I really like the ideas of Sand Elves; Derris Kharlan, my capital city, is built atop an ancient Elven city (which now serves as a high-level dungeon for adventurer characters). The name Derris Kharlan is, itself, an Elven name to begin with (it most certainly isn't Arabic).
It may have been the Sand Elves, or their ancestors, that built the underground city.