Law May Force Rent Hikes

Saudi real estate developers and economy experts fear the mortgage law will contribute to short-term hikes in rent rates thanks to expected increases in the prices of construction materials.

Some developers said the mechanism to implement the law will determine rent rates and expected them to drop within five years once the legislation is implemented.

The Saudi Council of Ministers recently approved real estate regulations governing mortgages, real estate financing and financing companies among others in a session presided over by Custodian of the Two Holy Mosques King Abdullah.

The approval aimed to organize the Saudi real estate market.

Talal Samarqandi, member of the real estate committee at the Jeddah Chamber of Commerce and Industry, said there would be some immediate effects once the law is implemented.

He added: “Construction materials will see a 5 to 10 percent rise in prices as a result of the expected increase in demand once the law is in effect.

“Rent will also increase shortly after the law is effective.”

He called for scrapping duties on imports of construction materials as an urgent solution to the expected hike in prices.

“Residential units’ prices in the Saudi market will balance itself out in five years, during which the benefits of the mortgage law will be seen (and) land and construction material prices will decline,” he said.

Hussien Al-Zahrani, director general of the loans division at the Real Estate Development Fund, expected the law to cause a 40 percent reduction in rent prices within three years of implementation.

Zawya