JEDDAH, 10 October 2005 — The recently approved regulations for licensing real estate investments have had an immediate effect on the real estate market and related businesses. In accordance with the new law, no real estate shares of any kind can be floated, used to collect money, advertised or approved until all regulations have been fulfilled. The regulations include getting the approval of the Ministry of Commerce and Industry to float the shares for public subscription. The ministry must verify that the land for which the shares are sold is in fact owned by the company which must have a valid deed; the company or individual offering the shares must have at least a 20 percent stake in the property.
Also, the land must have been officially approved for the investment by the relevant municipality. The law also states that the real estate units offered for floatation should have a valid license from the municipality plus a study by an official consulting office showing the building costs, duration and services. After getting the ministry’s approval and before advertising for investment, the company or individual must apply to the Capital Market Authority (CMA) to establish an investment fund under the name of the shareholding project in accordance with CMA regulations. Before establishing the investment fund and advertising for shareholders, the owner of the land must register the land in court in accordance with Ministry of Justice and CMA regulations which guarantee that the land will not be tampered with during the period of investment.
After an eight-month suspension by the Ministry of Commerce of licensing all real estate investments, the new regulations address the issues which led to such scams as the now infamous Venice Island venture from the Al-Duraibi Group. Real estate developers agree that with these regulations, life is returning to the real estate investment market. Already two real estate companies have submitted proposals to the ministry for floating real estate investments.
Hamdan Al-Nahar, president of Al-Nahar International Real Estate Group, one of the two companies, said that the new regulations would contribute to limiting the amount of capital going to neighboring countries especially for real estate investments. “The regulations also guarantee protecting the rights of investors and shareholders and allow big and small investors to increase their capital in safe investments,” he added. All this of course will lead to the growth of the national economy and develop the construction sector, especially in line with the high demand for additional residential and tourism projects.