December 17, 2007 / 3:28 PM / 10 years ago

UPDATE 1-Saudi firm eyes Islamic debt to fund $2.9 bln project

2 Min Read

(Rewrites first paragraph, adds background, more details)

By John Irish

DUBAI, Dec 17 (Reuters) - Saudi Arabia's Jabal Omar Development Co 4250.SE plans to tap the Islamic debt markets to help finance an 11 billion riyal ($2.9 billion) project in Mecca that will be built by developers including Binladin Group.

Jabal Omar awarded Binladin, the country's largest contractor, and Saudi Oger, owned by the family of former Lebanese prime minister Rafiq Hariri, the contract to build the project, the Saudi developer said in a statement on Monday.

"A portion of the sum will be raised organically, while a portion will come from Islamic finance and conventional methods," Jabal Omar said, without giving details.

Jabal Omar raised $537 million by selling a 30 percent stake in a November initial public offering (IPO) that valued the company at around $1.79 billion.

The remaining 70 percent of the company is held by the owners of a 23 hectare (56.8 acre) plot of land in Mecca near the Grand Mosque.

The cost of land in Mecca, Islam's holiest city, has surged, with land selling for as much $50,000 per square metre, according to government statistics.

That compares with $14,522 per square metre in London and $24,900 per square metre in Monaco, according to the Global Property Guide.

Jabal Omar said it expected to complete construction of the development in three years.

In addition to a prayer area accommodating 65,000 people, the development will have 39 buildings including hotels, residences and retail facilities, it said.

More than 1.6 million pilgrims have come to Saudi Arabia from abroad for this month's haj pilgrimage, the largest regular religious gathering in the world.

Islamic law bans the receipt of interest and operates on the principle of sharing risk and reward among all those involved in a business venture.

Investing in sectors such as alcohol, pornography and gambling is prohibited.

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