Real States Business Needs Regulatory Reforms
Golden Grass inc., which is ranked among the top 100 companies in Saudi Arabia, is set to divert from the agricultural business to the intricate world of real state. Turki Faisal A-Rasheed , CEO of the company speaks to MONEYWORKS on his future plans and general trends in the real state business .
How do you evaluate the real estate industry in Saudi Arabia at present?
It has been the uptrend. In fact, it’s huge market with bright prospects. We’re expecting a US$50 Billion worth of real state development annually in the next 20 years in Saudi Arabia.
What makes you so optimistic about the real estate industry in the Kingdom at this point in time?
We have customers, cash and land. Saudi Arabia has a population of 24 Million at present and 61 per cent are below the age of 25, each one of whom needs a dwelling. From these figures, you can see how much development, like house construction, there would be. However, the government has to change or armed the existing regulatory rule for the US$50 Billion worth of real estate development to materialize. We’re not asking for financial assistance now. What we’re asking for, is the removal of the barriers, so that the real estate sector may grow.
Could you please elaborate further?
Most of the investors in the Kingdom as well as in the other countries, mortgage their houses if they hit upon business idea and seek to generate funds. In this connection, there’s a problem in Saudi Arabia. If a Saudi has a lien on his house, he cannot have a second or even a third mortgage in his property. To purchase a second or third mortgage on a house is important to generate cash for business expansion. At present, there are 650,000 housing units being constructed by the government. A Saudi National is allowed to borrow up to SAR300,000 to avail one of these houses for his family, but he cannot sell or mortgage the property to raise capital for business expansion because of the existing regulation.
What should the government do in this regard?
It should remove the barriers to business growth. It should allow the sale of a property with liens as well as allow second or third mortgage to a property with a first lien so that the owner can generate cash for business growth.
Is Something being done, or has been done, to remove the barriers you are referring to?
Yes. We’re thankful, that the government has taken a positive view of our complaints. The Shura Council has made an announcement that it would form a government organization – similar to the Supreme Commission for Tourism in the tourism sector – to solve the problems of the local estate industry. It would form the organization in consultation with Custodian of Two Holy Mosques King Abdullah, who has been very supportive as far as business and industry are concerned.
Is the formation of an organization to look after the welfare of the real estate sector the solution to the problems hampering the industry at present?
It’s a step in the right direction. It is a shot in the arm for entrepreneurs in the real estate industry. In short, it’s a welcome development.
Golden Grass Inc. has been into construction which should make it well-prepared to embark on real estate ventures. What is your timetable in implementing your real estate plans?
The last quarter of this year. First we will launch a closed public company.
Will you be alone or with partner?
We will do it with another company. In Saudi Arabia, the single player is gone. It’s now a team player market.
How much will the initial capital will be?
It will depend on the feasibility study which is being prepared. We have not yet received our official documentation. It’s still in the hands of lawyers and the government. But the plan is to offer an IPO in the company’s fourth year of operation. When you set up a public company in Saudi Arabia, it must operate for three years, and in the fourth year, you may offer an IPO.
What advise you can give to the other businessman?
We have discovered the hard way that Saudis never talk about their losses. I know only two Saudi businessmen who have so far talked about their losses. Saleh Kamel of Al Baraka and myself. We invest in Merryl Lynch, Deutschebank, and other big investment houses, whose representatives talk to you everyday in a very nice way and in a very good language. They make you sign 300-400 papers. But at the end of the day, you’re left with an empty bag and yet you pay them so much. It’s better to put money in time deposits.
As an experienced businessman, what’s your advice to young people who are planning to go into business?
They should learn as much as possible in their 20s, work as much as possible in their 30s, supervise as much as possible in their 40s and manage as much as possible in their 50s.