1. Kuwait Financial Centre “Markaz”
REAL ESTATE RESEARCH
Saudi Arabia
Residential Real Estate outlook
Executive Summary
We expect the total demand for residential units in the
Kingdom of Saudi Arabia (KSA) to be in the range of
500,000 to 800,000 units during the period 2009-13
driven by our expectation that the economy would get back on
growth track from 2010 driven by recovery in oil prices. We
expect the passing of mortgage law to cause a trend shift in
demand leading to levels 50% higher than without it.
Residential real estate’s share in the total capital investment
came down from its high 20%+ levels during early 2000s to
13% in 2008, driven mainly by shortages in ownership
financing. This is corroborated by a 100 bps contraction in
mortgage lending as a percentage of total credit during the past
three years.
The younger generation of KSA, in the age group of 20-35, is
currently deprived of real estate ownership and they live along
with the elder generation, which also leads to the choice of
villas as preferred housing units. They have to face a rental cost
at 45% of their current income levels or a monthly mortgage at
41%, should they decide to move out. The higher equity levels
of 50% on an average, which is the result of lower mortgage
penetration also magnifies the lack of affordability.
The mortgage law, if and once passed, will include them in the
target market and expand the potential for residential real
estate in KSA thereby turning around the waning investment
trend seen in the past decade.
Supply scenario, currently dominated by projects worth less
than USD 50 mn apiece, is slowly drifting towards more
organized supply due to the planned mega cities. However,
completions will happen in a phased manner with major
completions planned during mid-next decade, thus providing
attractive opportunities for developers of smaller size projects
and also for other big projects.
The current major cities of Riyadh, Jeddah, Mecca, Al Khobar &
Dammam will remain the centre of activity for the next five
years till the shine gets shared by the planned mega cities.
Rentals and prices contracted on an average by 10%, much less
than other cities in the region driven mainly by fall in risk
appetite.
We expect rentals and prices to bounce back again following
economic recovery and re-emergence of risk seeking and we
expect Mecca and Jeddah to experience a much higher growth
compared to other cities mainly due to the current pent-up
demand. We expect the rentals and prices to grow at a much
higher pace on the passing of the much awaited mortgage law
because of the trend shift it creates.
June 2009
Research Highlights:
An outlook on the Residential
Real Estate Sector of The
Kingdom of Saudi Arabia
Bassam N. Al-Othman
Senior Vice President
+965 2224 8011
bothman@markaz.com
M.R. Raghu CFA, FRM
Head of Research
+965 2224 8280
rmandagolathur@markaz.com
Milad A. Elia
Assistant Vice President
+965 2224 8024
melia@markaz.com
Venkateshwaran Ramadoss
Senior Research Analyst
+965 2224 8000 ext 1144
rvenkateshwaran@markaz.com
Kuwait Financial Centre
“Markaz”
P.O. Box 23444, Safat 13095,
Kuwait
Tel: +965 2224 8000
Fax: +965 2242 5828
markaz.com

2. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 2
Economy
Consensus real GDP growth expectations for 2009 is in the
range of -1.8% to +1% (Appendix-1) down from 4.1% in 2008
mainly due drastic production cuts driven by fall in oil prices
and this signifies the positive growth expectations in non-oil
economy. Economic activity in KSA is expected to remain
sustained by the expansionary increased public spending
planned in the budget to the tune of SR475 bn, up by 16% Y-o-
Y, till oil prices stabilizes at a level which makes operation at full
capacity and expansions viable and the economy recovers to
growth path by 2010. Other sectors, essentially free wheels to
these two aspects of the economy, will benefit from the above
said developments both in the short and medium terms. In
terms of the Real Estate sector’s performance, ownership of
dwellings, which is the core RE’s contribution to GDP has
remained at an average of 6.7% consistently for a decade.
Exhibit 1: Economy-Historic trends and growth estimate
-15%
-10%
-5%
0%
5%
10%
15%
20%
-600
-400
-200
0
200
400
600
800
YoYRealGDPgrowthrate
RealGDPBnSaudiRiyals
Oil Sector GDP Non-oil GDP
YoY Growth-Oil GDP YoY Growth-Non-oil GDP
Source: Ministry of Economy and Planning, Samba, Markaz estimates
Residential
The total demand for residential units in KSA would be in
the range of 500,000 units to 800,000 units during
2009-13 depending upon the developments in economic
recovery and the lending conditions. The demand would
experience a 50% upward trend shift from its current
levels if the mortgage law comes into force thereby turning
around from the historic trend of waning investment in
residential real estate and lack of home ownership
affordability for the younger generation. The currently
planned organized supply would provide with around 73,000
units during 2009-13 and the rest would be tapped by current
and future projects by smaller size developers and major
projects that would be planned in future. We expect the
rentals and prices to start growing with oil price and
economic recovery and concomitant reemergence of risk
seeking, and to grow by a much larger scale when the ever
awaited mortgage law gets passed due to the demand
pick-up that happens due to the trend shifting.
Oil price stability to
improve economic
prospects
Slump in real GDP growth
during 2009 due to
negative real oil-GDP
growth offset by growth in
non-oil GDP driven by
enhanced public spending
Real Estate market players
to prepare themselves for
a fundamental turn around

3. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 3
Exhibit-2 : Incremental demand/supply expectations
39
127
171
201174
39
115121 93
74
39 30 28
100
100
0
50
100
150
200
250
2009E
2010E
2011E
2012E
2013E
2009E
2010E
2011E
2012E
2013E
2009E
2010E
2011E
2012E
2013E
Eco recovery + Mtge
law
Eco recovery & No
Mtge law
Prolonged slowdown
& No Mtge law
Housingdemand('000units)
Numbers on bars indicate the unorganised supply potential
Supply from major projects Unorganised Supply potential
Source : Markaz estimates
The three scenarios put forth in Exhibit-2 clearly indicates that
while demand will recover from its current levels as soon as the
economy revives, the passing of mortgage law will shift the
demand trends to a level 50% higher than the levels without the
law cumulatively. Exhibit-3 below talks about the assumptions
underlying the scenarios behind the above demand forecasts.
We believe that the possibility of Scenario-3 to materialize in the
future to be very low due to improving oil price and as we wait
for the mortgage law to be passed, hopefully soon.
Exhibit-3 : Assumptions behind the demand
Scenario Assumptions
Scenario-1 Economic recovery by end 2009/early 2010
Mortgage law by end 2009/early 2010
Current supply trends prevail
Scenario-2 Economic recovery by end 2009/early 2010
Mortgage law remains awaited
Current supply trends prevail
Scenario-3 Economy into a slow recovery path till 2012
Mortgage law remains awaited
Supply contracts further
Years of under-investment in residential real estate
Residential real estate is one major type of capital asset and a
sustainable trend in its share in the overall capital formation is
essential for the prevalence of equilibrium conditions in the
economy. Residential real estate investment has been growing
at a much slower CAGR of 4% in the past decade in nominal
terms compared to the 10% growth in overall investments
(Exhibit-4). In the past five years, marked by high nominal
capital and GDP growth, overall capital formation grew at a
CAGR of 16% in nominal terms while residential real estate
grew by a much smaller 6%. The better growth in non-
residential real estate capital, which was at a decadal CAGR of
15% and by 25% in the past five years should not be construed
for commercial and retail real estate assets as this includes the
infrastructure capital spending as well.
Passage of mortgage law
to result in a trend shift
with a 50% boost in
demand cumulatively
Timing of economic
recovery and mortgage
law the main drivers for
sector recovery
Investment in residential
real estate marked by
years of relative and
absolute under
investment

4. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 4
Exhibit 4: Capital formation-real estate trends
0
50
100
150
200
250
300
350
0%
5%
10%
15%
20%
25%
30%
35%
40%
GFCF-SRBns
Realestate'sshareofGFCF(%)
Total-GFCF- SR Bns (RHS)
Residential Real Estate
Non-Residential Real Estate (incl infrastructure)
Source: Ministry of Economy and Planning, Markaz analysis
Lack of ownership financing the root cause
The main cause of the dramatic fall in the residential real estate
capital build-up is the lack of mortgage lending. Exhibit-5 which
lays down the trends in credits extended by commercial banks
towards building and construction mirrors Exhibit-4 thus
explaining the reason behind the dismal performance. The effect
of the current economic slowdown hit bank lending hard which
has resulted in lending contraction. Given the historic dismal
lending to RE&C sector, we can expect no significant changes in
the trends in bank lending to real estate. Mortgage lending as a
percentage of total residential real estate capital formed stood
at a meager average of 3% in the past five years. Though it has
grown up to 5.5% in 2008, it still indicates dismal penetration.
KSA is among the least levered countries in GCC, measured in
terms of Bank Credit to Private Sector as a % of nominal GDP
(Appendix-2) and hence, is not a highly levered economy. This
scenario warrants the necessity for the passage of the mortgage
law which would remove these impediments while a further
delay could put the sector in a gridlock till the time it is passed.
Exhibit 5: Bank lending to RE & Construction
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
0
100
200
300
400
500
600
700
800
Sectorpercentage
Banklending-BnRiyals
Total bank credit
Loans to construction sector as a % of total credit
Real Estate Financing as a % of total credit
Source: SAMA, Markaz analysis
Growth in non-residential
investments in line with
overall investment growth,
but includes infrastructure
investments and hence not
a perfect indicator of
commercial and industrial
real estate
Trends in lending to real
estate and construction
resembles and has caused
the lower investment trend
as data proves

5. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 5
Home ownership and rental affordability
The Labor Ministry provides with the average salary earned by
employees working in private sector which stands as in Exhibit-
6. Average salary for a male employee in Riyadh stands at SR
4100 per month which compares well with the per capita GDP
level of SR 72000 p.a. With the current average family size of
6.4, which we get from the population and housing statistics,
and the dependent ratio of 3.1, we get to an average earning
capacity of more than 10000 per family, if the younger
generation lives along with their parents. In this situation, an
average villa rental of c.3000 SR per month becomes
manageable. However, if the younger generation decides to
move out, thereby reducing the average family size close to 5,
the family income drops to 4500 at the current level assuming
single person employment and with the dependent ratio of 1:4
and the average apartment rent of c.SR 2100, the rental
expenses as a % of salary shoots up to 47% and it remains
higher (35%) than the larger family arrangement (30%) even in
case of a two member earning family, as the average salary for
women is lesser than men.
Exhibit 6: Average private sector salary (Saudi Riyal)
Region
Saudi Non-Saudi
Male Female Male Female
Riyadh 4061.04 2551.32 1095.53 1236.69
Makkah 3148.04 2568.09 1069.25 1561.56
Eastern Prov. 4280.83 2404.56 1081.49 2690.78
KSA 3679.59 2419.62 997.87 1577.78
Source : Labor Ministry
In case of expats, the available statistics imply an average of a
workforce size of 3 per household, which compensates for the
lower average income levels on an average, the average family
income works out to around SR 3500 and since majority of them
stay in either an apartment or in a floor in a villa or traditional
house, the average rent would be around SR 800 to SR 1000
which is less than 30% of their total household income.
Exhibit-7 : Ownership and rental cost as a % of income
Villa-bigger
household
size
Small household
size - single
member earning
Small household
size – two
member earning
Expat’s
household
Monthly Rent 30% 45% 35% 28%
Cost of
ownership
3600% 5400% 4200% 3360%
Monthly EMI 28% 41.3% 32% 26%
Exhibit-8 : Scenario analysis of mortgage affordability
YearsInterest
rate 3.5% 4.0% 4.5% 5.0% 5.5%
10 53.4% 54.7% 56.0% 57.3% 58.6%
15 38.6% 39.9% 41.3% 42.7% 44.1%
20 31.3% 32.7% 34.2% 35.6% 37.1%
25 27.0% 28.5% 30.0% 31.6% 33.2%
Smaller families and
apartment living not an
affordable option for the
younger generation given
the current income levels
Expats better off with
higher workforce size per
average household
Need for higher tenure
mortgages to enable
mortgage affordability

6. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 6
Given the above rent vs income scenario and the average cap
rate of 10%1
in Riyadh, the cost as a % of monthly salary will
be as in Exhibit-7. A monthly mortgage installment (EMI) above
30% will be strenuous given the cost of living and hence not
affordable for the small household family. It becomes even more
unaffordable when the interest rate rises and is viable only in
case of mortgage finance availability for 25 years at the current
income/rent/price levels. The yields earlier were lower than 10%
and that would have increased both the cost of ownership and
thus the EMI.
The above analysis assumes that the cost of ownership is
entirely be financed by debt. However, the lending scenario in
KSA involves putting in equity as high as 50% if we study the
total lending to RE mortgages as a % of residential real estate
capital formation (Exhibit-9). This exacerbates the above
calculations and makes mortgage out of reach for many in KSA
and provides us with adequate base as a support for our
argument. An equity requirement as high as 50% on an average
means, we have a margin of safety of 100% in terms of errors
in our inputs regarding the price and rentals. Mortgage financing
involves longer duration lending and would seek lower equity
which boosts home ownership affordability by way of reducing
the monthly EMI as a % of income.
Exhibit-9 : Ratio of debt financing to total capital cost
0%
10%
20%
30%
40%
50%
60%
0
5
10
15
20
25
2003 2004 2005 2006 2007 2008
Creditasa%ofcapital
ResidentialcapitalformedSRBn
Mortgage and Bank credit to Residential RE
Credit to Residential RE as a % of Capital formation
Source: SAMA, Markaz analysis
Mortgage law unlocking demand and shifting trends
65% of Saudis live in owned houses and 56% of houses
occupied by Saudis are owned by them as of 2007 and
individuals living in owned houses grew at a CAGR of 5.52%
during 2004-07. The EU average ownership ratio stood at 61%
and the US average was at 70% and Saudi doesn’t look far
behind the developed countries’ average at first sight, thus
putting questions on the scope of future demand from this
segment and the need even for the ever awaited mortgage law.
However, the average size of families moving to own houses
during 2004-07 was astounding at 9 and the average family size
of Saudis staying in villas as at 2007 was 8 indicating that it is
1
Colliers International
Data indicates higher
equity levels on an
average and provides with
margin of safety for input
errors in our analysis
Home ownership limited to
larger families indicating
lower ownership among
the younger generation

7. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 7
the senior generation of the family that is buying houses and
the younger generation gets along.
The younger generation has been deciding to postpone the
decision to buy a home so that they can avoid a compromise on
their living standards. As economy recovers and salary levels
improves and credit is provided after the mortgage law coming
into force, this segment will open up to demand and will result
in a doubling of the size of potential demand and thus will be
trend shifting. Exhibit-10 provides us with a clearer view of the
demand potential once the mortgage law is announced. Until
then major developments will be predominantly targeting Villas
for the higher income group.
Exhibit-10 : Mortgage law and trend shift in demand
80 and above
75 - 79
70 - 74
65 - 69
60 - 64
55 - 59
50 - 54
45 - 49
40 - 44
35 - 39
30 - 34
25 - 29
20 - 24
15 - 19
10 - 14
5 - 9
1 - 4
LessThan 1
Male Female
Mkt
size
post
Mortgage
Law
Bars measure
the population
size in each
age group
Mkt
Size
now
Source : Central Department of Statistics
Supply characteristics – big players vs small players
Supply side of KSA’s Real Estate sector is dominated by small
developers who develop stand alone units and the picture is
slowly changing due to the mega cities planned. These projects
account for c.80% of all developments worth more than USD 50
mn which stands at around USD 200 Bn in total. The sheer size
of the forthcoming development may tempt us to think of a
flood of supply, however, as Exhibit-11 shows, much of the
supply is due only in the middle of next decade. Thus, the
shorter term future should continued to be dominated by
smaller sized developers and projects and stand alone
properties.
Supply of residential properties is dominated by small sized
players developing stand alone properties of average value less
than USD 50mn and is difficult to quantify. Mega cities dominate
the bigger size residential projects apart from which,
development by Dar Al Arkan and Emaar Properties are the ones
which are scheduled to be completed in the next couple of
years. Appendix-3 puts the detailed account of major projects
and their details which accounts for projects worth USD 495 Mn
in 2009, 2498 Mn in 2010 and 4892 Mn in 2011.
Mortgage law to provide
home ownership
affordability to the
younger generation
Domination of small sized
residential real estate
developers

8. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 8
Exhibit 11: Completion schedule plan of big projects
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
Valueofprojects(USDMn)
Completion of developments to happen in a phased manner
with majority of the completion happening during mid next
decade
Source : MEEDprojects
Regions in depth
Riyadh, Makkah and Eastern Province, which account for 70% of
the KSA’s population and economy, has the major cities of
Riyadh, Jeddah, Al-Khobar and Dammam. These cities account
for more than 80% of the total population in these regions and
economic activity except for the Eastern Region wherein the
industrial city of Jubayl has a considerable share of both
population and economic activity.
Exhibit 13: Typical composition of non-oil GDP
6%
36%
18%
9%
8%
7%
79%
53%
73%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Riyadh Eastern Province Makkah
Composition of GDP
Agriculture Industry & Mining Construction Services
Source: SAGIA
Riyadh region :The dynamics of this region will throw lights on
the characteristics of the region’s main city, Riyadh. Exhibit – 13
depicts the typical composition of Riyadh’s non-oil GDP. Being
the capital city as well as business centre, services sector
contributes more than 75% to the region’s GDP. Hence, the
region’s economic prospects should be weighed in terms of the
prospects of the service sector in KSA in general which is not
looking gloomy given the government’s spending plans and its
trickle down effects. Expansion in government spending needs
support from financial, trade and other services and the region
stands to benefit.
Bigger sized
developments to get
completed during mid
years of next decade
Service sector dominated
non-oil GDP and most
prominent contribution in
Riyadh

9. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 9
Makkah region: In this highly populated region, agriculture
has a far less role to play in the economic activity in the region,
which is dominated by the tourism related trade and service
activity concentrated in the holy city of Mecca and the city of
Jeddah. The region also has an industrial base manufacturing
mainly food and beverages, petrochemicals and other non-
metallic industrial products including rubber and plastic.
Eastern Province: This region has the twin cities of Al-Khobar
and Dammam and the industrial city of Jubail. This region
accounts for most of the oil fields and is the hub for industrial
activity. The region’s economic prospects depends entirely on
the oil price dynamics for job creation and income generation.
Services play a facilitative role in the highly industrialized
economy.
Demand expectations – main regions
Population – trends
The Central Statistics Department provides with the population
numbers for Riyadh region indicates that Saudi nationals in
Riyadh grew at 3.5% CAGR, more than twice the Kingdom’s rate
(1.5%) due to migrations to Riyadh city from other regions
during 2000-04. In the latter period, the growth got more in line
with the Kingdom’s pace which means lower migration due
probably to the increased availability of regional economic
opportunities. Saudisation and improved opportunities in the
neighboring GCC countries led to a fall in expats growth during
2004-07 to 2% CAGR from 4% during 2000-04, more in line
with the trends in the Kingdom. We expect the falling expat
growth trend to continue and be at 1.5% to 2% range in the
coming years. We expect fewer migrations from other regions to
Riyadh as well and expect the Saudis population to grow in the
range of 2% to 2.3% in the coming years.
In case of Makkah, the period 2000-04 witnessed a much slower
Saudi population CAGR of 0.22% which slowly is on the track to
catch up the Kingdom’s rate from 2004. We expect the growth
rate to be at 1.6% for Saudis and for expats at 1.5% range, in
line with the recent trends. Eastern Province too faced inter
regional migration during 2000-04 which got receded in the later
years. We expect the population growth in the region to be
more in line with the Kingdom’s rate.
Housing preference - Saudis/Expats
Statistics shows that, in Riyadh, while 50% of Saudis prefer a
villa, 56% of expats stay in apartments. Only 17% of Saudis
stay in apartments and the rest live in either a villa or a
traditional house or a floor in these buildings. Saudis preferring
to stay in an apartment is much higher in Makkah (47%) and
the Eastern Province (28%) as of 2007. On the whole, 82% of
people lived in traditional type of accommodation in Riyadh and
the number goes down to 71% in Eastern Province and 53% in
Makkah region. This implies the higher apartment penetration in
Jeddah and the cities of Al-Khobar and Dammam .
Industrial activity
contributes to the GDP in
Makkah and Eastern
Province
Lower cross regional
migrations to Riyadh and
stable expat growth
trends to prevail
Saudis prefer Villas and
Expats prefer apartments
currently

10. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 10
As exhibit-14 shows, apartment outgrew villas during 2000-04,
which is explainable by the growth in expat population during
this period. Given the outlook of Saudi domination in population
growth, villas should be the preferred form of housing
development in Riyadh, though there is a possibility of trend
shift towards apartments. During the years 2004-07, stock of
apartments grew at the rate of 3.7%, while the apartment
demand (17% of Saudis and 56% of expats) grew at 1.5%.
However, the average household size in apartments increased
from 4.14 in 2004 to 4.49 in 2007, growing 400 basis points
more than the growth in average household size in Riyadh,
which indicates that, Saudis increasingly prefer staying in
apartments and we expect the percentage of Saudis staying in
apartments to rise from 17% in 2007 to 20% in 2012.
Exhibit-14 – Distribution of housing stock
750 961 1021 982 1178 1245 465 533 566
0%
20%
40%
60%
80%
100%
Riyadh Riyadh Riyadh Makkah Makkah Makkah E. Prov E. Prov E. Prov
Number on top of each bar indicate the total available housing
units in thousands
Villa Traditional House A floor in TH/Villa Apartment Other
Source : Central Department of Statistics
The average household size in Riyadh was 6.3 as of 2000 and it
contracted to 5.5 in 2004 only to expand again to 5.7 in 2007.
Assumptions on household size is key in a typical residential
demand model and changes in household size is a result of
many structural factors and indicates the extent of demand
supply (mis)match. It is impacted by population growth
patterns, changes in the composition of population, economic
growth and supply of housing stock. Keeping other factors
constant, household size falls with economic growth and supply.
The effect of changes in composition of population on the
household size depends on the cultural factors of a country.
Demographics skewed towards young age/expatriates would
contract the household size with a smaller family culture and
vice versa . We intend to forecast the demand by assuming
scenarios in the behavior of household size based on
assumptions laid out in Exhibit-3 and with which we arrived at
the demand size as mentioned in Exhibit-15.
Saudis started to prefer
apartments we expect
the trend to continue to
grow
Household size tends to
fluctuate due to various
factors and hence critical
to housing demand
expectation

11. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 11
Exhibit-15 : Incremental demand for housing units
Region Scenario 2009E 2010E 2011E 2012E 2013E
Riyadh
Scenario-1 8355 35494 45173 51999 54400
Scenario-2 8355 28382 34703 26286 25758
Scenario-3 8355 7145 6522 28819 39342
Eastern
Province
Scenario-1 4514 16689 26020 34195 28703
Scenario-2 4514 16591 17112 11066 13687
Scenario-3 4514 4199 4311 16064 19735
Makkah
Scenario-1 13309 27413 36946 43254 44001
Scenario-2 13309 27639 26400 27053 27728
Scenario-3 13309 10233 12049 24097 23661
Supply
The supply is dominated by smaller size players with projects
valued less than USD 50 mn and supply from bigger sized
projects looks dismal compared to the demand expectations
above (Appenix-3), which implies huge opportunities for smaller
size developers and even for further bigger projects. The mega
cities planned would not be directly impacting the cities of these
regions during 2009-13, however, they could compete in the
longer term in terms of populace and economic activity.
Exhibit-16: Unorganized supply potential in regions
0
10
20
30
40
50
60
2009E
2010E
2011E
2012E
2013E
2009E
2010E
2011E
2012E
2013E
2009E
2010E
2011E
2012E
2013E
Riyadh Makkah Eastern Province
Housingunitsdemand('000s)
Supply from major projects Unorganised Supply potential
Source: MEEDprojecs, Markaz analysis
Rental Trends & Outlook
Both the rental level and the correction is incomparably small in
case of KSA cities compared to other GCC cities. Rentals grew
on an average by 25% YoY in 2008 before correcting by 10% in
Q1-09. Prices too reportedly grew up to even 100% in some of
the prime locations of main cities like Riyadh which too faced a
correction evident by the rise in yield to the extent of 200 basis
points. Both the rise and fall is driven mainly by changes in risk
appetite which drives up/down the value of all risky assets of
which residential real estate is no exception.
As investors seek risk again, we expect the rentals to bounce
back sharply tracking prices. We expect Mecca & Jeddah to
grow much more than Eastern Province and Riyadh, mainly due
to the sheer size of its current pent-up demand (Exhibit-15).
Planned mega cities not
to impact the demand in
the current cities of
domination in the near
term
Rentals to grow much
more in Makkah and
Jeddah than Eastern
Province and Riyadh

12. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 12
Riyadh and Jeddah, though has corrected of late, will be quick
to bounce back given their strong fundamentals and the
expected demand. Rentals in Al-Khobar and Dammam can be
expected to bounce back once the oil price stabilizes and overall
economy stabilizes and thus will be the last set of places to
recover. We expect that the price and rental growth would be
of staggering proportion once the mortgage law is passed and
the demand potential is increased in all these regions.
Exhibit-17 : Recent trends in rentals
-30%
-20%
-10%
0%
10%
20%
30%
-500
-400
-300
-200
-100
0
100
200
300
400
500
Riyadh
Dubai
AbuDhabi
Doha
Jeddah
EasternProvince
Makkah
Correctionfrompeak%
Rent-USD/sqm/annum
End 2008 Q1-09 Change %
Source: Colliers, Asteco, Markaz analysis
Rentals in KSA cities
incomparably small
compared to other cities
in the region and has
faced smaller corrections

13. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 13
Appendix – 1 : Major developments scheduled for completion – residential segment
Source Real GDP growth % Month of update
EIU -1.0% May-09
HSBC 0.8% Mar-09
Standard Chartered 1.0% Jan-09
Samba -1.8% Mar-09
DB -0.5% Mar-09
Merryl Lynch -0.2% Feb-09
IMF -0.9% Apr-09
Appendix – 2 : Private sector credit as a % of GDP
Country Units Month
Bank Credit
to Private
Sector Nominal GDP
Private Sector
Credit as a %
of Nominal GDP
(2008) Sources
UAE AED Mn Sep-08 727,661 928,510 78.37% UAE Central Bank, EIU
Bahrain BD Mn Dec-08 7,533 8,235 91.47% Central Bank of Bahrain
KSA SR Mn Dec-08 712,737 1,753,503 40.65%
SAMA, Ministry of
National Economy
Qatar QR Mn Dec-08 242,949 372,384 65.24% Qatar Central Bank
Kuwait KD Mn Dec-08 25,458 39,978 63.68%
Kuwait Central Bank,
EIU
Oman OR Mn Dec-08 8,759 23,049 38.00%
Oman Central Bank,
Ministry of National
Economy

14. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 14
Appendix – 3 : Major developments scheduled for completion – residential segment
Project Developer Location Value-
$ Mn
Year Details
Residential/Resort Districts Emaar, The Economic City King Abdullah
Economic City
145 2009 616 apartments
Al-Qasr Mixed-Use
Development
Dar Al Arkan Riyadh 350 2009 200 Villas
3800 Apartments
Jalmudah Apartment
Buildings
RCJ&Y Jubail Industrial
City
70 2010 6 four storey buildings
Esmeralda Suburb Emaar, The Economic City King Abdullah
Economic City
500 2010 200 Villas
Residential/Resort Districts Emaar, The Economic City King Abdullah
Economic City
120 2010 134 Villas
Residential Development:
Phase II
RCJ&Y Jubail Industrial
City
150 2010 412 Units
Jubail Residential
Development: Phase II
RCJ&Y Jubail Industrial
City
100 2010 193 Units
Yanbu Residential
Development
RCJ&Y Jubail Industrial
City
100 2010 240 Units
Al Ghadeer Village Emaar Properties Al Khobar 600 2010 226 Villas
Al Tilal Dar Al Arkan Medina 65 2010 499 Villas – Phase I
1589 Villas – Phase II
1840 Units – Phase III
Al Basateen Residential
Suburb
Kinan International Real
Estate Development Co.
Yanbu 93 2010 200 Villas – Phase I
40 Villas – Phase II
Al Nada Village Dar Al Arkan Al Khobar 700 2010 242 Villas
Staff Housing Development Ministry of Education Dammam 133 2011 197 Villas
Al Muhamadiyah Tanmiyat Group Jizan 300 2011 2770 Units
Jeddah Lamar Development Zahran Real Estate Jeddah 160 2011 2 Towers – 60 & 68
Storeys
Housing Development King Fahd University for
Petroleum & Minerals
Dammam 50 2011 100 Villas
King Abdulaziz University:
Housing Project
Ministry of Education Jeddah 801 2011 1260 Units
Jabal Omar* Jabal Omar Development
Company
Makkah 2700 2011 4235 Units
Olaya Towers GOSI Riyadh 268 2011 2 Towers – 34 & 36
Storeys
Mixed Use Tower KM Properties Jeddah 300 2011 1 Tower – 30 Storey
The Seafront Project Seafront Company Al Khobar 100 2011
Jeddah Residential Tower Al Rajhi Development/
Tameer Holding
Jeddah 80 2011 1 Tower – 57 Storey
Source : MEEDprojects

15. REAL ESTATE RESEARCH
June 2009
Kuwait Financial Centre “Markaz” 15
Disclaimer
This report has been prepared and issued by Kuwait Financial Centre S.A.K (Markaz), which is
regulated by the Central Bank of Kuwait. The report is intended to be circulated for general information
only and should not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell
any financial instruments or to participate in any particular trading strategy in any jurisdiction.
The information and statistical data herein have been obtained from sources we believe to be reliable
but no representation or warranty, expressed or implied, is made that such information and data is
accurate or complete, and therefore should not be relied upon as such. Opinions, estimates and
projections in this report constitute the current judgment of the author as of the date of this report.
They do not necessarily reflect the opinion of Markaz and are subject to change without notice. Markaz
has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the
event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein,
changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn.
This report does not have regard to the specific investment objectives, financial situation and the
particular needs of any specific person who may receive this report. Investors are urged to seek
financial advice regarding the appropriateness of investing in any securities or investment strategies
discussed or recommended in this report and to understand that statements regarding future prospects
may not be realized. Investors should note that income from such securities, if any, may fluctuate and
that each security’s price or value may rise or fall. Investors should be able and willing to accept a total
or partial loss of their investment. Accordingly, investors may receive back less than originally invested.
Past performance is historical and is not necessarily indicative of future performance.
Kuwait Financial Centre S.A.K (Markaz) does and seeks to do business, including investment banking
deals, with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report.

16. REAL ESTATE RESEARCH
June 2009
Strategic Research
Missing The Rally (Jun-09)
Shelter in a Storm (Mar-09)
Diworsification: The GCC Oil Stranglehold (Jan-09)
This Too Shall Pass ( Jan-09)
Fishing in Troubled Waters(Dec-08)
UAE Outlook (Oct-08)
Down and Out: Saudi Stock Outlook (Oct-08)
Kuwait Stocks: Fair Value Not Far Away (Sept-08)
Mr. GCC Market-Manic Depressive (Sept-08)
Global Investment Themes (June-08)
To Yield or Not To Yield (May-08)
The Golden Portfolio (Apr-08)
Banking Sweet spots (Apr-08)
The “Vicious Square” Monetary Policy options for Kuwait (Feb-08)
Outlook 2008: GCC (Jan-08)
China and India: Too Much Too Fast (Oct-07)
A Potential USD 140b Industry: Review of Asset Management
industry in Kuwait (Sep-07)
A Gulf Emerging Portfolio: And Why Not? (Jun-07)
To Leap or To Lag: Choices before GCC Regulators (Apr-07)
Derivatives Market in GCC (Mar-07)
Managing GCC Volatility (Feb-07)
GCC for Fundamentalists (Dec-06)
GCC Leverage Risk (Nov-06)
GCC Equity Funds (Sep-06)
Periodic Research
Title Frequency
Markaz Daily Morning Brief Daily
Markaz Kuwait Watch Daily
Daily Fixed Income Update Daily
KSE Market Weekly Snapshot Weekly
KSE Market Weekly Review Weekly
International Market Update Weekly
Mena Mergers & Acquisitions Monthly
Option Market Activity Monthly
GCC Asset Allocation & Volatility Monthly
Thought Speaks Monthly
Investment Outlook Quarterly
GCC Equity Funds Quarterly
Real Estate
 Saudi Arabia – Residential Real Estate Outlook (Jun-09)
 Saudi Arabia (Sep-08)
 Abu Dhabi (July-08)
 Algeria (Mar-08)
 Jordan (Mar-08)
 Kuwait (Feb-08)
 Lebanon (Dec-07)
 Qatar (Sep-07)
 Saudi Arabia (Jul-07)
 U.S.A. (May-07)
 Syria (Apr-07)
Sector Research
Real Estate Strategic Research
 Real Estate Earning -2009 (May-09)
 Supply Adjustments Are we done? (Apr-09)
 Dubai Real Estate Meltdown (Feb-09)
Markaz Research Offerings

