КИЕВ, 1 фев - SV Development.  JEDDAH: The selling of residential plots, villas, houses, apartments and offices on paper before their construction is a new type of scam that has led the Ministry of Commerce and Industry to take steps to protect customer rights.

A well-known real estate development company from the United Arab Emirates recently sold non-existing apartments in a planned 40-story residential tower to be built on the Jeddah Corniche.

It later transpired that the company in question did not even have the approval of the Jeddah Municipality, which had asked the company to amend its design before giving a final OK.

Neither the name of the company — which has also announced a similar real estate project on King Fahd Road in Riyadh — nor the sums of money it took from its customers have been disclosed. However, a number of Saudis have filed complaints against the company.

The municipality said it received an application from the company for the project, but had some concerns. “The company did not address our concerns nor did it follow up on the procedure for acquiring an approval despite selling all of its planned apartments,” the municipality said.

Ibrahim Kutubkhanah, undersecretary for real estate projects at Jeddah Municipality, said the municipality does not grant permission for the announcement of real estate projects before all requirements are satisfied.

Dr. Tarik Fad’ag, head of the Civil Council at Jeddah Municipality, said his department is in the process of starting an investigation into real estate companies that sell property before their physical structures are actually built.

He added that the investigation would be carried out to protect the rights of customers. “The council will start its investigations next week by looking at the files of these companies and will make strenuous efforts to stop such illegal operations,” he said.

He added that the Civil Council received information that some real estate companies were selling housing units without the municipality’s approval. “Some real estate development companies started marketing their projects on the Corniche without obtaining licenses from the municipality to commence construction,” he said, adding that the Ministry of Commerce and Industry and the Ministry of Rural and Municipal Affairs should investigate violations.

Fad’ag said the Civil Council deals with complaints that come under its jurisdiction and advised citizens who bought nonexistent buildings to go to court to get their money back.

He also asked concerned authorities not to grant permission for the announcement of real estate projects unless companies have obtained municipal approval for their projects. He added that in circumstances where announcements are made, companies should be required to make clear that their projects are pending until cleared by the municipality.

He also called for the launching of an awareness campaign to enlighten citizens about the risks of buying apartments on paper before their physical existence. Fad’ag said the municipality has so far approved five real estate projects on Jeddah Corniche and is considering 12 more.

Meanwhile, realtors have warned against the risk of selling housing units without official approval especially in light of the current world economic crisis and the financial position of many real estate companies.

Observers fear such practices may become widespread in the Kingdom because of a lack of regulations protecting citizens from fake real estate companies particularly since the Kingdom’s real estate market continues to grow in spite of real estate in other Gulf countries going bust.

Компания "SV Development"