KEC sees growth and resilience in Makkah, Madinah’s real estate sector

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WHAT WE’RE TRACKING TODAY

East-West pipeline back to full flow

Good morning, wonderful people. We went into the weekend discussing Iran’s closure of the Strait of Hormuz, and somehow, just a couple of days later, it’s now the US who’s threatening to blockade the Strait. US President Donald Trump said the US would prevent “any and all ships” from entering or leaving the waterway, though it’s unclear how far it might go and whether it will be getting help from other countries.

This came as negotiations between the US and Iran collapsed over the weekend. After 21 hours in Islamabad, negotiators from the two countries walked away without an agreement, each blaming the other for holding the line on core demands.

US vice president J.D. Vance said Iran refused to accept what he described as Washington's “final and best offer,” centered on an explicit commitment not to pursue nuclear weapons, Reuters reports. Iranian officials, meanwhile, described US demands as “unreasonable,” TRT World reports, citing Iranian state media.

The problem: The two sides are negotiating entirely different endgames. Iran is pushing for a broad settlement, covering sanctions relief, regional scrutiny, and sovereignty issues like the Strait of Hormuz, while the US is pursuing a narrower arrangement, focusing on Iran’s nuclear program — a major point of contention in the latest round of talks — along with the Strait of Hormuz and regional de-escalation.

Yes, but: No one’s calling time on diplomacy just yet: Iran’s Foreign Ministry Spokesperson Esmaeil Baqaei said no one expected an agreement in a single session and that the road to diplomacy wasn’t shut off.

Some movement did take place through the Strait, though: Three supertankers carrying crude passed through the Strait of Hormuz on Saturday, the first to exit the Gulf since the ceasefire, while three empty tankers were sailing into the waterway on Sunday, Reuters reports, citing shipping data. However, hundreds are still stuck waiting for clearance, and some were abruptly making u-turns mid-journey, Bloomberg reports.

Happening today

[wwtt3] The five-day International Monetary Fund and World Bank Spring Meetings kick off today in Washington, as policymakers assess the economic fallout from President Donald Trump’s war on Iran, which has disrupted energy markets and weakened growth prospects worldwide. The gathering comes amid failed US-Iran peace talks that were aimed at turning a fragile two-week ceasefire into a more durable agreement.

What to expect: IMF Managing Director Kristalina Georgieva warned the global economy to “buckle up” for downgraded forecasts on Tuesday. Meanwhile, discussions are expected to center on the war’s impact on global growth, oil price trajectories, and potential disruptions to energy flows, particularly through the Strait of Hormuz. Policymakers will also weigh how governments and central banks can support activity without exacerbating inflation pressures.

WEATHER- The showers won’t quit: Most of the Kingdom is in for moderate to heavy thunderstorms, rain, and strong winds through to Tuesday, with the most intense activity forecast for Asir, Jazan, and Makkah.

Riyadh: 30°C high / 20°C low;
Jeddah: 32°C high / 22°C low;
Makkah: 34°C high / 22°C low;
Dammam: 29°C high / 20°C low.

Watch this space

DISRUPTION WATCH — The Kingdom’s escape hatch is back in business: The East-West pipeline is back to its full 7 mn bbl / d capacity, recovering the 700k bbl / d lost in last week’s strikes on the Kingdom’s energy infrastructure, the Energy Ministry said on X. Output at the Manifa field has also been fully restored, bringing back an additional 300k bbl / d.

The recovery progress bar: The attacks initially disrupted around 1.3 mn bbl / d in combined pumping and production capacity. About 1 mn bbl / d (77%) has now been restored to the network, while recovery of the remaining 300k bbl / d at the Khurais field is still underway. It’s unclear whether impacted refining assets — including Satorp in Jubail, Ras Tanura, Samref in Yanbu, and Riyadh refinery — have resumed operations.

