Mohammed Al-Hassami: Delisting and exiting the market will have an impact on commercial land and real estate

Fawaz Bashrahil: I expect to see mergers among small and medium-sized enterprises in the coming period

Riyadh—Mohammed Al-Amin Jamous

Reports indicate a growing demand to cancel business licenses and to suspend certain business operations and economic activities. Last year, in 2021, the number of requests to revoke business licenses exceeded 324,000, at an estimated rate of about 900 requests per day, while the Ministry of Municipal, Rural Affairs, and Housing received 361,772 applications for the issuance of commercial licenses (standard immediate).

The “Amlak Real Estate” conducted a survey with a number of real estate experts on the reasons behind the rise in the number of requests to cancel commercial licenses, the extent of its impact on economic activity and the real estate sector, and solutions that could curb this phenomenon.

Al-Hassami: E-commerce Is a Fundamental Cause

Real estate expert Mohammed Al-Hassami revealed that the existence of e-commerce is one of the fundamental reasons that has forced many to cancel their business licenses, noting that it does not require significant expenses to conduct business online, unlike traditional commerce, which involves incurring substantial costs such as rent, labor, operational and administrative expenses, and government fees.

Al-Hassami explained that canceling licenses is considered a contraction of economic activity; because a decision such as expanding your business and opening a branch in another city requires extensive research and greater risk, in addition to incurring significant costs and expenses—unlike doing so online. He said: ” E-commerce has an impact on certain activities, but in light of the Vision 2030 goals aimed at increasing the share of small and medium-sized enterprises in GDP, along with opening up foreign investment and establishing the "Invest in Saudi Arabia" platform, this will help drive the future growth of commercial real estate, He noted that exiting the market has an impact on commercial land and real estate, which is considered the most important strategic commodity in the country’s economy because real estate is the gateway to trade.

Al-Hassami emphasized that the government is making significant efforts to curb the cancellation or suspension of commercial licenses by encouraging citizens to establish their own businesses, and that if there are any recommendations, they should involve granting exemptions or exceptions, easing government procedures imposed on small businesses, and providing them with incentives and guarantees given their low income.

Bashrahael: Avoiding Losses and Fines

For his part, real estate expert Fawaz Bashrahael (Faran Holding Company) emphasized that the main factor compelling investors to cancel their commercial licenses is the need to limit waste, if any, He attributed the high demand for cancellations to the economic situation during the COVID-19 pandemic, which had a significant impact on the entire world as well as medium and small-sized companies, in addition to the inspection campaigns and their associated penalties, explaining that suspending or canceling business operations is part of a downsizing strategy to avoid losses and fines resulting from the general market conditions, particularly for commercial and economic activities that were specifically affected by the COVID-19 pandemic.

Bashrahil emphasized that the real estate sector, like other public sectors, is negatively affected by companies exiting the market; however, in his view, this situation will not last, and the markets will return to operating with greater organization and strength under government regulations and systems driven by state support and the implementation of the “Vision for Good and Development” policy.

Bashraheil predicted that the coming period will see regulatory action through the merger of small and medium-sized enterprises, which will drive their success and survival, as well as adjustments to inspection committees and the resulting laws to keep pace with the general situation.