JEDDAH, 4 December 2005 — The Saudi real estate sector has been relatively quiet for a long time compared to the boom in the stock market and the high returns that investors have gained from speculation and other financial activities. It seems, however, that the real estate sector is about to pick up again. Two major forces will drive the sector’s future recovery: The launch of a new real estate bourse and the introduction of real estate financial products and funds.
Recently the Saudi government revealed its intention to launch a real estate bourse by the end of the year. The Saudi Capital Market Authority is monitoring the new bourse which will begin with 30 listed real estate companies. The traded stocks of the 30 companies are expected to amount to SR14 billion. Mohammed Al-Musbil, a member of the real estate committee in the Eastern Province Chamber of Commerce and Industry, estimates the total value of real estate in Saudi Arabia to exceed SR100 billion. He believes that the new bourse will compete with the stock market and it will protect the investment of shareholders in real estate companies.
Turning to real estate financial products, the second major force for the revival of the real estate, “Al-Rajhi Banking and Investment Corporation” have launched a new real estate investment closed fund this week known as “Al-Rajhi First Real Estate Fund” with a starting capital of SR500 million. The minimum subscription amount for this fund is SR375,000 with a unit price of SR100. The fund is closed and money cannot be withdrawn for three years. This fund, and similar funds and products, is the only hope for channeling investors’ capital into the sector.
The fund contribution is not limited to the sector as it will diversify investment opportunities for investors who are looking for long-term financial investments. The new investment opportunities that real estate funds expect to generate and the investment security that result from listing the companies on the real estate bourse are the main elements for the restoration of the public’s confidence in real estate investments.