Why speed matters: Because it takes a few days for oil to actually travel the pipeline to the Yanbu terminals, this quick fix might have just prevented the global market from feeling the physical pinch of the strikes. With the Strait of Hormuz still blocked, this bypass has been credited with keeping global prices from hitting catastrophic highs, helping keep both Brent and WTI under the USD 100 mark as of Sunday.

RHQ — Lenovo’s regional headquarters for the Middle East, Turkey, and Africa is up and running, with Investment Minister Fahd Al-Saif having inaugurated the launch yesterday, state news agency SPA reports. The hub, located in Al Majdoul Tower, has been under development since August 2025.

Meet the team: Lenovo already picked out the leadership to steer its localized strategy in the Kingdom, appointing Tareq Alangari as senior vice president and president of the regional cluster in January and a C-suite bench that includes Lawrence Yu (head of RHQ), Giovanni Di Filippo (VP for Saudi Arabia), and Zoran Radumilo (CTO for Saudi Arabia).

Why it matters: This is the first RHQ we’ve seen pop up since the war, building on a year of setup. It follows PIF-backed Alat’s USD 2 bn strategic investment in Lenovo in January 2025, which gave it a 12% stake in the Chinese PC and server maker. The investment is predicated on deep localization, where Lenovo is bringing a clean energy-powered manufacturing hub — set to go online this year — to produce Saudi-made PCs and servers.

Data point

6.7% — That’s the y-o-y increase of transshipment containers handled at Saudi ports in March, contributing to a total cargo throughput of 11.3 mn tons for the month, Mawani said on X. The Kingdom’s ports saw shipping traffic reach 1.1k vessels, while total containers handled hit 456.6k. Passenger traffic surged by 25.9% y-o-y to 73.7k, while 34.5k vehicles and over 635.2k heads of livestock transited the ports during the period.

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The big story abroad

For once, the international business press is focusing on something other than the war: Hungary’s elections. The European country just voted out Prime Minister Viktor Orban, who’s been in office for 16 years, and voted instead for centre-right rival Peter Magyar. Orban’s critics had accused him of being authoritarian; and his opposition to the EU’s efforts to help Ukraine fight Russia, as well as the economic decline that Hungary has gone through in recent years, contributed to why he fell out of favor.

Meanwhile, look out for earnings season to start this week, with Goldman Sachs set to report its earnings today. Expect an interesting week given the double whammy of earnings and the backdrop of the war.

The holy boom

For years, real estate developers in Saudi Arabia’s holy cities worked within a rigidly defined — albeit highly lucrative — market constraint: their ultimate buyer pool was restricted to the Kingdom's 32 mn citizens and a select group of premium residency holders. The impending legalization of foreign real estate ownership in Makkah and Madinah is poised to unlock demand from a global demographic of 2 bn Muslims.

Sitting at the center of this impending demand surge is Knowledge Economic City (KEC). The publicly listed giant with SAR 3.4 bn in capital controls 6.8 mn sqm located inside Madinah’s Haram boundary. The land bank is positioned directly on the main artery, connecting the Prophet’s Mosque, the Haramain High-Speed Railway station, and Prince Mohammad bin Abdulaziz International Airport.

We sat down with Hazem ElBanna, who took the helm as KEC’s acting CEO in November, to discuss how the company is preparing for this unprecedented capital influx, how it is navigating Red Sea supply chain disruptions, and why the economics of religious tourism remain uniquely resilient.

The foreign ownership catalyst

When asked about the defining shift in his mandate going into 2026, ElBanna points to the sheer math of the impending foreign ownership law.

“We have spent years catering to a single sector — Saudis and premium residency holders,” ElBanna tells us. “Today, you are opening up to 2 bn Muslims around the globe. Imagine capturing just 2-3% of that — that’s about 40 mn people. That is more than double the entire existing market”.

The anticipated demand is backed by active, high-level investor appetite. ElBanna confirms that KEC is already in advanced stages of negotiation with a diverse pool of international players. "Almost every Muslim around the globe wants a second home or an investment in Madinah, whether they are in the Gulf, the broader Middle East, Europe, Turkey, or the US," he notes.

