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Land disputes hindering Saudi property market http://today.reuters.com/news/newsArticle.aspx?type=reutersEdge&storyID=2006-08-02T044925Z_01_L27904362_RTRUKOC_0_US-PROPERTY-SAUDI-LAWS.xml
Wed Aug 2, 2006
By Andrew Hammond
JEDDAH, Saudi Arabia (Reuters) - Suleiman al-Shareef drives around a large plot of land that once was his, lamenting the millions of dollars he says have been stolen from him.
Fancy cars sit outside half-finished buildings lining newly laid-out roads on the Jeddah plot, which Shareef says he bought with some friends in 1995 for only 5 million riyals ($1.33 million).
"One day four years ago I heard that bulldozers were churning up the land and knocking the wall down. I went there and asked them to stop," he said, displaying his title deeds.
When he complained to police, he was arrested and held for eight days. He was told the ministry of defense had given three-quarters of his 168,000 square meter (1.8 million sq ft) plot to a Saudi princess.
Shareef's story opens a window on the murky dealings and legal chaos that industry experts say cripple the property market in this wealthy oil-producing kingdom, where different parties often claim to have legal title to the same plot.
"Land has been seized over the past 30 years across the country. I estimate a minimum of 20 percent of the country's land has been seized (by powerful figures)," said Ali al-Ahmed, a U.S.-based Saudi rights activist.
The lack of regulation is hampering a market that many analysts believe is poised to take off in a country of 17 million people, around 60 percent of whom are aged under 21.
"We expect in next three or four years a massive boom in real estate," said Ahmed Kandil, manager of Better Homes Saudi Arabia, part of an international franchise which like others is positioning itself ahead of expected expansion.
"Demand is there, and there is no problem in supply -- it's the regulations," he said.
LEGAL CHAOS
For Shareef, the legal morass has been frustrating and costly. He lobbied governors, courts and human rights groups to get his land back but to no avail -- last year, the disputed plot was sold for 58 million riyals ($15.5 million).
The princess's legal representative confirmed to Reuters that the land was granted to her by the ministry, which regarded Shareef's title as void. Now Shareef says he has been offered 11.6 million riyals by the princess to end the dispute, but he refuses to accept.
"They think 'okay just give the guy a few millions', but this is about rights," he said adamantly, offering dates and coffee in his dingy downtown flat.
Property prices have shot up in Saudi Arabia, the birthplace of Islam, since an economic boom triggered by rising international oil prices began four years ago.
Real estate prices in Jeddah, the traditional business hub and home to 2.5 million people, have risen 40 percent in the last year to 12,000 riyals per square meter in some prime areas.
Only in the holy cities of Mecca and Medina are prices higher, hitting 100,000 riyals per square meter around the Grand Mosque housing the Kaaba, toward which Muslims around the world turn daily in prayer.
Now, the government is preparing a mortgage law, promised for later this year, which industry experts say will revolutionize the market as it is expected to include regulations clarifying the issues of land ownership. Saud Al Gusaiyer, general manager of Dar al-Arkan, Saudi Arabia's only large property developer, said the ministry of justice must conduct a comprehensive national land survey.
"We need regulation and a legal framework. (Fixing) ownership will come with that," Gusaiyer said.
LAND RUSH
Real estate firms use different strategies to overcome the regulatory hurdles. Some, like Dar al-Arkan, try to cut out middlemen and buy plots directly from any of the thousands of Saudi royals who were given land by the monarchy or government.
"You have to check deeds and go to the municipality to verify everything," Kandil from Better Homes said.
Emaar Properties from the United Arab Emirates is the only major foreign developer to have so far entered the market, and it builds high-end housing in affluent north Jeddah.
It's not just ownership that needs a legal framework.
"There is no law yet on management of property, on who is responsible for a building's maintenance," Kandil said, adding that only in recent months had Jeddah municipality begun licensing high-rises in the Red Sea city.
With values rising and laws finally on the drawing board, there is now a race to establish ownership which in many cases amounts to a land grab, said activist al-Ahmed.
"There is a link between the real estate boom and the hunger for land," he said.
Shareef says he is taking no more chances.
He has voluntarily ceded 40 percent ownership of his remaining plot to another Saudi princess. "It is protection so that this doesn't happen again," he said.
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