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THE promoters of many stalled real estate share businesses — some of them fake — had exploited the Saudis’ desire to become rich quickly. Many of them have become victims of various scams and had to spend the rest of their lives to retrieve their hard-earned money by approaching special committees or courts.
Since its formation six years ago, the real estate disputes settlement committee at the Ministry of Commerce and Investment has settled 240 stalled real estate share projects valued at more than SR6 billion.
“It’s very difficult to estimate the volume of investments in stalled real estate projects in different regions of the Kingdom, but more than 30,000 investors have so far benefited from settlements reached through the disputes committee,” said Hamza Al-Askar, secretary-general of the committee, to Okaz/Saudi Gazette.
“We are now working on completing legal procedures to settle other stalled projects, including projects valued at SR200 million in the Eastern Province,” he said. Efforts are also under way to settle disputes in Riyadh, he added.
Real estate scams have different faces. Promoters of such fake businesses used various tricks to trap their victims. The con men were from well-known business figures to university students who mobilized funds worth SR3 billion from investors.
Women promoters have been implicated in some cases. A single woman has reportedly collected SR500 million in real estate shares.
The government does not have any official figures on the number of victims or the volume of investment by them in the business. Such businesses became mushroomed randomly after 2000 in the absence of strict monitoring. “If we say that there were tens of thousands of such businesses in the Kingdom it would not be an exaggeration,” Al-Askar said.
The government has moved early to protect investors from fake real estate share projects and has stopped many such businesses after their promoters had extorted millions of riyals in shares from the public. It also seized funds from project leaders who were involved in such suspicious deals.
The government succeeded in settling tens of stalled real estate share businesses. The judicial authorities are also looking into four share businesses outside the Kingdom in which many Saudis had lost their money.
The committee said these four cases were outside its jurisdiction.
The committee has prepared a list of stalled real estate projects and their locations, Al-Askar said. Ten cities played host to 64 such projects. They are: Jeddah, Riyadh, Taif, Makkah, Madinah, Yanbu, Unaizah, Alkhobar, Al-Ahsa and Qatif. Three of the stalled real estate projects outside the Kingdom where Saudis had lost their money were in Dubai and one in Sharjah.
According to a statement issued by the committee, it has so far reached 123 decisions regarding the stalled projects. Saleh Al-Shabrami, a former judge in Jeddah, said the real estate disputes settlement committee was set up on the basis of a Cabinet decision.
“The Supreme Judiciary Council has formed a three-member panel in Riyadh to speed up the settlement of such cases within a year,” he pointed out.
The committee is headed by the minister of industry and investment while its members are the undersecretaries of the ministries of interior, finance, justice and municipal and rural affairs and secretaries-general of the Saudi Authority of Chartered Accountants and Saudi Council of Engineers.
“The main objective and vision of the committee is to settle all disputes on the basis of Shariah, return the money of shareholders and close all cases legally,” he said.
The committee is now looking into six cases in Riyadh that do not have proper addresses of the promoters. There is no information about their whereabouts and the committee is now trying to find the addresses of those behind the ventures.
The committee is currently looking into a total of 251 real estate scams, the majority of them in Riyadh, Jeddah and Dammam. It has passed seven cases to authorized settlement agencies.
The committee is authorized to look into licensed and unlicensed share businesses and can appoint chartered accountants to study the financial condition of each business, determine the financial rights of shareholders and study all legal aspects. They issue regular reports until the business is totally dissolved and shareholders are given their dues.
According to financial experts, stalled share businesses have affected the real estate market as people were hesitant to invest in real estate fearing another scam.
Khaled Barasheed, chairman of the real estate committee at Asharqia Chamber, explained the reasons for stalled real estate share businesses in the country. A real estate project can become stalled because of external problems of investors, including their financial insolvency.
He praised the Commerce Ministry for its efforts to settle all such businesses across the country. “It’s a good step and will have a positive impact on the market. The continuation of cases without settlement would lead to investors suffering from heavy losses,” he said.
Barasheed said the cases covered a large portion of properties in the Kingdom, affecting the country’s real estate business. Owners and investors could not develop or sell their properties as a result of the protracted legal disputes.
“The settlement will open opportunities for new investors to develop these properties,” he pointed out.
Asked whether the settlement would reduce prices, he said prices would depend on the demand and supply. “The settlements will definitely lead to the development of new real estate properties across the Kingdom, slashing prices,” he said.
Barasheed said the market is now going through a semi-depression as key players are awaiting new steps and strategies to be taken by the Housing Ministry.
Hamid Bin Hamry, deputy chairman of the housing and construction committee at Asharqia Chamber, spoke about the economic losses as a result of the freezing of real estate shares.
“Its impact was not only on shareholders but also on the national economy,” he pointed out.
He said most share businesses failed because of mismanagement of funds and the lack of a regulatory system. This resulted in fake businesses to spring up all over the country.
Justice Minister Dr. Walid Al-Samaani has given a new push to settle all share cases quickly, giving hope to shareholders who have lost their money in stalled ventures.
Shareholders have urged the courts to implement the minister’s statement, which covers all stalled real estate investment ventures, especially the Eid project, which affected a large number of people in the Eastern Province.
The Justice Ministry has announced that the execution bench is working to deposit 15 percent of the project’s capital in shareholders’ accounts. The ministry has estimated the total funds invested by 7,966 shareholders out of more than 10,000 investors.
The court has estimated the bank deposits of the convicted Eid project promoters at SR600 million. The court is trying to retrieve more funds by selling their properties and shares inside and outside the Kingdom and the money would be deposited in shareholders’ accounts.
Ali Al-Ghamdi, one of the victims, said he was awaiting a court verdict to get the money he invested in the Eid project.
Mohammed Al-Shammari said he participated in the project after the promoter promised him 15 percent profit within three months.
“But he did not fulfill the promise. The prompter was not responding to my calls after receiving the money. After sometime, I learned that the man was under arrest,” Al-Shammari said. “The case has been in the court for many years and we are waiting a final verdict.”
