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Demand for mid-size houses dampens Dar Al Arkan's net
Published in The Saudi Gazette on 23 - 07 - 2011

Dar Al Arkan, Saudi Arabia's biggest property developer, reported a 31 percent drop in second quarter net profit on declining sales.
The Kingdom has a shortage of owner-occupied residential housing, particularly at the lower end of the income scale.
The growing needs of a large young population in the Kingdom, the housing market in Saudi Arabia has shifted its focus from luxury villas to the needs of a evolving society.
Saudi Arabia plans to build 500,000 new homes to cater for its growing population of over 27 million.
Dar Al Arkan made a net profit of SR297 million ($79 million) in the three months to end-June, compared with 437 million riyals a year earlier, it said in a statement posted on Tadawul website.
A report by Banque Saudi Fransi in March said developers needed to build about 275,000 units a year through 2015 to meet demand in the world's top oil exporter for about 1.65 million new homes.
The Kingdom will need 1.2 million new homes by 2014 to satisfy demand, Global Investment House noted.
The market is witnessing greater demand for affordable housing compare to traditional villas, an industry analyst noted earlier, saying that the "rapidly growing population and increasing number of married couples in search of affordable entry-level housing will fuel the demand for affordable housing in the Kingdom.
Dar Al Arkan's "decline in second-quarter net profits ... is due to lower sales as the company tries to improve profit margins at its stock land plots," the firm said in the statement.
Operational profit dropped 38 percent to SR305 million in the quarter.
Some 80 percent of Dar Al Arkan's assets of about SR23 billion are land plots in the Kingdom.
This is no small matter for the company. Land sales represent about 73 per cent of its revenue, according to a recent report by Global Investment House.
The company is saddled with SR7.8 billion of debt, making it difficult to fund any new developments without selling land.
"We believe that the land sales model is unsustainable and has already started decreasing in terms of volume," Credit Suisse said in a report in February, when it dropped its target price for the company from SR14.77 a share to SR10.10.
Dar Al Arkan closed at SR7.50 Wednesday, down from a high of SR10.10 on January 24.


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