The company is simply waiting for the regulatory ink to dry. "We already have many deals ready and undergoing final fine-tuning. Potential investors are ready to go once the decision goes into effect.”

The question of pricing

A sudden influx of global capital chasing finite real estate inside the Haram boundary naturally raises concerns of a Dubai-style price bubble. ElBanna rejects this premise, characterizing the expected price movements as a structural correction rather than unchecked inflation.

The core issue is a historical lack of institutional-grade, lifestyle-driven supply, he argues. To quantify the gap, KEC commissioned KPMG to forecast the city's housing needs. Even factoring in all of KEC's deliveries and competing mega projects like Rua Al Madinah, the city will face a shortage of 109k residential units by 2035.

KEC's strategy is to capture this demand across all asset classes, deploying a master plan that caters to housing, hospitality, retail, offices, medical, and educational sectors. “We are not going to overshoot Dubai or London. Prices will be reasonable and directly matched to the amenities offered,” he says.

Talking geopolitics

The long-term demand might look solid, but the immediate operational reality involves executing a massive development pipeline against the backdrop of regional geopolitical tensions and severe disruptions in the Red Sea supply chain.

KEC's mitigation strategy? The company has rewired its logistics to avoid halting operations or accepting massive cost overruns, ElBanna tells us. Materials sourced from Europe remain largely unaffected, arriving via Mediterranean and Red Sea ports that sit just a two-hour drive from Madinah. More importantly, KEC has managed to keep its critical Asian supply lines open by utilizing geopolitical loopholes.

“We asked our Chinese contractors explicitly if they are facing impacts. They told us they have no issues, as Chinese vessels are not being intercepted entering through the Bab el-Mandeb strait. Our vessels are moving without any objections.” he says.

KEC is also utilizing the distress in other global markets as leverage. Chinese suppliers suddenly have surplus inventory because construction has shut down entirely in some conflict-affected countries. Meanwhile, “Production is still running, so we benefit from this. We negotiate on price differences, secure the same rates, and avoid paying extra.” ElBanna adds.

When direct shipping to regional hubs becomes problematic, KEC shifts tactics. “If operations through the UAE become difficult, instead of materials dropping there and coming to us later, we establish direct supply lines," ElBanna says. Equipment and raw materials, such as aluminum, that face bottlenecks are quickly swapped for alternatives from China or Europe to prevent timeline delays.

ElBanna acknowledges that ins. premiums on shipments have increased, but he stresses that the overall impact is manageable, aided significantly by the government's stabilization of domestic fuel prices — a stark contrast to the inflationary fuel spikes seen in Europe and the US.

The spiritual moat

Beyond construction logistics, we asked ElBanna about the potential impact of regional uncertainties on tourism footfall — a critical metric for a company building tens of thousands of hotel rooms. ElBanna draws a sharp distinction between conventional leisure tourism and religious devotion. "We are not Dubai. We are not London. We are not a traditional tourist destination," he asserts.

“Every Muslim has a direct link to the city. They want to live here, and ideally, they wish to pass away here,” ElBanna explains. Because of this deeply ingrained religious mandate, the sector operates counter-cyclically to global anxiety. Airspace restrictions can cause temporary, drops in flow, but the city remains fundamentally busy, insulated by a demographic that views travel to Madinah as a spiritual necessity rather than a discretionary vacation.

The ambitious pipeline

The company is undertaking a phase of “exponential growth” to build a city designed to house 150k residents and host 42k hotel rooms. The development pipeline includes flagship projects like:

The Islamic World District (IWD), a SAR 6.56 bn hospitality play;
The residential-focused AlAlya gated community;
The commercial hub Multaqa Almadinah;
Madinah Gate, a transit-oriented development strategically connected to the Haramain High-Speed Railway station, which processes 12 mn annual passengers.

