Ninety-five properties and 126 mosques in total will be razed for the project, which follows an historic $20 billion renovation and expansion of the Grand Mosque in Mecca.
Saudi Arabia, the home of Islam, is undertaking a massive redevelopment of the two holy cities to increase the number of pilgrims that can perform Umrah and Haj at one time.
More than 1 million pilgrims are estimated to have performed Haj, one of the five pillars of the religion, earlier this month.