JEDDAH, 4 July 2005 — Total investments in 53 real estate share businesses across the Kingdom have reached more than SR14 billion, according to Abdul Monem Mohamed Niazi Murad, chairman of the real estate development committee at the Jeddah Chamber of Commerce and Industry (JCCI).

Murad made this comment after a meeting of the real estate working team at JCCI headquarters, which was chaired by lawyer Wahib Ibrahim Al-Lami and attended by real estate experts. “The meeting proposed that the flotation of real estate shares must be restricted to licensed real estate offices and officially registered joint partnership companies, with a capital of not less than SR5 million and business duration of not less than three years,” he said.

The new proposals, carried by the Saudi Press Agency, are made to reorganize the real estate business and make it more transparent and foolproof. Real estate is one of the fastest growing business in Saudi Arabia and is estimated at more than SR1 trillion. A large number of investors, Saudis as well as foreigners, have shown interest in the sector as new projects are coming up all over the country.

Spelling out the proposals, Murad said the real estate offices and companies must have obtained commercial registrations and should have offices in the cities where they intend to float the shares. “They should get permission from the Commerce and Industry Ministry before starting flotation procedures,” SPA quoted the official as saying.

The property for which shares are invited must be under the ownership of the company or its owner and there should not be any legal dispute on its ownership. The construction plan for the real estate project must be approved by the municipality in the city where the property is located.

The company must appoint a lawyer to monitor business and a financial consultant to conduct feasibility studies. It must own at least 20 percent of the property floated for public subscription. It should have only one bank account in a local bank for the business.

The meeting also advised the shareholders in such businesses to form a committee of not less than three and not more than seven members to ascertain the amount invested in the business and deposited in the bank account. They will also look into cash withdrawals from the account to ensure whether such withdrawals were legitimate or not.

The executive committee along with a chartered accountant will inspect the development and operation plans as well as for approval of payments and settlement of shareholders. It will be responsible for any wrongdoings in this respect and must pay compensations to shareholders for damages.

The real estate company is not allowed to withdraw money invested from the account without the permission of the executive committee. It will also fix the date for settlement of shareholders. The land should be sold in public auctions. The value of the share and the number of shares must be fixed based on the feasibility study.

Referring to advertisement on flotation, the meeting said its wordings must be approved by the Commerce Ministry. The advertisement must carry the location and borders of the property, total area and the number and date of the deed. The company should put a large board in the land showing that it is owned by them. The board must carry the full name of the company, approval from the ministry, account number and name of the bank, total number of shares and the share value.

“The advertisement should not contain rates of expected profits,” Murad said while explaining the proposals. Companies and offices will be asked to correct their advertisements if they make any such references and if they repeat the same mistake it would be closed down by authorities.

The meeting also proposed that the total days of flotation should not exceed more than 90 days and the business will be canceled if it did not give full value of the shares. The company must pay the money to shareholders within 30 days after cancellation of its license. If the business includes construction of buildings, the feasibility study must cover the cost of such projects and the construction must start within 90 days after the closing of subscription. The business must be settled within a year after the end of construction work.

During the past months, several real estate auctions have taken place in various parts of the Kingdom. In March, the real estate auction held by Al-Oula Development Company in Jeddah drew a record crowd of 5,000 businessmen and investors and fetched SR1.3 billion in five hours.

Ayedh ibn Farhan Al-Gahtani, executive president of the company, expressed his happiness over the big turnout of investors at the auction, which could be described as the largest in the world in terms of sales.

“The completion of the auction for such a large number of plots within hours is an unprecedented achievement,” Al-Gahtani told Arab News.

A total of 888 plots spread on an area of 1.2 million square meters at Old Jeddah Airport were on sale and the prices per square meter doubled from SR1,500 to SR3,200 as a result of the big demand. The lands offered for sale, known as Al-Nakheel plots, are owned by Al-Oula Development in partnership with Aflad Development Company and could be developed as one of Jeddah’s outstanding landmarks.

In November last year, Crown Prince Abdullah launched six major development projects worth SR35 billion around the Haram Mosque in Makkah. The projects, including expansion of the mosque’s northern courtyard and construction of residential towers, are aimed at providing more housing and prayer facilities for pilgrims.