Feb 26 2013
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Regulatory body key to streamlining Saudi's real estate business
Working hand in hand with the Saudi government to adopt changes in its real estate market, regulating its real estate funding market, and promoting its commercial sector with a global appeal are the three main concerns of Khalid Jamjoom, CEO of SEDCO Development.
According to Jamjoom, SEDCO's vision is reflected clearly in its outstanding performance marked by the balancing of originality, creativity, ingenuity and quality of projects.
"The Kingdom's real estate market is exposed to many changes, especially as the market is becoming more organized," Jamjoom said in an exclusive interview with Diana Al-Jassem of Arab News in the company's head office in Jeddah. The Kingdom will finally address the housing problem with the implementation of mortgage law, said Jamjoom.
A businessman who works efficiently for the prosperity of his country and then his company is an ideal one from my point of view. Such a successful businessman, who could influence his country and company at the same level, has to gather two important elements - leadership and skills. A businessman must possess the knowledge of market, technological development, inventions, innovation, organization, business laws, sincerity and honesty. It requires an ability to initiate, direct and control, and even more important, the capacity to win and hold the respect and loyalty of fellow employees.
What words would you choose to describe your success story?
Sincerity and honesty contributed very well in portraying my success map. Furthermore, I tried my best to get the best knowledge and work ethics such as cooperation, enthusiasm, dependability, courtesy and sociability.
Since the time I started working in this sector, most real estate developers and I have been facing similar challenges that almost belong to bureaucracy and inflation. Our major problems as contractors is the late issuing of permits, and the continuous increasing of electricity, water, and sewage rates, and communications and raw material prices. On the other hand, we faced challenges due to the absence of a regulatory body to be in charge of real estate sector in Saudi Arabia.
How do you contribute toward the development of Saudi economy and what are your company's efforts to support the government's development plan?
Our current development projects in Saudi Arabia include hotels, retail malls, commercial offices and residential projects, which aim at catering to the needs of the community. Currently we have the Galleria Project located at Prince Mohammed bin Abdul Aziz Street (Tahlia Street), Jeddah. The Galleria serves as a luxury retail mall and a five-star hotel boasting 445 rooms managed by Elaf Group . Such a project will contribute positively toward attracting commercial brands to come to the Kingdom. Makkah also is considered one of the most attractive investment locations, where religious tourism plays a major role. In order to drive changes in the present services in Makkah, we have a hotel project called Elaf Bakkah located in Al-Azizia district. This hotel is considered one the biggest in Makkah where it serves different society levels with a variety of rooms. Its capacity of 810 rooms is set to satisfy the needs of Umrah and other pilgrims. We believe that developing religious tourism requires us to boost affordable services for our visitors. With the huge increase expected in the number of pilgrims due to the holy areas' expansion and establishment of a new airport, we as contractors have to play our role in supporting and developing the various services. However, to achieve our vision we are planning to launch projects for the next five years, including land development in Makkah, Riyadh and Jeddah.
What is SEDCO Development's philosophy in the real estate market?
Serving the Kingdom's development plan and becoming number one in its real estate market is our main concern. To achieve this goal, our philosophy is to work with partners and provide integrated real estate solutions for a healthy and sustainable real estate sector. Such well-developed sector will have a positive impact on the lifestyle of Saudis.
Are you satisfied with SEDCO Development's plans to apply Saudization and what is SEDCO's role in terms of enabling Saudi women?
Saudization is a national duty that must be adhered to, and we were successful in building a mutual trust between our young Saudi employees. In fact, we have to confess that young Saudi generations are enjoying very high skills, pursuing higher education and training in soft skills that enable them to undertake several projects with great success. In SEDCO, we depend on young Saudis as they have a high level of training and knowledge. We believe that it is our responsibility to continue with this approach in order to achieve sustainable development and build healthy human resources. Saudis who are working in SEDCO show a very high degree of competence, efficiency, experience and knowledge. SEDCO still does't hire women; in our business we don't need their contribution. We believe that the role of women is very important and they need to participate in Saudi market more and more. In terms of sales, we have hired women who work in marketing, and we need them in this field.
KSA's property portfolio
What is your opinion about the flexibility of Saudi laws and how do you evaluate the changes that have occurred in the Saudi market during your career?
