RIYADH, 5 February 2006 — A Saudi couple learned the hard way about real estate investment scams in the Kingdom, Asharq Al-Awsat reported.
After a Saudi teacher and her husband saved more than SR500,000 to buy their dream home, they decided to join a real estate investment project in the Eastern Province to build additional capital.
What happened later was shocking to this small family. It’s been four years since they invested in the project but they’ve received no profit on their original investment. The investment managers are skirting every inquiry into the deal.
A similar incident happened to a woman school principal who put her money in a real estate project on encouragement by her father. For three years she did not get one riyal back on her investment. Another teacher participated in a real estate investment using her life’s savings. She ended up filing a lawsuit against the real estate investor after he failed to return her money.
A real estate investor placed the blame on the lack of supervision by the Ministry of Commerce. This encouraged many people to apply for permit for real estate investment, collect as much money as they can get and then escape the country. People trust real estate investment. They believe real estate investment always pays off.
The investor said people’s trust in real estate has declined with the increasing trend of investing in the stock market. Real estate development ended because of the limited availability of land, especially in Riyadh. The nearest area that is available for land development and investment is 60 kilometers from Riyadh, which many investors reject due to the distance from the city.
Abdul Aziz Al-Ajlan, president of Real Estate Investment Committee at the Riyadh Chamber of Commerce and Industry, said the committee received many complaints from investors who were victims of real estate scams. He said that after the committee receives a complaint it contacts the owner of the real estate investment for investigation. The committee then writes a complete report that helps investors in claiming their money at the governorate office. He said that the committee would not look into claims where the terms of contract are not violated.
The rapidly growing real estate sector offers a lucrative investment channel for Saudis and plays a significant role in the country’s economic development. The newly enacted regulations, coupled with awareness programs as well as the influx of more foreign investment, would strengthen the market further, especially after the Kingdom’s accession to the World Trade Organization. But the dangers remain, not least for investors going into the market with their eyes closed in the blind belief that property values will always soar.
