Similar to the imposition of fees on white lands, some opinions and proposals that call for (controlling) the real estate rental market by the intervention of the Ministry of Housing to regulate the relationship between the landlord and the tenant in order to set a specific percentage increase on the rental value during certain periods of time, according to their justification that this measure will reflect positively on the housing cost crisis, both for sale and rent, more than the impact of imposing fees on white lands.
The Cabinet issued Decision No. 221, in which it was decided that properties rented before 1-1-1394 AH would be increased by 20%, while properties rented after that would remain rented during 1401 AH and 1402 AH without increase, in addition to giving freedom to the lessor and the lessee to agree on the rents that they agree on, starting from the beginning of 1403 AH.
A number of real estate professionals suggested that a mechanism be put in place to increase the value of rental contracts by an increase not exceeding 5 percent of the rental value, provided that this increase is every two years, while others have reservations, pointing to the importance of preserving the freedom of the market and their fear that investors and developers will stay away from the sector as a result of the application of such a proposal.
In this context, legal advisor Khalid bin Othman Al-Rukban, a member of the Saudi Regulations Association, said that in order to preserve public money and safeguard it from any manipulation, the executive regulations of the State Real Estate Leasing and Vacation Law stipulate that the rent may be increased by no more than 5% of the first rent if the extension is for one year, and no more than 10% of the first rent if the extension is for more than one year. However, due to the economic renaissance and attractiveness of the Kingdom's business environment, which enabled it to rank eighth in the world in attracting foreign investments and first in the Middle East region, a group of real estate owners in various cities of the Kingdom took advantage of this renaissance.
For his part, M. Talal Abdullah Samarkandi, Chairman of the Engineering Offices Committee at the Jeddah Chamber of Commerce, said that the implementation of such a proposal can be implemented in all cities of the Kingdom, with the exception of the holy cities of Makkah and Medina due to the huge expansion works that these two cities are witnessing.
Samarkandi pointed out that applying the available laws in this aspect and studying them in a way that ensures that landlords do not significantly increase rents on tenants in a way that does not constitute injustice or harm to those landlords is healthy and okay, pointing out that this also applies to reducing the value of rent if there is a new development that calls for it.
For his part, businessman and real estate developer Ibrahim Abdullah Al-Subaie said that such a proposal may carry a number of negatives, mainly contributing to the reluctance of investors from the sector, in addition to making the tenant of the real estate eye, whether it is a store or a residential unit, stick to it and refuse to leave, which will result in a weak supply and make many rent seekers not find it, but that does not prevent a positive in such a proposal related to limiting the excessive increase in rental prices.
Al-Subaie said that it is necessary and important for the secretariats and authorities granting construction and related licenses to reduce the period of granting licenses to developers and investors so that there is proportionality and balance in the rate of supply and demand, especially in an era when electronic dealing is available and many government and private agencies have succeeded in reducing the time taken for transactions, and as long as investors and developers exist, money exists, land is available and there are no obstacles, we will see an expansion of construction and thus an increase in supply that will restore balance to the market and limit the rise in property prices, both buying and selling.