I am still not satisfied with the performance of Saudi laws in terms of real estate. In the course of my career, I find that there are many regulations that have to be reset. For example, we need the Ministry of Commerce and Industry to regulate the sale of commercial and residential units in the presales stage. Such a step will secure the rights of both parties - shareholders and buyers. Some important steps have been adopted recently, and I really wish the government continues with its efforts to set up a Saudi Organization for Accredited Assessors in order to determine the standards of real estate appraisals, as also the continuous update of the required construction techniques in municipalities and civil defense to cope up with development and technology. In fact, the Capital Market Authority has initiated its control over the real estate investment fund.
How do you view the Saudi real estate map, especially when the Kingdom is moving toward solving the housing problem by launching several projects?
The main driver of the Saudi real estate market is the strong growth of the economy through launching mega projects, high population growth and migration. The Ministry of Housing realized the need for housing, which is why the government has made a big budgetary allocation to address the need for housing growth. To solve the housing problem the government has started forging strategic partnerships between the Ministry of Housing and major real estate development companies in the Kingdom. Furthermore, they have to check the inflating land prices, increase mortgage loans and modify certain regulations related to the purchase of units by the Saudi Real Estate Development Fund.
What are the reasons for speeding up the Kingdom's residential projects -- is it only the growing population or are there other reasons like globalization, inflation and baby boom?
The ever increasing population, and rising marriage rate, as well as the expanding job opportunities have been attracting expatriates and so we need to speed up to meet our housing needs. No doubt, housing specifications have changed over the past few years, due to globalization where Saudi families have become more open to adjust to changes.
How do raw materials and high prices impact the real estate sector in Saudi Arabia?
Prices of raw materials are subject to supply and demand, in addition to the raw material prices globally. About our projects, we do allocate an additional budget to ensure that we cover any sudden or unexpected rise in the prices of raw materials.
What are your expectations of the Kingdom's housing and retail sector during the coming 10 years, especially when the Kingdom has become a major attraction for foreigners due to the euro crisis and the unstable political situation in most MENA countries?
The Kingdom needs one million new housing units during the next five years to keep up with a compounded annual housing growth rate of 3.3 percent, while the residential development sector in the Kingdom now accounts for 70 percent of the total real estate market. Records indicate that there is a significant growth in recent times, where the volume of demand for housing shot up due to rapid population growth and the deterioration of some older housing units, as well as increasing numbers of youths looking for homes. The existence of the two holy mosques has given the advantage to the Kingdom better than any country in the world, where the investment risk rate is considered very low compared to other countries in the MENA and worldwide.
Competition among real estate companies is getting tougher, especially when foreign investors are allowed to join the Saudi market and work with flexibility. Tell us your evaluation of the competition among these companies?
Saudi real estate companies are more qualified to develop construction projects. This is because of the local developers' awareness about Saudi requirements. Partnership and cooperation with foreign companies is also good and healthy where Saudis will be able to get better skills, and experience. In SEDCO we cooperate with one of the biggest Singapore companies that operates in real estate sector, and we really benefit from the partnership.
What reasons have led to the hike in the real estate prices? And what are the most expensive cities?
Continuous growth of demand and higher land prices are the main reasons that fuel the real estate prices. Talking particularly about the holy city of Makkah, the limited land space around the holy areas has led to higher prices. This is true with the other holy city of Madinah as well.
Experts expected the mortgage law to stop the continuous hike in real estate prices. What is your opinion in this regard?
Mortgage law will have both short and long term effects. In the short term (few years from now), more people will be able get house funding, thus reducing the housing cost. In the long term, the effect of mortgage law will stop, where there will be a balance in supply and demand. So the prices will be stable. On the other hand, some regulations in the mortgage law will be changed, where after applying the system, the government and people will be able to discover its disadvantages.
The Ministry of Labor's decision to force an expatriate pay additionally SR 2,400 per year has raised the anger of real estate development companies. What are your views on such huge taxes, and how will it affect the Saudi real estate market?
Such decisions will increase the taxes that real estate companies will pay to the Ministry of Labor. These taxes are however, estimated to increase the cost of raw materials, construction and buildings, and residential units. The consumer will be the ultimate victim, as he will have to pay additional costs for services.
Name: Khalid Jamjoom
Position: CEO of SEDCO Development
Age: 58 years old
Degree: B.S. in Civil Engineering
University: University of Portland Oregon
• Head of the Real Estate Development Department
• Senior Vice President of Marketing Operations
• Senior Vice President of Real Estate Operations
• CEO of Eimar Arabia
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