Knowledge Economic City sees growth and resilience in Makkah, Madinah’s real estate sector

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.