To capture and direct this immense footfall, KEC is deeply integrated into the city's wider infrastructure plans. “We are working with the municipality on a Bus Rapid Transit (BRT) system that will move people from the airport to the central area, the Haram, and various historical shrines,” ElBanna details. KEC has built a major transportation hub attached to its city terminal to intercept these passengers, deploying an internal transit network and dedicated shuttles to seamlessly move guests from KEC hotels directly to the Prophet's Mosque and back.

Domestic surges offset the inbound tourism slump

A sharp drop in international arrivals during the first quarter of 2026 was largely offset by surging domestic travel, boosting the resilience in the Kingdom's hospitality sector amid regional volatility.

By the numbers: The number of tourists was up 8% y-o-y to 37.2 mn in 1Q, but the topline figure masks a divergence, according to Gastat figures (pdf). Inbound tourism dropped 13% to 8.3 mn visitors, hit by regional headwinds and airspace closures. This dragged international tourism spending down 7% to SAR 48 bn.

Stepping into the breach were domestic travelers. Local tourism surged 16% to 28.9 mn tourists, who injected SAR 34.7 bn into the local economy — an 8% jump in domestic spend.

Why it matters

Total tourism spending slipped some 2% to SAR 82.7 bn during the quarter, but local leisure appetite prevented a wider sector contraction. The data shows that Saudi’s deep domestic market can absorb significant shocks to inbound international traffic, alleviating the risk from capital deployments currently flowing into the sector.

The capacity expansion

This shift in the traveler mix follows a period of aggressive capacity expansion. The total number of licensed hospitality facilities in the Kingdom jumped 34.2% y-o-y to over 5.94k in 4Q 2025, a separate Gastat report (pdf) showed.

Hotel operators adjusted their yield strategies. The average daily room rate in the fourth quarter dropped 11.7% to SAR 389. The pricing flexibility edged hotel room occupancy up to 57.3% by the end of the year, laying the groundwork for the domestic surge in early 2026.

Operators are hiring aggressively to staff the rapidly expanding footprint. Total employment in tourism activities crossed the 1 mn mark 4Q. Still, the sector remains heavily reliant on expatriate labor. Saudization in tourism currently hovers at just 24% — some 247k Saudi nationals, meaning the vast majority of the payroll keeping these new hotels running goes to foreign workers.

What tourists spent on

High-end assets captured the holiday spend: The domestic demand in 1Q wasn't limited to budget staycations but targeted premium assets during the Ramadan and Eid school holidays. Several luxury properties in Makkah pushed past 97% — and up to 100% — occupancy during peak Ramadan days. The coastal and leisure corridors saw similar spikes, with occupancy climbing to 82% in featured Red Sea ultra-luxury resorts and 85% in Jeddah resorts.

Advanced Petrochemical’s net income halved in 1Q

Advanced Petrochemical Company’s net income fell 58.3% y-o-y to SAR 30 mn in 1Q 2026, though it significantly outperformed Bloomberg analysts’ expectations of SAR 13.5 mn, it said in a Tadawul disclosure. While revenue surged 75.7% y-o-y to SAR 1.1 bn — driven by a 94% spike in sales volumes following the 3Q 2025 launch of Advanced Polyolefins Industry Company — the bottom line was pressured by the new facility's depreciation and financing costs, as well as a 10% dip in netback prices

Jazan Port slashes shipping and handling fees

Jazan Port introduced an incentive program to reduce shipping costs and attract more shipping lines, Mawani said on X. The scheme offers discounts of up to 50% on shipping and handling services, including a 20% cut on new services, full exemption from marine dues for the first three voyages, 5–20% reductions on import and export handling, and a 50% discount on transshipment services.

Our take: The incentives support the Logistics Corridors Initiative by lowering costs for vessels bypassing the Strait of Hormuz. Launched in mid-March, the scheme links Red Sea ports to overland routes serving GCC markets, enabling cargo flows from Asia and Europe via inland corridors while mitigating higher rerouting and ins. costs amid regional instability.

