diar Real Estate Company, which envisions it hosting 200,000 residents and 170,000 employees. It is anchored by Qatar’s largest World Cup stadium, an 80,000 seat venue that will host the opening and closing matches.
Colliers International, whose office was an early entrant to Lusail, says getting companies to fill a rush of towers coming online ahead of 2022 will be a daunting task.
“There’s going to be massive structural oversupply for office infrastructure for the foreseeable future,” said Colliers’ Qatar country director Adrian Camps.
In a bid to spur activity, Qatar last month ratified an investment law allowing foreigners full ownership of companies, and for years Qatar has designated certain high-end areas like Lusail open to foreigners, but brokers say demand remains low.
Shopping malls, lacking the Saudi or Emirati shoppers who once flocked to them before the boycott, are among the most visibly affected, with some having to shutter shops in recent months.
New malls are being built anyway.
Total retail space has doubled in three years and will grow 50 percent more by 2021 with nine new malls, according to DTZ.
Beyond 2022, Qatar real estate faces an uncertain outlook. Aside from soccer stadiums, Qatar has not specified legacy plans for what happens to infrastructure developed for the World Cup after the tournament.
“There’s too much uncertainty as to where that demand specifically is going to come from,” Richard Rayner, who surveys property for DTZ said.