Mushtak Parker | Arab News
Published — Monday 22 December 2008
Last Update 22 December 2008 3:00 am
LONDON: Every house in Jeddah will have running water from taps and an integrated sewage system within the next five years, stressed Vice Mayor for Planning and Urban Development at Jeddah Municipality Abdulgadir Amir.
Amir, refreshingly candid for a senior municipal official and who has been in his current position for less than a year, admitted that the situation was unacceptable and that some 80 percent of Jeddah does not have a sewage system. But he declined to apportion any blame stressing that it was important to look forward to the future.
The vice-mayor was addressing the annual International Real Estate Finance (IREF) 2008 conference organized by ICG-Events and which was held in London a few days ago and which discussed the latest trends and developments in the sector, especially Islamic real estate finance in the GCC (Gulf Cooperation Council) countries and UK. He showcased the various developments planned for Jeddah, often described "The Bride of the Red Sea," over the next five years.
"I admit that Jeddah lacks fresh water and sewage facilities in large parts of the city," he said. "I cannot give you a reason why this is the case. But work has started about two years ago to build a comprehensive sewage system for the whole city which would be completed in three to five years time. Similarly, a huge desalination plant is being built in Shuaiba which should be finished in the next three years. I am confident that within the next five years the two major deficiencies in infrastructure of Jeddah should be in place," he added.
The total estimated project spend for the renovation and new infrastructure projects for Jeddah for the next five years - excluding the sewage, desalination, transport projects which are funded from central government budgets - is about SR30 billion. Projects include the re-development of the North Corniche - a 12 km stretch for which the master plan has been completed by British consultants Scott Wilson, who are also in the process of completing the master plan for the redevelopment of the Middle Corniche.
The municipality is also paying much attention to the greening of the city with the planned Linear Park on completion becoming the largest park in the city's history. A draft framework for the Eastern Forest Project is also being done. This is the basis for the long-term strategic plan for Jeddah's green spaces. There is also the Aqua Park in Salman Bay for which Scott Wilson is also doing the designs.
The municipality is also enhancing several gateway roads into Jeddah including Al-Tahliyah Street, King Abdul Aziz Street and Faisal bin Fahd Street. Altogether 97 bridges and tunnels are being built in the city over the next 10 years.
The municipality, since it has no powers to charge any rates or local city taxes, will finance the projects from central government allocations, and through public private financing initiatives. As such, according to Amir, the opportunities for the private sector are huge to participate in the future development of the Saudi Arabia's commercial capital.
Amir stressed that the financing opportunities are open to both conventional and Islamic financial institutions, because the strategy would be to have a diverse source of funding strategy. However, it is up to the Islamic financial institutions in the Kingdom and the region to lobby and to come up with proposals to fund the various projects. "I am not an expert on Islamic finance structures but we would welcome the participation of Islamic banks. We would look at the various proposals made and based on value-for-money, cost effectiveness and efficacy. There is a considerable amount of liquidity in the market," he explained.
Mohammed Al-Qahtani, CEO of Al-Aman Investment and chairman of the Saudi Projects Group Holding, stressed that in today's financial turmoil "where investments shy from risks and must navigate through recession," investors are asking which areas and countries are less affected and which of these offer the best potential. To him Saudi Arabia is the "lone star" in the stormy real estate markets in the region and the world. The Kingdom's population of 28 million is 40 percent higher than the combined population of the rest of the GCC countries; its size is about 2 million square miles and its 2008 GDP is estimated at $460 billion.
The realty sector's trading value and volumes have doubled in 2007. The value in 2007 totaled $27 billion with residential accounting for 66 percent.
According to Al-Qahtani, the Saudi real estate market constitutes 50 percent of the GCC market size. Demand for residential units alone in the Kingdom is estimated at 200,000 units per year with supply only satisfying 20 percent of this demand.
In the GCC markets in general, especially Dubai and Bahrain, the real estate sector has embarked on a three-pronged policy of recapitalization, retrenchment and restructuring - recapitalization through initial public offerings (IPOs) and other capital raising exercises; retrenchment through cutting back on some jobs; and restructuring through prioritizing or even suspending projects to suit the current economic cycle and market dynamics.
However, the Kingdom to a large extent is an exception due to several primary factors that are driving the local real estate market.