17. REAL ESTATE RESEARCH
June 2009
Bahrain
 Gulf Finance House (Oct-08)
 Esterad Investment Company
(Aug-08)
 Bahrain Islamic Bank (Aug-08)
 Ithmaar Bank (July-08)
 Tameer (July-08)
 Batelco (July-08)
Research Coverage Market
Cap as % of total Market cap 29%
Qatar
 United Development Co. (Feb-09)
 Qatar Fuel Co. (Dec-08)
 Qatar Shipping Co (Dec-08)
 Barwa Real Estate Co. (Nov-08)
 Qatar Int’l Islamic bank (Nov-08)
 Qatar Insurance Co. (Nov-08)
 Qatar Telecom (Oct-08)
 Qatar Gas Transport Co. (Oct-08)
 Doha Bank (Aug-08)
 Qatar National Bank (Aug-08, Feb-09)
 QEWC (July-08)
 QISB (July-08)
 Masraf Al-Rayan (Jun-08)
 Commercial Bank of Qatar (Jun-08)
 Industries Qatar (May-08, Apr-09)
Research Coverage Market
Cap as % of total Market cap 95%
UAE
 Sorouh Real Estate PJSC (Feb-09)
 Gulf Cement Company (Jan-09)
 Abu Dhabi National Hotels (Dec-08)
 Dubai Investments (Dec-08)
 Arabtec Holding (Dec-08)
 Air Arabia ( Nov-08)
 Union Properties (Nov-08)
 Dubai Islamic bank (Oct-08)
 Aldar Properties (Sept-08, Feb-09)
 Union National Bank (Aug-08)
 Dubai Financial Market (July-08)
 Emaar Properties (July-08)
 Dana Gas (July-08)
 FGB (July-08)
 DP World (July-08)
 ADCB (Jun-08)
 Etisalat (Jun-08)
 NBAD (May-08, Feb-09)
Research Coverage Market
Cap as % of total Market cap 48%
Oman
 Galfar Engineering & Cont. (Nov-08)
 Oman Telecommunications (Sept-08)
 Bank Muscat(Sept-08)
 Oman cement (Sept-08)
 Raysut Cement Company (Aug-08)
 National Bank of Oman (Aug-08)
 OIB (July-08)
Research Coverage Market
Cap as % of total Market cap 69%
Egypt
 Commercial Int’l Bank (Oct-08)
 Orascom Telecom (Sep-08)
 Mobinil (Sep-08)
 Telecom Egypt (Aug-08)
 EFG-Hermes (Jun-08)
Research Coverage Market
Cap as % of total Market cap 45%
Jordan
 Arab Bank (Sept-08)
 Cairo Amman Bank (Oct-08)
Research Coverage Market
Cap as % of total Market cap 39%
Saudi Arabia
 Saudi Investment Bank (Jan-09)
 Savola Group (Dec-08)
 Kingdom Holding Co (Dec-08)
 Al Marai Company (Nov-08)
 Saudi Kayan Petro Co. (Aug-08)
 Al Rajhi Bank (Aug – 08)
 Arab National Bank (July-08)
 Saudi Telecom Co. (Jun-08, May-09)
 SAFCO (Jun-08)
 Banque Saudi Fransi (Jun-08)
 Riyad Bank (Jun-08)
 Samba Financial Group(May-08, Feb-
09)
 Sabic (May-08, Mar-09)
Research Coverage Market
Cap as % of total Market cap 60%
Company Research
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