14 real estate developers referred to prosecution: Off-plan sales penalties
In a decisive move reflecting the seriousness of regulatory bodies in controlling the real estate market in Saudi Arabia, the General Authority for Real Estate recently referred the developers of 14 real estate projects to the Public Prosecution. This decision came after the detection of a series of serious violations, including engaging in off-plan sales and receiving payments from beneficiaries without obtaining the necessary licenses, in several cities across the Kingdom.
A regulatory framework that aligns with Vision 2030
These measures come within the context of the major transformations taking place in the Saudi real estate sector as part of the Kingdom's Vision 2030, which has placed great emphasis on regulating the real estate market and increasing homeownership rates among Saudi families. Over the past few years, the government has worked to move from a haphazard real estate market to a more organized environment governed by precise regulations. Key among these initiatives were the establishment of the General Authority for Real Estate and the launch of the "Wafi" program for off-plan sales and leasing, aimed at boosting confidence in the sector and attracting both local and foreign investment.
Legal penalties: imprisonment and millions in fines
In a legal commentary published in Okaz newspaper, lawyer Taghreed Haddadi explained that the system for selling and leasing off-plan real estate projects provides a safeguard for protecting the rights of investors. She emphasized that the Saudi legislature has adopted a "zero tolerance" policy towards violators, as Article (24) of the system stipulates severe penalties for serious offenses, including imprisonment for up to five years, a fine of up to 10 million riyals, or both. These penalties apply to anyone who engages in the activity without a license, provides misleading information, advertises fictitious projects, or embezzles investors' funds.
Rights of victims and compensation mechanisms
Regarding buyers' rights, Attorney Haddadi explained that the system does not overlook the aspect of civil compensation. Article (35) obligates the real estate developer to pay compensation to the buyer or tenant in the event of a delay in delivery. This compensation is estimated at no less than 2% annually of the value of the developed land, or the equivalent rent for the property unit, thus ensuring redress for the damage resulting from the buyer's inability to benefit from their property.
Economic impact and reliability protection
These measures are of paramount importance, extending far beyond individual incidents, as the real estate sector is a cornerstone of the Kingdom's non-oil economy. Strict enforcement of regulations enhances the credibility of the Saudi real estate market regionally and internationally, and protects citizens' savings from the fraud and defaults that previously plagued unlicensed projects. Furthermore, classifying violations as serious or operational, and imposing escalating fines, fosters a fair competitive environment among compliant developers.
The General Authority for Real Estate concluded its statement by stressing that it will not tolerate any practices that violate regulations, calling on all investors and citizens to verify the legality of project licenses through official channels before paying any sums of money, in order to guarantee their rights and contribute to market stability.
