JEDDAH, 12 January 2008 — Some real estate owners in the Kingdom have hiked rents by 10 to 50 percent recently putting additional financial burden on tenants already hit hard by rising prices of essential commodities.
Saudis and expatriate workers have called for a pay increase to help them meet growing living expenditures. Many tenants have refused to pay the hike, accusing real estate owners, who demand higher rents, of being greedy.
Some expats have left the Kingdom as a result of rising cost of living in recent months. Fewer skilled workers from countries such as India and Pakistan are seeking jobs in Saudi Arabia because of rising prices and the declining exchange rate of the riyal.
Abdullah Sulaiman Al-Balawi, a leading real estate developer in Jeddah, confirmed that house rents in Makkah have increased considerably over the past week. But, according to him, only a few individuals were raising rents in Jeddah.
However, a real estate owner in Al-Faisaliya district of Jeddah hiked rents by 20 percent, asking tenants to pay an annual rent of SR18,000 per flat instead of SR15,000 which they were paying for the past five years.
Al-Balawi said most real estate owners in Jeddah were charging old rents. Saleem Kaniyantavida, Air France cargo manager for Saudi Arabia, agreed with Al-Balawi and said that in the Aziziya district of Jeddah new two-bedroom flats are available for an annual rent of SR13,000.
Al-Balawi was not in favor of a rent cap: “It’s a free market and the rents are determined by demand and supply. It is very difficult to fix a specific rent as it differs from one location to the other and building space.”
By all accounts, people in Riyadh are the worst hit.
V.A. Tommy, acting general manager of Al-Rajhi Insurance, called for a pay hike to offset the increasing cost of living. He said rents in Riyadh have gone up by 25 percent. “If companies do not increase salaries, skilled workers may leave the Kingdom,” he said.
Tommy said companies were finding it difficult to get skilled manpower from India and Pakistan.
Some analysts blamed foreign investors for increasing rents, but Ahmed Faqeeh, another real estate developer, refuted that claim saying the Kingdom’s real estate market is different from those in other Gulf countries.
Faqeeh attributed the increase to growing demand for residential apartments, especially in Riyadh, Jeddah, Makkah, Madinah, Dammam and Alkhobar, as well as the rising prices of building materials and increase in workers’ wages.
Abdul Kareem Sait, business development manager of Arabian American Insurance in Alkhobar, reported a 25-percent increase in rents in the Eastern Province. “Real estate owners are charging higher rents from new tenants,” he added.
Faqeeh urged the government to intervene and, following the UAE’s example, put a rent cap.
For Mazen Batterjee, deputy chairman of the Jeddah Chamber of Commerce and Industry, the hike was inevitable. He hoped that the construction of new housing units for Saudis would help reduce rents. According to him, real estate owners were receiving only 10 percent returns for their investment.
