A number of real estate offices have been closed down while some others have complained of a sharp decline in their businesses.
Yet, a number of other investors continue their activities despite a sharp fall in their commercial activities, Al-Eqtisadia business daily reported.
Sources in the real estate sector said that real estate offices in Riyadh incur huge losses mainly because of apathy on the part of consumers who buy real estate products.
According to sources in the market, main reason for sluggishness in business activities is the delay in the application of the much-awaited mortgage law. They said that the real estate offices are paying huge prices due to the delay in announcing the law and thereby they were unable to cash in on the prevailing favorable market situations following stability in prices of steel and increase in the prices of cement.
The concerned authorities are still in the process of finalizing the draft regulations on property mortgages, which had been expected to be issued before the end of last year. The importance of issuing the mortgage system lies in enabling the business sector to contribute to facilitating the ownership of citizens to their homes, as well as supporting and financing of national industries especially in light of the reluctance of local and foreign banks to provide loans to those industries.
An economic study prepared by the Research and Studies Center of the Chamber of Commerce and Industry in Riyadh last year has shown that experts in the area of finance with interest in real estate believe that the absence of housing finance mechanisms and legislation is one of the most important factors for the absence of giant real estate companies in Saudi Arabia, and the provision of appropriate mechanisms to assist housing seekers in the Kingdom.
Ali Fouzan Al-Fouzan, chairman of the board of directors of Ali Al-Fouzan Real Estate Company, said that real estate sector still offers the best investment opportunities for investors despite the current sluggishness prevailing in the market. He noted that the real estate sector in Saudi Arabia continues to retain its appeal, despite the global recession and property market downturn. He also drew attention to the reports showing that the real estate and construction sector in the Kingdom provides one of the most attractive investment opportunities in the region. Al-Fouzan called on the authorities to unify efforts and come out with a clear policy to enable the sector to cope with the huge demand for residences in the Kingdom.
Echoing the same view, Nassir Al-Manie, director general of Al-Manie Group, called for serious steps to help the real estate industry come out of the current crisis, and to enable them to play an active role in solving the housing problem for the rapid growing population in the Kingdom.
He also noted the acute shortage of residential facilities in the Kingdom. About half of Saudi population is under the age of 25 years, and the percentage of Saudis, who do not possess their own houses, reached 70 percent.
Saudi Arabia has emerged as one of the favored destinations for real estate developers to tap unexplored opportunities in housing construction sector.
At present the Kingdom is facing massive shortage of housing units because of huge demand-supply gap. Rising population coupled with declining household size has been fueling the demand of housing units in the country.
Taking into account these factors, the Kingdom’s real estate sector has been projected to sustain a growth rate between five and seven percent until 2012, powered by a consistently strong domestic housing demand, expanding business development projects and a burgeoning hospitality sector.
According to official estimates, the number of occupied housing units in the Kingdom totaled 4.3 million in 2007, of which about 50 percent are self-owned. If the Kingdom seeks to meet demand, 1.5 million new homes will need to be built by 2015. Reports have revealed that the real estate and construction sector in the Kingdom provides one of the most attractive investment opportunities in the region, and there are more than 285 real estate projects valued at $260 billion under various phases of construction or design.