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Truce or not, the damage is done

Even if a ceasefire holds, the economic fallout from the Iran war is already rippling far beyond the region, World Bank President Ajay Banga told Reuters, sketching out a global economy that slows, heats up, and grows more fragile the longer the conflict lingers.

Two paths, one problem

The World Bank’s outlook hinges on two primary scenarios: A ceasefire baseline where global growth slows by 0.3-0.4 points, and a prolonged war that triggers a full 1.0-point contraction, Banga said. Inflation is projected to jump 200–300 basis points in a ceasefire scenario, with an additional 0.9-point spike if fighting continues.

The toll on emerging markets: The World Bank slashed 2026 growth forecasts for emerging markets and developing economies to 3.65% in 2026, down from 4% in October, with a downside scenario pulling it as low as 2.6%. Meanwhile, inflation projections have jumped to 4.9%, up from a 3% estimate, potentially climbing to 6.7% if the conflict persists.

Where the shock is coming from

Energy markets are leading the disruption, with oil prices surging by roughly 50%, while supply chains for gas, fertilizers, and even niche inputs like helium are under strain. Aviation and tourism — early casualties in any regional conflict — are also absorbing fresh blows.

The fate of the Strait of Hormuz is also adding pressure. The longer the strait remains closed, the deeper and more lasting the damage will be to critical energy infrastructure.

And the two-week truce appears increasingly tenuous. Exchanges between Israel and Iran, coupled with flopped peace talks, proved how quickly the situation could deteriorate — keeping markets on edge.

Crisis tools are being deployed

To support vulnerable economies, the bank is activating crisis-response channels to fast-track liquidity, particularly for energy-importing nations. These mechanisms allow countries to bypass new board approvals and tap into previously authorized but undisbursed funds. Despite these measures, high debt and currently high-interest rates leave little room for error in these economies.

What not to do: Banga cautions against broad energy subsidies, which could further destabilize already strained fiscal positions.

If there is a longer-term takeaway, it’s structural. The crisis is highlighting the need for energy diversification and self-sufficiency. The World Bank nodded to this shift by re-entering nuclear financing alongside continued support for renewables and hydro. Countries that invested early are already seeing the benefits — Nigeria leveraged its large-scale refining capacity to increase output and supply aviation fuel regionally, insulating itself from the worst of the shock, Banga said.

MARKETS THIS MORNING-

Asian markets opened lower on US blockade news. Hong Kong’s Hang Seng shed 1.2%, while Japan’s Nikkei declined 0.6% and the Shanghai Composite was down 0.3%. Wall Street futures are also in the red.

TASI	11,315	-0.3% (YTD: +7.9%)
MSCI Tadawul 30	1,526	-0.3% (YTD: +10.0%)
NomuC	22,800	+0.6% (YTD: -2.1%)
USD : SAR (SAMA)	USD 3.75 Sell	USD 3.75 Buy
Interest rates	4.25% repo	3.75% reverse repo
EGX30	49,079	+1.0% (YTD: +17.3%)
ADX	9,838	0.0% (YTD: -1.5%)
DFM	5,715	+0.4% (YTD: -5.5%)
S&P 500	10,601	-0.1% (YTD: -0.4%)
FTSE 100	10,601	0.0% (YTD: +6.7%)
Euro Stoxx 50	5,926	+0.5% (YTD: +2.3%)
Brent crude	USD 95.20	-0.8%
Natural gas (Nymex)	USD 2.65	+0.8%
Gold	USD 4,787	+0.6%
BTC	USD 70,781	-2.2% (YTD: -20.2%)
Sukuk/bond market index	917.35	+0.4% (YTD: -0.2%)
S&P MENA bond & sukuk	150.77	+0.3% (YTD: -0.7%)
VIX (Fear gauge)	19.23	-1.3% (YTD: xx%)

THE CLOSING BELL: TADAWUL-

The TASI fell 0.3% yesterday on turnover of SAR 3.4 bn. The index is up 7.9% YTD.

