Contractors in Mecca have warned that billions of dollars worth of regeneration projects in the holy city could be demolished to make way for the expansion of the Masjid al-Haram (Grand Mosque).

In May, King Abdullah approved the expansion of the Haram to the north, which will result in hundreds of existing buildings being torn down. An estimated 16,000 units have already been lost.

“The area around the Haram is going to be increased and expanded,” says one source working on the $2.7bn Jabal Omar project close to the mosque. “A lot of new projects are included in this area of expansion, and they are going to have to be demolished. Jabal Omar is not affected.”

Projects under way in the area adjacent to the Haram also include the SR6bn ($1.6bn) seven-tower Abraj al-Beit project being developed by local construction giant Saudi Binladin Group.

Saudi Binladin was unavail-able for comment. Its Abraj al-Beit project is due to be completed by 2009.

“In Mecca, the idea is to build these buildings and then knock them down to make way for the expanding Haram,” says another contractor working in the city. “It does not matter because Saudi Arabia has the money to do this. It is very short term.”

However, other senior industry figures working on projects in Mecca deny that major schemes are facing demolition. “No, they will not be pulled down,” says Saleh al-Habib, chief executive officer of Jiwar Real Estate Company, which is developing the 21-tower Rawabi Abraj al-Beit project in the city.

Speaking at the launch of the pro-ject to potential Dubai investors on 24 June, he said his own project was also safe. “There is no chance of that [being demolished],” he said. “We will not be affected because we are in the hills.”

The efforts to regenerate Mecca come as the government struggles to accommodate an ever-increasing number of religious tourists who visit on the Hajj and Umra each year. Some 4 million pilgrims visited Mecca in 2007 to perform the Hajj. The government aims to increase the number of international visas issued to pilgrims, which will place even greater pressure on the city.

According to Mohammed al-Shuaib, chief executive officer of Kuwait-based Esdarat, which is developing nine of the towers in Rawabi Abraj al-Beit complex, the number of international pilgrims visiting Mecca could increase by up to 10 per cent over the next five years.

As a result of the Grand Mosque expansion, the Saudi government has been compensating owners of property in the immediate vicinity of the Haram.

One contractor says land values in Mecca currently average SR150,000 a square metre, with the most attractive plots attracting valuations of as much as SR400,000 a sq m.

The equivalent site in the kingdom’s capital would cost a maximum of SR25,000 a sq m.