19 March 2009
Saudi Arabia's decision last week to ban the sale of off-plan properties is a step towards setting up stringent regulations for the kingdom's real estate sector, say developers.
"The Government of Saudi Arabia is going back to the basics of regulating the real estate market. These are the introductory guidelines towards establishing escrow regulations in the country," said Kareem Derbas, Chief Executive Officer, Cayan Investment and Development. "I am sure the Saudi Government is working retroactively to make sure all the projects are approved," he added.
Last Monday, the Saudi Arabian Cabinet banned the promotion and sale of real estate on the basis of development plans on paper without the consent of a committee, which comprises representatives from the Saudi Ministries of Commerce and Industry, Municipal and Rural Affairs, the Saudi Arabian Monetary Agency (Sama) and the kingdom's General Commission for Housing.
The ban was contained in a set of rules passed by the country's cabinet governing the sale of residential, commercial, office, service and industrial units. The cabinet also tasked the committee with laying down the conditions that developers must meet, including proof of their technical qualifications and financial capabilities.
Among other conditions to be drawn up by the committee will be clauses defining the rights of consumers, measures to protect consumers from being exploited by real estate developers and brokers, and the operational conditions in joint facilities of any real estate development project.
Firas Al Attili, Group Financial Director, Tanmiyat, said: "This step from the Saudi Arabian Government appears to be part of a move to regularise the real estate sector in the kingdom and make sure that developers and brokers do not exploit consumers and investors.
"From what we understand, the Saudi Cabinet has banned the promotion - through both domestic and international advertising, marketing, exhibitions etc. - and sale of off plan real estate projects for all residential, commercial, office, service and industrial units without the consent of a special committee," said Al Attili.
Salwa Malhas, Executive Vice-President, Al Mazaya Holding, said the ban on the sale of off-plan property in Saudi Arabia will not have much of an impact on the sector as the market is largely end-user driven.
"Saudi Arabia is an end-user driven market, therefore the recent law will not have much of an impact. There is a considerable shortage of homes for Saudi nationals and so most of the supply will be absorbed. We are not much worried about this law," said Malhas. She said the regulation would benefit buyers and ultimately prove to be in investors' interests, "as customers will feel more comfortable to invest in the market".
"We, as developers in Saudi Arabia, will follow the regulations set out by the government," she added.
Al Attili said: "If you look at the other things the committee is tasked with, this move is actually going to be beneficial for investors and developers in the long run. It will also affect the business models of the developers currently active there. We will wait to learn more about the implementation of these regulations in order to adjust our business model accordingly."
Tanmiyat's projects in Saudi Arabia include Al Majed - a key property being developed in Jeddah. Its other developments in the country include the Breman project in Jeddah, the Al Salam project, and the Al Tahlia Trade Centre.
Another one, the Al Muhamadiyah development, was launched in 2007, and is located to the north of the booming Jizan Economic City, just 10 kilometres from King Abdullah bin Abdulaziz Regional Airport. The development comprises a residential area with 2,770 housing sections.
In Makkah, Tanmiyat has a development called Al Manafeh, located near the Le Meridian Hotel. It comprises eight residential towers, two hotels, a hospital, and a mall. The project will provide residential facilities to pilgrims and will also incorporate a metro train, taking residents directly to the Al Haram mosque. The total built-up area (BUA) of the project is estimated to be approximately 7.5 million square feet.
"Our ventures in Saudi Arabia will not be affected by the recent law. They are either projects that are already in the pipeline or have not been launched yet," said Al Attili.
Malhas of Mazaya Holding said the company only has a land bank so far in Saudi Arabia.
Saudi Arabia's decision last week to ban the sale of off-plan properties is a step towards setting up stringent regulations for the kingdom's real estate sector, say developers.
"The Government of Saudi Arabia is going back to the basics of regulating the real estate market. These are the introductory guidelines towards establishing escrow regulations in the country," said Kareem Derbas, Chief Executive Officer, Cayan Investment and Development. "I am sure the Saudi Government is working retroactively to make sure all the projects are approved," he added.
Last Monday, the Saudi Arabian Cabinet banned the promotion and sale of real estate on the basis of development plans on paper without the consent of a committee, which comprises representatives from the Saudi Ministries of Commerce and Industry, Municipal and Rural Affairs, the Saudi Arabian Monetary Agency (Sama) and the kingdom's General Commission for Housing.
The ban was contained in a set of rules passed by the country's cabinet governing the sale of residential, commercial, office, service and industrial units. The cabinet also tasked the committee with laying down the conditions that developers must meet, including proof of their technical qualifications and financial capabilities.
Among other conditions to be drawn up by the committee will be clauses defining the rights of consumers, measures to protect consumers from being exploited by real estate developers and brokers, and the operational conditions in joint facilities of any real estate development project.
Firas Al Attili, Group Financial Director, Tanmiyat, said: "This step from the Saudi Arabian Government appears to be part of a move to regularise the real estate sector in the kingdom and make sure that developers and brokers do not exploit consumers and investors.
"From what we understand, the Saudi Cabinet has banned the promotion - through both domestic and international advertising, marketing, exhibitions etc. - and sale of off plan real estate projects for all residential, commercial, office, service and industrial units without the consent of a special committee," said Al Attili.
Salwa Malhas, Executive Vice-President, Al Mazaya Holding, said the ban on the sale of off-plan property in Saudi Arabia will not have much of an impact on the sector as the market is largely end-user driven.
"Saudi Arabia is an end-user driven market, therefore the recent law will not have much of an impact. There is a considerable shortage of homes for Saudi nationals and so most of the supply will be absorbed. We are not much worried about this law," said Malhas. She said the regulation would benefit buyers and ultimately prove to be in investors' interests, "as customers will feel more comfortable to invest in the market".
"We, as developers in Saudi Arabia, will follow the regulations set out by the government," she added.
Al Attili said: "If you look at the other things the committee is tasked with, this move is actually going to be beneficial for investors and developers in the long run. It will also affect the business models of the developers currently active there. We will wait to learn more about the implementation of these regulations in order to adjust our business model accordingly."
Tanmiyat's projects in Saudi Arabia include Al Majed - a key property being developed in Jeddah. Its other developments in the country include the Breman project in Jeddah, the Al Salam project, and the Al Tahlia Trade Centre.
Another one, the Al Muhamadiyah development, was launched in 2007, and is located to the north of the booming Jizan Economic City, just 10 kilometres from King Abdullah bin Abdulaziz Regional Airport. The development comprises a residential area with 2,770 housing sections.
In Makkah, Tanmiyat has a development called Al Manafeh, located near the Le Meridian Hotel. It comprises eight residential towers, two hotels, a hospital, and a mall. The project will provide residential facilities to pilgrims and will also incorporate a metro train, taking residents directly to the Al Haram mosque. The total built-up area (BUA) of the project is estimated to be approximately 7.5 million square feet.
"Our ventures in Saudi Arabia will not be affected by the recent law. They are either projects that are already in the pipeline or have not been launched yet," said Al Attili.
Malhas of Mazaya Holding said the company only has a land bank so far in Saudi Arabia.
By Anjana Kumar
© Emirates Business 24/7 2009
