The project will combine residential, hospitality, tourism, commercial and educational facilities and is being developed in partnership with private-sector companies as well as local and regional investors.

The project is designed to capitalise on Al-Khafji’s location in the northern part of Saudi Arabia’s Eastern Province, close to Kuwait and within reach of other Gulf markets.

PIF said the location provides access to residents and visitors from Saudi Arabia, Kuwait and neighbouring Gulf states, while creating direct and indirect economic opportunities for the local population.

Once completed, the destination will feature eight residential neighbourhoods containing more than 16,000 housing units and about 1,400 hotel keys.

Plans also include public commercial and tourism facilities, educational infrastructure and dedicated boat marinas, creating a mixed-use coastal community rather than a resort focused solely on short-term visitors.

Development will be carried out in three phases. The first phase is scheduled for completion in 2030 and will include three residential neighbourhoods, establishing the foundations for what PIF describes as an integrated tourism and residential community.

The project is part of PIF’s expanding real estate and urban-development portfolio and fits into its newly defined urban development and liveability ecosystem under the sovereign wealth fund’s 2026-2030 strategy.

PIF has increasingly used its capital and portfolio companies to develop new destinations, infrastructure and economic clusters across Saudi Arabia as the Kingdom seeks to diversify away from oil.

Saad Al-Kroud, head of Local Real Estate Investments at PIF, said the project would build on Al-Khafji’s cultural and logistical advantages while creating opportunities for residents, upgrading infrastructure and expanding private-sector participation.

The emphasis on private investment is significant. PIF is increasingly seeking to use its capital to attract outside investors and developers rather than finance every component of major projects itself.

This approach aims to increase the economic impact of PIF’s investments and distribute development opportunities throughout Saudi Arabia.

Al-Khafji’s transformation also reflects the broader shift in Saudi tourism policy. The Kingdom is seeking to build a more diversified tourism industry encompassing luxury resorts, urban destinations, nature-based attractions, cultural sites and domestic leisure facilities.

Saudi Arabia has already surpassed its earlier target of attracting 100 million visitors, and its National Tourism Strategy now aims to reach 150 million visitors by 2030. The government sees tourism as an increasingly important contributor to employment, investment and non-oil economic growth.

Coastal destinations have become particularly important to that strategy. PIF-backed companies are developing projects along both the Red Sea and Arabian Gulf, creating a network of new destinations intended to appeal to domestic travellers, regional visitors and international tourists.

On the Red Sea coast, PIF-backed Red Sea Global is developing luxury tourism destinations, while Cruise Saudi is building the infrastructure and services needed to expand the Kingdom’s cruise industry.

PIF has also established companies such as Asfar and Dan to develop tourism opportunities in cities and natural environments across the country.

The Al-Khafji project therefore represents a different dimension of the tourism strategy: the creation of a large-scale, mixed-use destination serving both residents and visitors.

Its proximity to Kuwait could prove particularly important. The northern Eastern Province already benefits from cross-border movement and established links with the wider Gulf economy.

A new waterfront destination with hotels, housing, marinas and commercial facilities could give Al-Khafji a larger role in regional tourism and leisure.

The project also has a potential real estate dimension. More than 16,000 housing units will create a substantial residential market alongside the planned hotel inventory, while commercial and educational facilities could support a permanent population rather than relying exclusively on tourist traffic.

For PIF, the development is consistent with its wider effort to increase the value of Saudi Arabia’s cities and regional economies.

The sovereign wealth fund says its local real estate investments are intended to diversify the economy, generate opportunities, expand trade and investment, and improve the attractiveness of urban centers.

ALSO READ | Saudi Arabia’s New Murabba replaces CEO as PIF rethinks giga-projects

PIF’s financial strength gives it the ability to take a long-term view of projects whose returns may take years to materialise. Its assets under management exceeded USD 900 billion in 2025, according to the fund’s latest annual report, underscoring the scale of resources available for domestic investment.

The Al-Khafji development nevertheless faces the same challenge confronting Saudi Arabia’s wider tourism push: converting large-scale investment into sustainable visitor demand and commercially viable destinations.

The phased approach is designed to manage that challenge. By delivering the first three neighbourhoods by 2030 and building out the wider destination over subsequent phases, PIF can develop infrastructure and tourism capacity alongside demand.

For Al-Khafji, the project could mark a fundamental change in the city’s economic profile. What is currently a relatively small coastal centre could emerge as a new residential, hospitality and leisure destination serving Saudi Arabia and the wider Gulf.

For PIF, the development is another test of its strategy of using real estate and tourism investment to create new economic engines outside the Kingdom’s traditional oil and major city centres. If successful, Al-Khafji could become another piece of the much larger transformation of Saudi Arabia’s coastline under Vision 2030.