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Makkah said to be facing acute shortage of affordable homes

Makkah is facing an acute shortage of affordable housing, especially as the area around the Holy Mosque is being redeveloped to service religious tourists, according to a new report.

Real estate consultants JLL said as with other major cities in Saudi, Makkah needs to address the growing issue against the need for seasonal accommodation and extreme land values.

It said the Markazia – the area around the Holy Mosque – has transitioned into an area almost exclusively servicing religious pilgrims with permanent residents being largely priced out of the central city.

“This trend is expected to continue with further redevelopment of the areas around the Holy Mosque, increasing land values still higher,” JLL said in the report.

It added that the expansion of the Makkah metro network and the construction of a number of mega projects in the outskirts of the city will further enhance this trend for the Markazia area to become something of a “city within a city”.

JLL estimates the number of residential units in Makkah is currently around 338,000.

The report highlights an almost unlimited global demand for hotel and other tourist facilities in Makkah due to the continued growth of religious tourism, creating huge opportunities for both developers and investors to upgrade existing properties and create new ones.

The pace at which the potential growth can be tapped into will rely on overcoming constraints including pilgrim quotas and investment in supporting transport infrastructure, JLL said.

Jamil Ghaznawi, country head of JLL Saudi Arabia said: “Increasing religious tourism will create huge opportunities in the retail, hotel and broader accommodation sectors in Makkah. The long term prospects for the hotel sector are extremely positive given the reliance on accommodation providers to support the global unlimited demand of religious pilgrims to Makkah.

“More than ever, the key to capitalising on growth of the real estate market is the strong cooperation between public and private sectors to invest in new and existing accommodation. An added benefit is the maxim of ‘build it and they will come’ which applies more aptly to the Makkah market than any other city in the region.

“In addition to increasing accommodation, the success of the Saudi Government’s plans to expand the number of religious visitors also relies heavily on the ability to address transportation capacity. While there have been significant investments to improve the networks serving Makkah, many of the projects have been affected by the stringent 2016 budget.”

However, he said the traditional residential sector continues to suffer from a shortage of affordable homes and poor quality infrastructure projects.

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