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Elevating urban living: Unraveling smart city innovation in Middle Eastern real estate

The incorporation of Smart City technologies is not only augmenting the standard of living but also establishing Middle Eastern cities as alluring centres for investment

Smart city

A sustainable interconnected infrastructure with efficient and enhanced urban services that improve the quality of living is what today’s growing urban population in the Middle East is fervently looking at. This reshaping of urban neighbourhoods into resilient and futuristic smart cities is a result of effective collaboration between government, private companies, universities, and individuals.

Historically, the Middle East has been remarkably proactive in developing smart cities, with the first such project being developed as early as 2006. Masdar City in Abu Dhabi, the first sustainable city in the Middle East, was developed to reduce the consumption of natural resources such as energy and water, and waste generation, combining technology, architectural designs, and solar power.

In 2017, the Ministry of Municipal and Rural Affairs and Housing (MOMRAH) of the Kingdom of Saudi Arabia strategically launched the ambitious Smart Cities program across 17 cities including Riyadh, Yanbu Industrial City, Makkah, Jeddah, Medina, Al-Ahsa, and the NEOM mega project by the Red Sea. The NEOM project has turned out to be a trailblazer in the western provinces – a USD 500 billion exemplar committed to harness technology for enhanced urban living and sustainable development. Powered by clean energy, NEOM integrates artificial intelligence, machine learning and predictive analytics and offers an exclusive economic zone.

Sankey Prasad, CMD, India and CMD Middle East Project Leaders, Colliers

Pillars of the Smart City Revolution

The Middle East is experiencing rapid urbanisation, with a burgeoning population and increasing urban sprawl. The need for sustainable and efficient urban development has given rise to the imperative for Smart Cities that leverage cutting-edge technologies to optimise infrastructure, utilities, and services, ultimately enhancing the overall quality of life for residents.

One of the fundamental pillars of Smart City innovation lies in the transformation of infrastructure. From intelligent transportation systems and energy-efficient buildings to integrated communication networks, Middle Eastern cities are investing heavily in building these foundational elements to not only ensure seamless connectivity but also resource optimisation and sustainability. For example, Dubai is working towards automated vehicles and smart mobility initiatives and plans to transform one-fourth of its total transportation to autonomous modes by 2030.

The Middle East has been traditionally associated with opulent skyscrapers and luxury properties. However, Smart Cities in the region are redefining the narrative by placing a strong emphasis on sustainability. Green building practices, renewable energy integration, and efficient waste management are becoming standard features of real estate projects. Masdar City’s use of sustainable building materials such as low-carbon cement and recycled aluminium set a precedent worth following and the commitment to sustainable development aligns with global environmental goals and ensures a healthier and eco-conscious urban landscape.

Technology plays a critical role in implementing this commitment – interventions such as the Internet of Things (IoT) plays a pivotal role in shaping the Smart Cities of the Middle East. Through the interconnectivity of devices and sensors, cities can gather real-time data on various aspects, such as energy consumption, waste management and traffic patterns, promoting a data-driven approach for informed decision-making, leading to more responsive and efficient urban environments.

Investment Magnet and Government Support

The integration of Smart City technologies is not only enhancing the quality of life but also positioning Middle Eastern cities as attractive hubs for investment. Investors are drawn to the potential for sustainable growth, innovation, and a tech-driven economy. As a result, the real estate sector is experiencing a paradigm shift, with Smart City developments becoming magnets for both local and international investment.

The market research firm Frost & Sullivan pegs the current investments in smart cities from the United Arab Emirates (UAE) and Saudi Arabia alone at up to USD 50 billion through the year 2025. The sector is optimistic about the unconventional non-oil sector growth scenario in the Middle East that is translating into foreign direct investments (FDIs), capital projects and new business propositions in the construction industry. The growth continues to be positive, owing to the high level of business certainty that has set in in recent years, particularly from the post-pandemic era when international travel once again picked up.

To attract investors, the Saudi government is reported to have introduced more than 700 regulatory changes. The efforts are meant to sustainably accommodate the bulking up population in mid- and high-rise housing facilities. In the UAE and its adjoining regions, there is a significant surge in demand for luxury properties, impacted by a combination of variables such as consumer preferences, macroeconomic factors, market trends, and local conditions.

Expatriates, comprising a whopping 88.53% of its population, driving the demand for upscale housing, including high-rise residential skyscrapers, and luxury villas. Developers are encouraged to create unique projects that satisfy the needs of wealthy customers that emphasize energy efficiency and green spaces and typically coincide with a growing interest in sustainable and eco-friendly constructions.

The seed for creating smart, efficient and connected cities was sown by increasing demands for resources and a bundle of other preferences from a huge migrating population settling in urban centres. With supportive government initiatives and incentives towards a robust non-oil economy, the Middle Eastern countries represent a paradigm shift in urban living.

As technology continues to weave its way into the fabric of real estate development, the region is poised to become a global leader in smart and sustainable urban solutions – industry reports suggest the smart cities market in Saudi Arabia is anticipated to reach USD 14,745.2 million by 2027, exhibiting a compound annual growth rate (CAGR) of 19.6% from 2020. The real estate sector in the Middle East has been a partner in its digital transformation – with investments scaling up and technologies being tested for developing upcoming urban hubs, the Middle East has well become the ‘incubator of smart cities’.