Okaz newspaper

DESPITE the government’s efforts to support housing projects by enacting laws, extending soft loans and other services and establishing infrastructure, Saudi Arabia still requires a large number of housing units to meet the needs of its growing population.

The government has instructed municipalities to soften procedures for real estate property development companies in order to ensure enough supply of suitable homes for citizens. The Ministry of Housing, considered one of the most active ministries, announces new housing projects quite often for the welfare of citizens in all parts of the Kingdom.

The Real Estate Development Fund’s capital has been doubled while multiple funding facilities through banks have been opened. The Capital Market Authority is keen to organize and monitor the work of real estate investment funds to protect the interests of all stakeholders as well as to prevent foul play.

A huge real estate investment fund was announced five years ago for the development of a new housing city in Dhahban, north of Jeddah, in a strategic location on Madinah Road. The project was aimed at constructing 2,000 residential units in three phases. Investments were invited and a group of businessmen covered the fund’s full capital. Investors included an agency of the Jeddah-based Islamic Development Bank that backs private sector projects, in addition to major national and regional investment companies.

A contracting company that owned the land where the project was implemented was accepted as a shareholder and the price of the land, which was very high based on the market value, was considered as the company’s investment in the project. This contracting company was given the responsibility to build and market the housing units. After marketing 30 percent of the project and constructing and handing over about 100 villas out of a total of 2,000 villas, the company collapsed.

There were many reasons for the collapse including obstacles it encountered, mismanagement and corruption. The company withdrew from the project, despite acquisition of SR500 million from a development bank for the project. The investment fund backed down from the project while some international partners also announced their decision to withdraw. The fund then forced the company to stop its activities, even though the work was supervised by the CMA.

The contracting company has started processing bankruptcy papers. Work stopped on nearly 2,000 villas, which now look like a ghost town in the desert. More than 70,000 citizens with their children have been accommodated in the first phase of the project but the contracting company has withdrawn its security guards, saying it is no longer responsible for the township’s operation and maintenance. This situation has sent shock waves among the residents.

Work on the project’s drinking water and sewage networks has also halted leaving its residents on the verge of an environmental catastrophe. Senior officials of the company said all the problems were caused by the municipality as it did not cooperate with the project and did not meet its requirements. Work on the project stopped because it was difficult to continue its activities, thus causing huge losses to investors as well as shareholders, the majority of them low income people who have been saving money to realize their lifetime dream of having a home.

The huge loss of money has dashed the hopes of investors and shareholders. This issue demands a quick solution to save the economy and protect the investors. I personally believe that it was the duty of the ministries of Housing, Commerce, and Municipal and Rural Affairs to intervene, under the supervision of the Makkah governorate, to find a solution and save the project. They should then looked for a new contractor to construct the remaining villas.

Efforts must be made to bring utility services to the new township. The municipality should express its readiness to provide cleaning services and illuminate the streets. The National Water Company should have intervened to build water and sewage networks. The Public Security Department must establish a police station in the area while the Civil Defense should open its office and the Saudi Electricity Company must ensure power supply.

The disruption of a huge project like this will affect investor confidence. I am sure the Ministry of Housing will not miss the opportunity to provide housing for 2,000 families and make every effort to restart the project. The Capital Market Authority should not let a major investment fund such as this to collapse and push investors and shareholders to sustain heavy losses.

The Anti-Corruption Commission should not allow such a catastrophe to befall citizens and I am sure it will intervene to find out the reason for the project’s failure. The commission should question officials without exception and no one should be allowed to get off scot-free.

At the same time, the bankruptcy law should not give the officials loopholes to evade questioning on their role in pushing the investment fund to collapse. The commission should reopen old files related to this vital project.