In the green: Chemanol (+7.4%), SIIG (+6.8%), and Alujain (+4.1%).

In the red: Fourth Milling (-3.9%), Saleh Alrashed (-3.2%), and Sport Clubs (-3.0%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.6% yesterday on turnover of SAR 13.8 mn. The index is down 2.1% YTD.

In the green: Leaf (+9.3%), Alkuzama (+8.9%), and Horizon Educational (+7.3%).

In the red: Tam Development (-9.2%), Tharwah (-5.4%), and Aljouf Water (-4.9%).

CALENDAR

APRIL

20-22 April (Monday-Wednesday): Sports Investment Forum (SIF), Riyadh.

20-22 April (Monday-Wednesday): Future Aviation Forum, Riyadh.

MAY

3-9 May (Sunday-Sunday): The Global Sustainability Expo, The Arena Riyadh Venue.

19-21 May (Tuesday-Thursday): The Saudi Entertainment and Amusement Expo, Riyadh Front Exhibition and Conference Center.

24-28 May (Sunday-Thursday): Eid Al Adha holiday.

JUNE

15-17 June (Monday-Wednesday): Aluminum Arabia, The Arena, Riyadh.

21-24 June (Sunday-Wednesday): Saudi Food Exhibition and Conference, Riyadh Front Expo.

21-24 June (Sunday-Wednesday): Saudi Print & Pack, Riyadh International Convention & Exhibition Center.

21-24 June (Sunday-Wednesday): Riyadh International Industry Week, Riyadh International Convention & Exhibition Center.

21-24 June (Sunday-Wednesday): Saudi Plastics & Petrochem, Riyadh International Convention & Exhibition Center.

21-24 June (Sunday-Wednesday): Saudi Smart Logistics, Riyadh International Convention & Exhibition Center.

22-24 June (Monday-Wednesday): The Future Hospitality Summit, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

JULY

6 July-23 August (Monday-Sunday): Esports World Cup, Riyadh.

AUGUST

31 August-3 Sep (Monday-Thursday): Leap Tech Conference, Riyadh Exhibition & Convention Center - Malham.

SEPTEMBER

9-10 September (Wednesday-Thursday): Procurement and Supply Chain Futures Forum, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

9-10 September (Wednesday-Thursday): Real Estate Supply Chain Forum, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

15-17 September (Tuesday-Thursday) The Global AI Summit, King Abdulaziz International Convention Center, Riyadh.

23 September (Wednesday): Saudi National Day.

OCTOBER

12-15 October (Monday-Thursday): World Energy Congress, Riyadh.

26-28 October (Monday-Wednesday): ACHEMA Middle East, Riyadh International Convention & Exhibition Center.

NOVEMBER

24-28 November (Tuesday-Saturday): Aero Middle East and Sand & Fun, Thumamah Airport, Riyadh.

Signposted to happen sometime in 2026:

2H: Sabic’s USD 6.4 bn Fujian project in China to start production;
September: Saudi Paper and Packaging Expo, Riyadh International Convention & Exhibition Center;
November: The UN Trade and Development Global Supply Chain Forum to take place in Saudi Arabia;
November: The Esports Nations Cup, Riyadh;
The World Economic Forum’s Global Collaboration and Growth Meeting, Jeddah;
SkyMove Air Cargo MENA, Riyadh;
The Intervision international music competition will take place in Saudi Arabia.

Signposted to happen sometime in 2027:

The World Water Forum takes place in Riyadh;
The Ocean Race finishes in Amaala on the Red Sea;
Riyadh-Kudmi transmission line to be completed;
Capital Markets Forum takes place in March in Riyadh.

Signposted to happen sometime in 2Q 2027:

The Hail Region Water Networks Project is expected to be completed.

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