Qatar has signed a deal with Cyprus to develop a hotel, office and residential complex in the capital Nicosia, targeting rising numbers of visitors to the east Mediterranean island.

Qatari Diar Real Estate Investment Company and the Cypriot government agreed to set up a joint venture for the development of a leisure complex, with the initial investment exceeding $150 million, officials said.

Mohmmed bin Ali Al Hedfa, group chief executive officer of Qatari Diar, owned by the Gulf state, said the first phase will be a five star hotel, while the second phase will be apartments and offices.

The contribution in capital of each side in the venture was still under negotiation, Al Hedfa said. Each side will hold 50 per cent.

The area allocated for the complex is close to the commercial hub of the capital and is expected to cover 50,000 sq m of construction, Cypriot officials said.

The joint venture agreement was one of several signed on Wednesday between the Cypriot government and Qatar, whose ruler Emir Sheikh Hamad bin Khalifa al-Thani headed a large delegation on a visit to the island.

Qatar reported growth of more than 11 per cent last year despite the global financial crisis, and has been pouring billions of dollars into infrastructure, real estate and education projects.

Cyprus, one of the smallest members of the euro zone, is heavily reliant on tourism, banking and real estate. It has well-developed tourism infrastructure along its coastline, but does not have many luxury hotels in Nicosia, located in the centre of the island.

Tourism arrivals to Cyprus rose by 5.6 per cent from January to March year on year. Tourism accounts for around 11 per cent of Cyprus's gross domestic product. – Reuters